Mercosur-EU: Agreement Postponed to 2023

SÃO PAULO – Everything indicates that 2022 will be another lost year for Brazil’s foreign trade. Besides the exclusion of Reporto from the coastal shipping stimulus program called BR do Mar, which is expected to block at least R$ 2 billion in private investments in the modernization and expansion of port and railway infrastructure, the French government, which assumed the rotating presidency of the European Union (EU) this year, has already made it clear that it will advocate for trade rules that could justify barriers against foreign products connected to the deforestation of native forests.

In other words, considering the news that has been circulating intensively in European media regarding the lack of control over deforestation in Brazil, it is clear that this is an indirect message to the current Brazilian government. Therefore, the conclusion of the Mercosur-EU agreement will be postponed to 2023 or a later date, depending on the government that emerges from Brazil’s elections later this year.

It is worth remembering that in 2019, at the beginning of the current presidential term, the treaty was concluded after 20 years of largely fruitless negotiations. Since then, the agreement’s entry into force has depended on approval by the parliaments of the 27 countries that make up the European bloc. However, with the increase in deforestation rates in Brazil, the French government took the lead in advocating for the paralysis of the agreement’s ratification process.

To make matters worse, the current French President, Emmanuel Macron, who has already exchanged personal jabs with the Brazilian president, needs to defend an environmental agenda that includes veiled protection for French farmers against foreign competition to fare well in elections scheduled for the coming months. This leads to a halt in negotiations with the Brazilian government, the main partner in Mercosur. Only after this, probably, can the agenda for the signing of the Mercosur-EU agreement be reopened.

This is clear in the proposal that the French government recently submitted to the other EU countries, where neither Mercosur nor Brazil are mentioned. In the proposal, it is stated that among the suggested priorities are the African continent and the Indo-Pacific region – which includes Indonesia, Japan, Laos, and the Maldives – as well as Turkey, the Balkans, and neighboring countries in the Southern Mediterranean, in this case due to migration issues.

In the same proposal, there is a defense for the creation of barriers preventing the entry into Europe of products harvested in recently deforested areas, on the grounds that these products may contradict the production standards applied in the EU, which could harm the export of agricultural commodities by Brazil.

Obviously, this will be a year of challenges for Brazilian diplomacy, which is banking on a change of course if Macron wins the presidential elections in April, with a softening of the demands he intends to implement in the EU’s agenda. However, all of this will take time and also includes the possible election in Brazil of a leader more open to dialogue and able to meet some of the European bloc’s demands. Otherwise, the Mercosur-EU agreement will end up in the realm of uncertainty, meaning it will be postponed to a distant date or a time that will never come.

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Liana Lourenço Martinelli, lawyer, postgraduate in Business Management and International Trade, is the Manager of Environmental, Social, and Corporate Governance (ESG) at the Fiorde Group, consisting of Fiorde International Logistics, FTA Transport, Warehouses, and Barter International Trade. Email: lianalourenco@fiorde.com.br. Website: fiorde.com.br.

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