Nostalgia Finally Brings us an EU-Mercosur Free Trade Deal

In the early 2000s, the idea behind many policy approaches were to promote complete and open free trade. An international policy that has come upon much criticism in the wake of several alliances and trade agreements coming apart or being re-designed, the idea of trade agreements have lost some of its luster.

The agreement between the EU and Mercosur was a long time in the making. The EU already had an extensive trade surplus into the Mercosur member states in manufactured good at the time and still does today, being their most significant trading partner. With Mercedes and fine foods entering Brazil, Argentina, Uruguay and Paraguay, the South American group wished to modernise their own industries and push away from being solely an agricultural exporter. Increased investment was thought to bring in new technologies, research and development. Local industry that did not benefit or were wholly owned by foreign companies had issues with the increase in competition from dominant international corporations. In many ways, the situation for local industries in Latin America is not much different than twenty years ago. Notable exceptions is the case of the suspended Mercosur member, Venezuela, currently under sanctions and having nationalised many international companies post 2013 and Argentina having done the same over the last few years in one case after nationalising Repsol, a Spanish oil and gas giant in Argentina.

Since the early 2000s, the current and expected debate many within the EU have is over agriculture entering the EU. Negotiating with the EU and its key issues even brought the current foreign minister of Canada to tears when attempting to finalise the EU-Canada FTA, so it was no surprise that the current agreement with Mercosur might have needed twenty years to congeal, and will still face many critics within the EU itself. Beyond common barriers to making trade agreements with the EU, the current face of the EU may change as soon as this year when the UK finally leaves the trading bloc. The strength of the EU currently looks like the strength of Mercosur about twelve years ago, where it was theorized that Mercosur might be ended or at best just fade away. The cause of this was political and economic stress on its members, notably Argentina’s economy and Brazil’s political and economic stability that permeated to other members and Latin America in general. Venezuela as a current suspended member of the trade bloc turned full force towards Chavismo, and their government is facing heavy pressure from the international community for change amongst several human rights violations by their current government.

Beyond all of those internal issues, on the face of it the EU and Mercosur states have a productive relationship, but there are few differences and few resolved issues since 2000. Latin America in general suffers from being almost wholly a commodity exporter, being affected greatly by fluctuations in commodity prices that often were perilous to their local economies. This unfortunate reality did little to reduce poverty or inequality under the modern global economic order that was in effect since the 1950s, and the EU-Mercosur Trade Agreement will likely encourage the status quo. Still, Chinese demand for agro-exports have given Brazil, Argentina and other regional economies added investment through exports of their soy and other products as well as bringing investment from China to help build infrastructure and some industries. While the US and EU turned away from Latin America over the last few years, investments have come in, despite local economic and political issues plaguing Brazil and Argentina, and of course Venezuela.

So the EU needs to decide who they wish to be it seems, while Mercosur still is dependent on the health of their local state economies taking precedent over the trade pact itself. A twenty year long agreement may have passed its prime years ago with little progress being made over trade agreements in general in addressing local policy issues. The measure of its success will come from farmers in the EU and more importantly, small and medium sized businesses in Brazil, Argentina, Uruguay and Paraguay that may lose more than they may gain post agreement.

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