Agreement should be in place by the end of June

Agreement should be in place by the end of June

Brussels For a long time, Latin America was only a sideshow of German foreign policy, but that is now changing. In January made Chancellor Olaf Scholz in ArgentinaChile and Brazil Station. A few weeks ago, Vice Chancellor Robert Habeck and Agriculture Minister Cem Özdemir (both Green) visited the Amazon rainforest.

The previously neglected region is suddenly seen as a key partner in an attempt to free Europe from economic dependence on China and to find substitutes for raw materials from Russia.

That is why the next important date is already in sight: the free trade agreement, which is intended to reduce trade barriers between the EU and the Mercosur states of Argentina, Brazil, Paraguay and Uruguay, is to be in place by June 27.

At least that is the plan of the Commission, which is responsible for the Union’s trade policy: It is currently negotiating with the Mercosur countries an additional declaration that will primarily improve the regulations on sustainability and the protection of the indigenous population. These additions should be legally equivalent to the agreement, but should not untie the contract that was negotiated in 2019 again.

The idea is to appease critics of the trade pact without having to start all over again. “We also have a lot to gain,” stresses a senior EU official. Four billion euros in tariffs would be eliminated every year, especially in the automotive, mechanical engineering and chemical sectors.

The South American countries warn to hurry

The South Americans are also urging them to hurry, especially Brazil and Argentina. In South America, concerns about growing dependence on China are increasing, the EU official explains. The trade agreement with Europe could provide a counterweight.

A first draft of the planned additional declaration is already circulating in Brussels and Berlin, it is also available to the Handelsblatt. However, the document is not particularly meaningful, says Bernd Lange, Chairman of the Trade Committee of the European Parliament. “It is still a very early version.” Lange does not expect a detailed version until April, which will allow conclusions to be drawn about the status of the negotiations.

Clearing of the Amazon rainforest

How can sustainability rules be enforced in the free trade agreement?

(Photo: AFP/Getty Images)

Critics of the agreement, however, already see their suspicions confirmed that the additional agreement is “window dressing”. The declaration contains “no further enforcement instruments, so that the sustainability chapter would continue to be the only chapter exempted from the sanction-enforced dispute settlement mechanism,” says Armin Paasch, trade expert from the aid organization Misereor.

In fact, the question of how compliance with agreed environmental and sustainability standards can be monitored is crucial for the acceptance of the agreement in Europe. The Commission knows that too. However, the Brussels authorities do not want to insist on sanctions.

How can sustainability rules be monitored?

“We don’t think that’s a good approach,” the official said. MEP Lange also argues that the point must be to reach an agreement with the Mercosur states on “monitoring options based on partnership”. Satellites could sound the alarm if deforestation increases. Inspectors could be sent out to get an accurate picture of the situation. However, the Europeans should “not point the finger up”, warns Lange.

The problem: the German governing coalition decided last summer that Commercial contracts must be linked to the possibility of sanctions. The resolution states that this only applies to future commercial contracts. However, the EU official reports that there are definitely voices in the Green-led Federal Ministry of Economics that would like to see Mercosur as a sanctions instrument. “Very robust discussions” are underway.

In the meantime, however, it has been heard from German government circles that they no longer want to be the brakeman and would probably be basically satisfied with the additional declaration.

The agreement is met with greater reservations in other EU countries. The Netherlands are demanding that agriculture be excluded – which would be completely unacceptable to the South Americans. Resistance also came from Austria and France.

Conclusion would be a great success for the EU Commission

Should it still be possible to get the agreement signed and sealed by the summer, that would be a great success for the EU Commission – and would be theirs underpin geopolitical design claims. Negotiations with the Mercosur states have dragged on for a total of 20 years, the world’s largest free trade zone would be created.

“Both economically and geopolitically, everything speaks in favor of ratification,” says David McAllister (CDU), Chairman of the Foreign Affairs Committee of the EU Parliament. “That would be a strong accent for multilateral cooperation and against protectionism.”

In order to get the deal through, the Commission apparently wants to use a tried and tested trick: it plans to separate the trade part of the agreement from the political part. That would allow the economically important passages to be put into effect with the consent of the EU Parliament. Individual member states could not stop the treaty.

More: Scholz in Argentina, Chile, Brazil: Is the world’s largest free trade zone failing because of the EU?

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