Europe's trade opportunity - will France block it?

France will block at all costs a Europe-South America trade agreement. Brussels and Berlin see strategic benefits in the agreement with Mercosur, writes Auron Dodi.

It is about the creation of a free trade zone for about 800 million citizens. It has been 25 years, since 1999, since the European Union and South American countries in the Mercosur economic community are negotiating the agreement.

If the signing of the agreement is achieved, the Europeans would benefit, as the customs fees for machinery, vehicles, chemical products, etc., which the EU exports to the Mercosur countries, which include Brazil, Argentina, Paraguay and Uruguay, would be removed.

Meanwhile, Mercosur countries would export more agricultural products to the EU without customs duties: they would export meat, raw materials, vegetables and fruits.

The European Commission in Brussels, which is leading the negotiations, wants to sign the agreement at a summit on December 5 and 6. Mercosur states have also expressed interest in this date.

This is also supported by Germany and ten countries of the European Union, which call the agreement urgent and beneficial for all of Europe. But France is putting up fierce resistance and gathering allies.

Arguments for and against the EU - Mercosur agreement

The "cows for cars" deal, as one diplomat in Brussels humorously called it, currently clearly does not include compliance with the climate objectives of the Paris Agreement. The European Union requires a stricter stance here, accompanied by sanctions, while the South American states require greater flexibility.

Supporters of the Agreement point out that the agreement is of great economic importance. If customs were removed, the European Union would save four billion euros a year in trade with Mercosur countries.

As for an idea of ??the size of the trade: in 2023, the EU exported goods worth 56 billion euros to Mercosur countries. 12.6 percent of all EU imports were from Mercosur countries, according to the Eurostat agency.

Whereas Brazil, Argentina, Uruguay and Paraguay exported goods worth 24 billion euros to the EU in 2023.

On the other hand, the opponents of the agreement, mainly France, have declared war on the agreement. French President Emmanuel Macron called the deal "unacceptable" if it does not include elements of the Paris Climate Agreement, a ban on deforestation and a European response.

Reasons for impatience to sign the agreement

The impatience of Germany and many other countries in support of the agreement has to do with the economic stagnation in many European countries. As well as the increase in geopolitical risks for the EU. In Brussels, they think that the benefit for the entire EU would be greater than a potential harm.

Strategically, the European Union aims to promote trade. Because the future American President Donald Trump has announced customs tariffs of up to 25% for Canada and Mexico. He can also do it with the European Union. China invests all over the world to secure strategic resources.

But, as an expert said in the German newspaper Die Welt, when you negotiate with Brussels "you get a lesson". "When you negotiate with China, you get a port". In this case, the expert was talking about a container port that China built very quickly in Peru.

French interests over European ones?

Despite constant declarations that Europe needs to increase capacity to face geopolitical challenges, President Macron is again intent on holding back. It is true that Macron's position in France is difficult. But it is not the first time. We recall the case of the blockade for the start of EU negotiations with Albania and North Macedonia in 2019.

In the case of customs tariffs for Chinese electric vehicles, which the EU imposed this year at the instigation of France, there were actually several countries in the EU in support of this protectionism. Germany, which despite economic problems feels stronger, defended a position of courage: it was for open competition with China, it was against customs tariffs and protectionism. But there was no success.

In the case of the current agreement with the Mercosur economic community, this agreement has even been approved in principle, already in 2019. France is now trying to block it, however, because Macron again feels weak in front of the right-wing extremism of Le Pen and the French farmers.

France benefits, but does not dare

A French MP recalled (on condition of anonymity) to the Reuters agency that France actually has a trade surplus of 155 billion euros with South America. He said France could benefit from the agreement on dairy products, pork and dairy products, even if competition for beef increased.

But Macron chooses the safest path for him: the blockade attempt. In this case, the French president ignores the real geopolitical and economic pressure from China and the US. He ignores again, as for the customs for Chinese vehicles, the arguments of the third economic power in the world, Germany.

German and French interests

It is natural that Germany and France also pursue national interests. Macron, and in rare unity the French government, parliament and farmers, fear that Europe will be flooded with cheap beef from Argentina and Brazil and that they will lose out. French farmers launched these days large protests against the Agreement in several French cities. Macron fears that anger in France over the deal will be used against him by Le Pen's right-wing extremists.

French peasants protest against the agreement with Mercosur

In the French media, French MEPs argued this week that agriculture is not an economic activity like others. It has strategic importance for the resistance and stability of democracy.

Whereas in Germany, Olaf Scholzi wants to help the automotive industry and the car building industry and the German economy as a whole. For their part, countries such as Spain, Portugal and Sweden want to expand the volume of trade exchanges and improve the trade balance.

Probability of signing the agreement

Legally, this agreement can enter into force if it is approved by a qualified majority of states. And then to vote in the European Parliament. So approval from all 27 member states of the European Union is not needed.

In this context, for the agreement to be blocked, the opponents must create a blocking minority: that is, four EU states, which simultaneously represent 35% of the population of the European Union, should join together.

France managed to convince Poland this week. In a few months there are presidential elections in Poland and Prime Minister Donald Tusk will not risk the anger of Polish farmers again. Tusk suddenly declared that "in its current form" he does not support the Agreement.

Poland and France together represent 24% of the population of the European Union. Italy is wavering whether it will ultimately support the deal or not. The Netherlands too. Austria and Ireland are not definitively positioned.

Germany currently has the support of ten other European Union states, among them Spain, Portugal and Sweden.

Brazil: France cannot announce the end of the agreement

Among the Mercosur states, Brazil, which dominates this economic community, expressed its determination to sign the agreement. "I plan to sign this agreement within this year," Brazilian President Luiz Inácio Lula da Silva said on Wednesday. Lula da Silva said that only Brussels, not France, can decide whether to end the deal.

In fact, Brussels thinks that France will have a hard time creating a blocking minority. But Brussels does not want to ignore an important country like France for an act like this agreement and hit Emmanuel Macron, even in Europe (after the big problems he has in France). Negotiations continue, the possibility of compensation for French and Polish farmers is also being considered./ DW