Four barriers hampering the entry into force of the EU-Mercosur agreement

More than two years after the end of negotiations on the trade agreement between the European Union and Mercosur, which lasted more than 20 years, there is no indication that it will be out of paper anytime soon. To enter into force, it depends on the ratification by the parliaments of the more than 30 countries that make up the two economic blocks. And there is resistance on both sides to put it into practice.

The measure would help give more dynamism and facilitate commercial transactions between the two blocs. According to the Secretariat of Foreign Trade (Secex), in the first seven months of the year, Brazil exported US $ 21 billion to the European Union, 27.1% more than in the same period in 2020, and imported US $ 21.3 billion, 23.9%. Following.

The director of the consulting firm Prospectiva, Ricardo Mendes, sees advantages in this agreement: it opens up space to new markets for the region, reducing the difficulty of entering products; it allows easier access to new sources of inputs and technologies for Mercosur companies, stimulating competitiveness; and extends the organization of business flows between companies operating in the two blocks.

“Europe has a lot of capital invested in Latin America, which would benefit intra-company trade in Mercosur,” adds Professor Carlos Eduardo Vidigal, from the History Department of the University of Brasilia (UnB).

And, given the context of a major geopolitical transition, with the possibility of a “cold war” between China and the United States, the implementation of the agreement becomes more relevant. “This would make new investments possible, since production costs are lower than in developed countries and there is a relevant industrial base in the country,” Mendes emphasizes.

He believes that there are many segments that can benefit, such as the automotive sector, which already has a globally integrated chain. Another segment that could gain in importance, despite the European lobby against it, is the food industry, he says. “The agreements would help further develop activity in this area,” said César de Castro, of the Itaú BBA agribusiness consultancy.

In the short term, the president of the Brazilian Foreign Trade Association (AEB), José Augusto de Castro, sees more political than economic gains. “This would show Brazil’s ability to sign agreements with the partners concerned. We don’t need an agreement to sell soybeans.

Currently, Brazil has agreements with Angola, Guyana, Mexico, Panama, São Cristóvão and Nevis, Suriname and Venezuela. Within Mercosur, there are partnerships with Bolivia and Chile. Colombia, Cuba, Egypt, Ecuador, India, Israel, Peru and the Southern African Customs Union.

Experts interviewed by Gazeta do Povo admit that this is an agreement that takes time. Several factors hinder its implementation. “It’s a very complex agreement. There are many hitches to be resolved, ”quotes Vidigal.

Flavio González, professor of integration law at the University of Buenos Aires (UBA), hopes that putting the deal into effect will take less time than it took to negotiate it – the negotiations lasted more than 20 years.

See below some of the main obstacles hindering the implementation of the agreement:

1. European resistance, mainly French

One of the main obstacles is the environmental issue, explains Gonzalez. “Problems such as the fires in the Amazon are helping to create barriers and fuel protectionism, especially with regard to the agricultural sector. Mercosur has good conditions to compete when it comes to meats and grains.

The greatest resistance comes from France, one of the main European rural producers, whose production is heavily subsidized by the EU. The UnB professor says that the French agricultural space is a matter of national security.

Relations between Brazil and France are not at the right time. Since 2019, Bolsonaro has accused French President Emmanuel Macron of wanting to intervene in Brazilian sovereignty over the region. The shocks also include offenses against French First Lady Brigitte Macron by Brazilian President and Economy Minister Paulo Guedes and the sudden cancellation of Bolsonaro’s meeting with French Chancellor Jean-Yves Le Drian – the president decided to cut their hair at the time of the meeting.

According to Folha de S. Paulo, in March, Brazilian Ambassador to France Luís Fernando Serra ignored a formal invitation from the French National Assembly (equivalent to the Chamber of Deputies in Brazil) to attend a hearing on the investigation into the illegal mine. in French Guiana.

2. Brazil did not do a good PR job in Europe

But resistance to the deal is not just coming from France. Other countries that have expressed reservations about the deal are Ireland, where the agricultural lobby is also strong, and Austria.

“Brazil has not done a good job of public relations with Europe. Diplomacy has failed to convince European society on issues such as the environment and human rights, ”explains Mendes of Prospectiva.

French President Emmanuel Macron said in January that to depend on Brazilian soybeans is to approve of deforestation in the Amazon. According to the Brazilian Institute of Geography and Statistics (IBGE), three quarters of Brazilian grain production comes from five states: Mato Grosso, Rio Grande do Sul, Paraná, Goiás and Mato Grosso do Sul.

3. Divergence of interests between Brazil and Argentina

Another hurdle, according to Mendes, are the views that Mercosur’s two biggest partners have on the deal. Despite shortcomings in public relations, Brazil has focused on adopting a more liberal trade policy and is more interested in trade agreements. In the meantime, for Argentina, there is no point in a short-term deal.

Vidigal points out that one of the reasons Argentina is behind on the deal is because it is unable to expose as much agribusiness abroad as Brazil.

Another complicating factor is Europe’s comparative advantages in industry. Some segments where this is more obvious, underlines the professor at UBA, are the automotive, auto parts, chemicals and pharmaceuticals sectors. “There is a lot of asymmetry between the two blocks.

4. Brazil Cost

Castro emphasizes that, on the Brazilian side, there are challenges to overcome. The main one concerns what is called the “cost of Brazil”. “This problem must be resolved so that the country can benefit from this agreement which, for some segments, provides for a transition period of up to 15 years.”

The president of the commercial entity underlines that in the short term, the agreement brings more advantages to the European Union than to Brazil, because it opens opportunities for the bloc in the industrial sector and offers it better conditions. than two of its major competitors: the United States, the United States and China.

The industry has lost importance in Brazilian GDP and in the list of exports. In 2000, he was responsible for 23% of the wealth generated by Brazil. Last year, the share was 17.7%, according to data from the Brazilian Institute of Geography and Statistics (IBGE). Meanwhile, the sector’s share in Brazilian exports has halved, from 59.07% in 2000 to 28.97% two decades later.

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