EU-Mercosur: Will the trade negotiation saga ever end?

As trade experts agree that the window of opportunity to clinch a deal is closing, Josep Borrell, the High Representative of the European Union for Foreign Affairs, last week delivered yet another dose of bad news regarding the trade agreement between the EU and the South American trade bloc Mercosur.

While the South American countries expressed their intention to sign the controversial trade pact, resistance from within the EU, Borrell said, was threatening to derail the deal.

Especially, French President Emmanuel Macron is wary of the anger brewing among his country's farmers, who are fearing a fierce competition with the highly efficient agricultural sectors of Brazil and Argentina.

'We've lost 22 years'

Former Uruguayan President Jose 'Pepe' Mujica encapsulated the sentiments of Mercosur member countries Argentina, Brazil, Uruguay, Paraguay, and soon-to-join Bolivia. Speaking at an event of the trade bloc in Brazil last week, Mujica said negotiations "haven't gone well, and they won't go well," as he came to the sobering conclusion that "we've lost 22 years."

Reports suggest that negotiations may be suspended until after the European elections in June, with some sources even hinting at a suspension until September, according to Paraguay's Foreign Minister Ruben Ramirez.

Europe the 'ultimate loser'

Buenos Aires-based consultant and analyst Carl Moses sees a clear loser in the ongoing saga. In an interview with DW, he asserted that Europe "not only loses market share and future opportunities in South America" but also credibility concerning it's "geopolitical role."

"The Mercosur has been waiting for the EU for years and has likely grown accustomed to this situation. The loser is Europe," he said.

Moses highlighted the setback for the new Argentine President Javier Milei, a staunch advocate of free trade, who anticipated a first foreign policy success and progress in market liberalization through the Mercosur agreement.

China returns to the spotlight

With Europeans once again failing to reach a consensus, China is reemerging as a potential partner.

Uruguayan President Luis Lacalle Pou has been advocating for Beijing as a potential new partner for free trade talks, but was criticized for his position among Mercosur members.

Argentina's Milei, for example, is vehemently opposed to talks with "the Chinese communists" as he's become the "bulwark of resistance" against Beijing, said Moses. "Meanwhile, Mercosur is forging agreements, such as with Singapore and soon with the United Arab Emirates."

Also in the making is a trade agreement between Mercosur and a group of smaller European nations that are not members of the EU but are closely associated with the bloc. The so-called EFTA trade bloc, including Lichtenstein, Norway, Iceland, and Switzerland, is, however, less important with a combined population of just 14 million people.

Missed opportunity and new challenges

The EU-Mercosur free trade agreement was already fully negotiated in 2019, but has since faced a blockade from France over environmental concerns for deforestation in the Amazon rainforest under former Brazilian President Jair Bolsonaro.

Moreover, the EU has now further toughened environmental rules, causing Brazil's new leftists president, Luiz Inacio Lula da Silva, to accuse the EU of pursing "green protectionism" against South America.

After the European elections in June, both sides are planning to make a fresh attempt at finalizing the trade pact.

However, the political and regulatory landscape is shifting rapidly. A group of EU member states led by Germany has wrecked the bloc's so-called Supply Chain Act that was supported by environmentalists and human rights activists, but was perceived by South Americans as a colonial encroachment on their sovereignty.

On the other hand, environmental activist group Greenpeace has released a legal opinion questioning the fundamental basis of the free trade agreement, arguing that it could lead to an "environmentally unfriendly" expansion of trade and maritime transport.

Argentine analyst Carl Moses said that every other day "a new nail is being nailed into the coffin" of the EU-Mercosur trade agreement.

"It's absurd, but most experts are convinced that Europe needs the agreement much more urgently than South America. And still, Europe fails to make any progress," he said.

This article was originally written in German.