Germany, Brazil fight to keep EU-Mercosur deal alive

German Chancellor Olaf Scholz and Brazilian President Luiz Inácio Lula da Silva committed to concluding the EU-Mercosur trade agreement in Berlin on Monday (4 December), despite the blowback the deal received from France and Argentina.

The trade deal between the European Union and the South American Mercosur bloc (Brazil, Argentina, Uruguay, Paraguay) was finalised in 2019 after some 20 years of negotiations, but those involved are yet to sign on the dotted line.

The deal’s conclusion hinges on a side agreement currently negotiated between the EU and Mercosur, which should prevent increased trade from leading to deforestation, particularly of the Amazon rainforest.

Germany and Brazil, the biggest economies in their respective blocs, favour the deal, which they hope would boost trade sustainably.

“For too long, we have been discussing the free trade agreement between the EU and Mercosur,” German Chancellor Olaf Scholz (SPD/S&D) told the “German-Brazilian Business Forum” in Berlin on Monday evening, following a bilateral government consultation with Brazil.

“Now it’s about getting the agreement over the finishing line. And that’s why I am calling for pragmatism, including on the side of the EU,” Scholz said, referring to comments made by French President Emmanuel Macron, who torpedoed the late-stage negotiations with comments made this weekend at the sides of the COP28 climate conference.

Brazil has hoped to conclude the negotiations during its current presidency of the Mercosur bloc, which only runs until this Thursday (7 December).

But Macron said he could not “ask our farmers, our industrialists in France but also everywhere in Europe to make efforts to apply new rules to decarbonise and then say all of a sudden, ‘I’m removing all the tariffs to allow products to enter which do not apply these rules’,” and that he would therefore be against the EU-Mercosur deal, FT reported.

Meanwhile, Germany hopes the agreement could support the efforts of Brazil’s president, Lula, who promised to end deforestation of the Amazon rainforest by 2030.

“I would say that now, with deforestation down 49% in ten months, with the resumption of the creation of conservation units, the resumption of processes to protect indigenous peoples with investments, with these concerns that we are making here, there are no more excuses for not signing the Mercosur agreement with the European Union,” said Marina Silva, Brazil’s Environment Minister, during the conference.

Argentina and France blocking the deal

Lula said, “Brazil is very interested in making the agreement, ” saying there were “technical problems” with concluding the deal.

“If there isn’t an intervention from the chancellor or the president, things don’t get done,” he said, announcing that he wants to take the deal to the political level of foreign ministers and presidents of the Mercosur bloc on Wednesday and Thursday.

Argentina is also blocking the deal, as outgoing president Alberto Fernández, who previously favoured the deal, wants to hand it over to president-elect Javier Milei, who takes office on Sunday (10 December).

“The move that Argentina has just made between the still President Alberto Fernández and the elected President Milei is, of course, messed up, to put it bluntly,” Barbara Konner, CEO of the German Chamber of Commerce in São Paulo, Brazil, said.

“I’m going there in an attempt to convince him that we can reach an agreement,” Lula said about Fernández, adding, “We can’t make a deal with our friend Macron unless the Chancellor [Scholz] uses all his charm,” Lula said.

Always trouble with the neighbour

“That’s how I summarise it, a little mockingly: Everyone has their neighbours. We have the French, and you have the Argentinians,” German Economy Minister Robert Habeck (Greens), another proponent of the deal, told the conference.

However, Habeck’s own Green party adopted a motion last week calling to reject the EU-Mercosur deal “in its current form” on environmental grounds.

Habeck said that Germany and Brazil should prepare for the case that official negotiations do not yield a result.

“In the best case scenario, this could result in a non-paper without letterhead, without a state seal, without signatures, but a blueprint that you can show to others and say, look, Germany, the largest economy in Europe and Brazil, the most important Mercosur country, that’s how we could imagine it,” Habeck said.

“To be honest, it worked the same way with CETA,” he added, referring to the Trade and Investment Agreement between the EU and Canada.

In Brussels, however, official negotiations have not been given up either, despite a trip by EU trade chief Valdis Dombrovskis to Brazil being cancelled.

“The political will is to keep going. The window of opportunity is now,” an EU diplomat said.

Additional reporting by Kjeld Neubert and Max Griera.

[Edited by János Allenbach-Ammann/Alice Taylor]

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