The agreement signed in 2019 must be ratified by all countries involved. Negotiations have been dragging on since 1992.
The meeting between Brazilian President Luiz Inácio Lula da Silva and European Commission President Ursula von der Leyen on 12 June in Brasilia was not just a diplomatic rapprochement. One of the main points of the meeting was the commitment to conclude the EU-Mercosur agreement “as soon as possible”, preferably in 2023.
“We are finally close to the finish line. I think it is time to cross that line. President Lula and I are committed to conclude the agreement as soon as possible. By the end of the year at the latest,” the German ambassador said in a statement, adding that it is not just a trade agreement, but a platform for dialogue and long-term engagement.
Lula recalled that the European Union (EU) is Brazil’s second largest trading partner, behind only China, and concentrates here the bulk of foreign direct investment in Latin America, in sectors such as manufacturing, digital infrastructure and services. However, the Brazilian president did not fail to criticise the extension of environmental obligations, with the imposition of condemnations in case of non-compliance, foreseen in an additional document to the agreement presented by the Europeans.
“The premise that should exist between strategic partners is that of mutual trust, not distrust and condemnation. At the same time, the EU passed its own laws with extraterritorial effects that change the balance of the agreement. These initiatives represent potential restrictions on Brazilian agricultural and industrial exports,” Lula said. In early June, attending the inauguration of an electric bus factory in São Bernardo do Campo, São Paulo, Lula said he was unwilling to give up, for example, government procurement, which especially benefits small and medium-sized Brazilian companies.
The EU relates to the rest of the world through trade agreements signed bilaterally with countries or multilaterally with other blocs. An agreement has been negotiated with Mercosur since 1992, when a cooperation agreement was signed with the Council of the European Communities, the forerunner of the European Union. Formal negotiations on the terms began in 1999.
In 2019, after two days of meetings in Brussels,Belgium, the closure of the agreement was announced, which is still under review by the four Mercosur member countries (Argentina, Brazil, Paraguay and Uruguay) and the 27 EU member states. Diplomats involved in the negotiations at the time considered the decision to be more political than commercial.
The agreement, which is very complex, has to be good for both sides. Mercosur members want to reduce tariffs and subsidies to European producers and expand export quotas for products such as meat, fruit, cereals, sugar and ethanol. The Europeans, for their part, want to explore the services sector, with a focus on transport, finance and telecommunications, but complain about the environmental aspect in relation to Brazil. The sustainability rules contained in the agreement, currently non-binding, may become mandatory if the additional document is approved. This is one of the main obstacles to the ratification of the agreement.
Amazon Fund
After the meeting with Lula, Ursula von der Leyen also announced the donation of 20 million euros from the European Union to the Amazon Fund. In addition to these resources, the EU plans to invest more than 400 million euros in actions to combat deforestation and inappropriate land use in the Amazon.
The Amazon Fund, created in 2008, is the main financier of environmental policies in the region, investing in actions to combat deforestation and promote sustainability, but had been put on hold since the beginning of the Bolsonaro government.
In 2019, the extinction of the Amazon Fund Guiding Committee and the Amazon Fund Technical Committee, responsible for managing the resources, was what stopped the use of approximately R$ 3 billion in environmental actions. On 1 January 2023, President Lula re-established the committees by decree, allowing them to resume their activities and receive new contributions. In April, the US government announced a donation of US$500 million (about R$2.5 billion) to the fund.
To learn more
What is Mercosur
The Southern Common Market (Mercosur) was created in 1991 to adopt economic and customs integration policies. It is made up of Argentina, Brazil, Paraguay and Uruguay. Bolivia, Chile, Colombia, Ecuador, Guyana, Peru and Suriname are associated, while Venezuela has been suspended since 2016.
What is the European Union?
It is an economic bloc that brings together 27 states from the European continent, also taking on the role of a political and monetary union. It was officially created in 1992 with the signing of the Maastricht Treaty. It has its own currency, the euro, adopted by 19 countries.
What is the EU-Mercosur free trade agreement?
The EU-Mercosur free trade agreement covers both regulatory and tariff issues, in ambits such as services, public procurement, trade facilitation, technical barriers, sanitary and phytosanitary measures and intellectual property. It will allow for the elimination or reduction of import tariffs on goods, integrating markets with 800 million inhabitants (around 25% of the world’s wealth) and more than $100 billion in bilateral trade in goods and services.
Chronology of the EU-Mercosur agreement
29/06/1992 – Brazil and Mercosur sign a trade cooperation agreement with the member countries of the Council of the European Communities, the forerunner of the European Union. The document, in which the parties state that they “are determined to encourage, in peculiarity, the development of cooperation in trade, investment, finance and technology”, would only be enacted in 1995.
15 December 1995 – The framework agreement on interregional cooperation between Mercosur and the European Union is signed in Madrid.
June 1999 – During the Mercosur-EU summit in Rio de Janeiro, the objective of starting negotiations on the agreement on three pillars – trade, political and cooperation – is officially announced.
2004 – The first offer of an agreement is considered unsatisfactory.
May 2010 – Offers on market access in services and public procurement are tabled in Madrid and negotiations resume.
2012 – The second phase of negotiations ends, with no exchange of offers between the economic blocs.
May 2016 – Mercosur and the European Union exchange offers on market access for goods, services and public procurement.
December 2017 – Mercosur presents a new offer. The EU responds in January 2018.
28/06/2019 – The EU-Mercosur agreement is signed in Brussels after two days of negotiations. To enter into force, it must be ratified by all countries involved.
March/2023 – The Europeans present in Buenos Aires, Argentina, a “side letter”, a diplomatic document with demands for Brazil’s environmental commitment, including condemnations in case of non-compliance.
12/06/2023 – President Lula and European Commission President Ursula von der Leyen meet in Brasilia and reaffirm their commitment to conclude the agreement by 2023.