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Future of EU-Mercosur FTA – Could it finally be ratified this year?

Updated: Aug 16, 2023

Mercosur EU FTA title photo

The European Union (“EU”) and Mercosur Free Trade Agreement (“FTA”) has been the subject of much discussion and debate in recent years. At IVEJM we have thoroughly explored this topic in our previous articles, and we warmly invite readers to review them for a more in-depth understanding.

The EU and Mercosur states (Argentina, Brazil, Paraguay and Uruguay) reached a political agreement on June 28, 2019, after more than 20 years of negotiations. The agreement is considered to be an ambitious, comprehensive and balanced trade deal, and would create one of the largest free-trade zones in the world. Despite the agreement being made in 2019, the deal has been on hold mainly due to environmental concerns regarding the rampant deforestation of the Brazilian Amazon rainforest under the leadership of right-wing President Jair Bolsonaro in Brazil.

However, the recent election of Luiz Inacio Lula da Silva as President of Brazil may represent a solution to these environmental concerns and pave the way for the EU-Mercosur FTA to finally be ratified. Brazil's President Lula da Silva placed the conclusion of the FTA high on his list of priorities, saying that the long-awaited Mercosur accord with the EU must be completed urgently (Lula´s visit to Uruguay in January 2023). He announced that he wanted the agreement with the EU to be concluded in 6 months after assuming presidency. As far as environmental protection is concerned, Lula advocates a more sustainable model of economic development, including in the Amazon forest, and has expressed his commitment to fighting deforestation in the region.

Amazon jungle photo
Photo by David Riaño Cortés

Lula vows to begin undoing the environmental destruction seen under his far-right predecessor, Jair Bolsonaro, and work towards zero deforestation of the Amazon rainforest. Crossing the ocean - on the EU side, 2023 undoubtedly offers a favorable setting for concluding the FTA as tradefriendly countries are at the helm of the EU’s rotating Council presidency this year and next and have expressed their eagerness to get the trade deal back on track (Sweden, Spain).

Despite the readiness and willingness to conclude the agreement on both sides, concerns remain, particularly on the EU side, regarding environmental issues. The EU plans to negotiate an additional document on environmental protection with the Mercosur bloc to address these concerns. However, how far these additional demands for the Mercosur bloc should go is already a sensitive debate in the European Commission and is likely to prove even more controversial when discussed with the European Parliament, EU and Mercosur bloc.

The EU is well aware that it must proceed cautiously and offer something that is acceptable for the Mercosur bloc. Nevertheless, additional environmental commitments from the Mercosur bloc cannot be just empty promises. Brazil's President has also expressed an ambition to renegotiate some parts of the trade deal in favor of its country's industrial development, since strengthening Brazilian industry was one of his main promises during the campaign. Lula's desires, combined with the EU's plan for imposing extra environmental commitments on Mercosur bloc, make clear the need for both sides to carefully address their reservations before the deal can go ahead.

In conclusion, the outlook for the approval of the EU-Mercosur FTA is indeed positive, with strong motivation to reach the agreement on both sides. Nevertheless, certain reservations must be addressed before the agreement can go ahead. At IVEJM, we keep our fingers crossed for the agreement to be approved as soon as possible, as it brings many benefits for both parties, as discussed in our previous articles.

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