EU countries corner Macron on Mercosur trade deal

A group of EU countries and their South American allies are preparing to squeeze French President in a major initiative to resurrect a giant transatlantic trade deal.

Countries such as Spain, Italy, Portugal and Sweden are finding heavyweight allies within the European Commission, including trade boss Valdis Dombrovskis and foreign policy chief Josep Borrell, as they seek to overturn Macron’s resistance to an accord that would grant the EU privileged access to South America’s largest trading bloc, ahead of China and the U.S.

As Portugal prepares to take over the EU’s rotating Council presidency from January, momentum is growing to save the pact. “The Portuguese presidency will ensure that the Mercosur agreement moves forward,” said an EU diplomat. “The largest trade agreement the EU has ever negotiated will not be shelved.”

After two decades of stop-start negotiations, EU trade negotiators struck a historical pact with the Mercosur group of Brazil, Argentina, Uruguay and Paraguay in 2019. But Macron sought to kill the cars-for-cows accord at infancy by warning that it could not be ratified by Paris because of Brazil’s rapid destruction of the Amazon rainforest.

France argues it opposes the deal because Brazil does not sufficiently respect the Paris climate accord. But proponents of the agreement question whether Macron’s real concern is for the Amazon or for the interests of powerful French farmers ahead of regional elections in the spring.

Over the coming months, Brussels and the group of EU countries plan to either win France round by introducing a system of environmental oversight with Mercosur, or call France’s bluff over its real motivation for its opposition.

Pressure from Paris

While the French government stresses Brazil’s environmental failings, they have other political considerations: The deal is anathema to France’s influential farmers, who see a flood of cheap South American beef, wine and sugar as a threat. On a more personal level, the Mercosur agreement is also hostage to Macron’s enmity with Brazil’s populist President . The two engaged in a bitter war of words after Bolsonaro insulted Macron’s wife in 2019, with the Frenchman retorting that Brazil needed a new leader who was “up to the task.”

Despite these obstacles, several EU countries and prominent Commission officials reckon it’s time to resurrect some political momentum for a Mercosur agreement.

The counter-attack kicked off last month when nine countries (the Czech Republic, Denmark, Estonia, Spain, Finland, Italy, Latvia, Portugal and Sweden) wrote to Dombrovskis to argue that “not signing and ratifying the EU-Mercosur Agreement will not only affect the EU’s credibility as a negotiating and geopolitical partner, but will also strengthen other competitors’ position in the region.”

Spain is leading the charge against the French position, and Portugal will also push to revive Mercosur when it takes over the presidency of the Council of the EU in January. The deal’s advocates say it is key to building up democratic trade groupings, pointing out that China just landed a landmark deal among 15 countries in the Asia-Pacific last month, the RCEP.

Spain’s Foreign Minister Arancha González Laya stressed the political dimensions of closer ties with a continent of “hugely similar views” that is “interested in joining the EU in fighting global climate change, working to ensure a more solid financial system” and boosting “multilateralism.”

“And this is why the European Union should do good in paying more attention to Latin America, starting with delivering on the trade agreements that Europe has negotiated in good faith with … Mercosur or the one that it is currently negotiating with Mexico or with Chile,” she said in an interview with POLITICO. “Latin America is … a test case of the so-called strategic autonomy of the European Union, its ability to build alliances.”

Green commitments

To pave the way for ratification, Dombrovskis has agreed with Mercosur to negotiate additional commitments on the environment, a first for an EU trade deal, without reopening the accord itself. Last Friday, Dombrovskis met Uruguayan Foreign Minister Francisco Bustillo in Brussels and agreed to “immediately commence joint work” to negotiate additional environmental commitments, according to a Commission spokesperson.

In a sign that this was more than Brussels spin, Montevideo, which currently holds the presidency of the Mercosur bloc, issued a statement confirming that Mercosur was “willing to cooperate in the design of an additional declaration that would deepen [environmental commitments] as long as the additional commitments and actions applied to both parties.”

On the face of it, that push to make Mercosur greener is a victory for Macron. But Dombrovskis’ new plan could also put Macron in a bind, forcing him to decide between environmentalists and farmers.

The nine EU countries pushing for a deal argue that the EU’s failure to ratify Mercosur could make matters only worse in environmental terms, as the South Americans would only turn to partners with weaker rules than Brussels.

Until very recently, Macron has signaled he is simply no longer interested in the agreement, even if Mercosur agreed to additional environmental commitments. French officials said Macron had decided the deal’s economic advantages were not worth the political cost.

“I don’t think there is any chance this agreement goes through,” a French minister told POLITICO in October, when asked whether additional commitments on deforestation and climate could save the deal.

Two birds with one ‘non’

Jordi Cañas, a Spaniard from the liberal Renew Europe group and the European Parliament’s point man on the Mercosur deal, said Macron’s environmental concerns were an excuse. “Macron has found a cheap way to please both environmentalists and farmers by opposing Mercosur. It doesn’t cost much, because he doesn’t have to do anything, and he can make great principled statements. But it’s still protectionism, camouflaged by virtuous semantics.”

Supporters of the deal say they now see a chance to move forward in the summer. “After the French regional elections [in March or June 2021], I see a window of opportunity during the Portuguese presidency to start the ratification,” said Cañas.

The statement from Montevideo said Bustillo and Dombrovskis had agreed that the latter would “present a first draft of the declaration [on additional rainforest and climate commitments] early 2021 as a working basis for both sides.”

Cañas said he was optimistic. “I think even skeptical countries such as France are recognizing that globalization will continue with or without us. China has just signed RCEP, and that is putting pressure on Europe to forge our own trade alliances.”

In a rare sign that the pressure on France’s isolation is starting to have an impact, Franck Riester, France’s junior minister for trade, told a POLITICO event that his country recognized the economic value of the deal.

“We have to be sure that the Paris agreement [on climate change] will be respected by the Mercosur countries,” Riester said. “After that, why should we not continue with the Mercosur agreement? We don’t want to put 10 years of negotiations in the garbage.”

David Herszenhorn contributed reporting.

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