Seal the Deal or Lose Brazil: Implications of the EU-Mercosur Negotiations

Written by | Tuesday, May 26th, 2015

Mikael Wigell (The Finnish Institute of International Affairs)

Ever since 1999, negotiations have taken place between the EU and Mercosur, a sub-regional free trade block comprising several South American states, aiming to reach a Free Trade Agreement between both regions in the near future. An extremely complicated negotiation process has been suspended and re-launched multiple times. A more significant turn of events took place in May 2014 when the Mercosur states adopted a new negotiating position in order to reach a solution acceptable to both regional blocks. As a result, the new agreement should be especially focused on complex trade policies, the liberalization of trade in goods and services, the improvement of rules concerning public procurement, customs and technical barriers.

According to the calculations by the European Commission (EC) and the Brazilian government, the estimate annual trade between the EU and Mercosur would amount to €9 billion, which would provide a rapid economic stimulus for both sides. However, there are no strong commitments from the side of the EU and it seems that the negotiations between the EU and Mercosur are currently eclipsed by TTIP. As a result, China is taking advantage of the situation and continually strengthens its influence in South America.

In January 2015, Brazil assumed the semiannual chairmanship of Mercosur and made one final offer to speed up the negotiations and close the deal. The failure of these negotiations would propel Brazil, the most important Mercosur member, towards other BRICS members and the EU would thus lose its influence in South America. Another impediment stems from Argentina’s position, which is, in some cases, prolonging the negotiation process and is simultaneously trying to explore export options to Russia.

The EU’s greatest area of interest constitutes the Brazilian internal market and the strengthening of political ties with Brazil. Some political actors also yearn to negotiate with Brazil individually, should Brazil leave Mercosur. This idea has also been voiced by the EC, which expressed concerns over the final draft of the agreement, especially if the Argentine objections would be taken into account. However, such approach by the Brazilian government is currently very improbable. In conclusion, it’s high time for the EU to urgently seek a consensus, which would seal the deal and concurrently also prevent Brazil’s re-orientation to other partners.

(The study can be downloaded here)

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