Since 1999, the EU has been negotiating a trade agreement with the four Mercosur founding states Argentina, Brazil, Paraguay and Uruguay. From the beginning the process was characterised by non-transparency as well as being subject to much criticism. In 2019, a political agreement was reached between the contracting parties. In view of the devastating consequences of the clearing of the rainforest and the disregard for the environment under the then President of Brazil, Jair Bolsonaro, the ratification process came to a standstill. Since the change of government in Brazil and in an effort to find new trading partners in the face of geopolitical tensions, efforts are again being made to finalise the free trade agreement. Both the current Swedish and the subsequent Spanish Presidency are very interested in trade relations with South America.

Opportunities and risks of the trade deal
With a population of 260 million people and an annual economic output of more than 2 trillion euros, Mercosur is considered the fifth largest economic area in the world.. Above all, the prospect of increased EU export volumes in machinery, motor vehicles, chemicals and pharmaceuticals through reduced customs duties provides an incentive for treaty negotiations. However, an AK Study shows that the economic benefits of the trade deal would be limited. The primary focus should also be put much more on the environmental and social risks associated with that trade agreement.. Mercosur's exports to the EU include not only agricultural and food products but also critical raw materials. Thus, concerns about deforestation, climate change and human rights violations are real. Further deterioration of working conditions, wage and social dumping and massive environmental damage in various sectors are not in accordance with the EU's declared sustainability aspirations.

Status of negotiations and (uncertain) outlook for the future
Since the conclusion of negotiations in 2019, the agreement has been quiet for a while. The inauguration of Luiz Inácio Lula da Silva as Brazilian president in January 2023 is now seen by some as a new opportunity the agreement between the EU and the Mercosur states: Concerns about the agreement are to be dispelled by an additional instrument drafted by the EU. This is currently being discussed between the two sides, whereby the process is not transparent to the public.  Even though the additional instrument is supposed to clarify the benefits of the agreement in relation to the sustainability goals, it is not an effective instrument to actually guarantee sustainable environmental or even social standards due to its non-binding nature. On 25 May 2023, a meeting of EU trade ministers was held, at which a  Greenpeace protest caused a stir: activists hung a large "STOP EU-MERCOSUR" banner on the façade of the EU Council building and sprayed water to warn of the harmful effects of the agreement on the environment.

The EU-Latin America Summit will take place on 17 and 18 July (EU-CELAC Summit, Community of Latin American and Caribbean States); it appears that the aim is to conclude the agreement by the end of the year. But the EU is also interested in closer relations with South America beyond Mercosur. A recently presented Commission strategy announced the prospect of more frequent meetings and increased trade and investment.. On her current trip though Latin America, Commission President Ursula von der Leyen underlines the EU Commission’s ambition to conclude the EU-Mercosur agreement by the end of this year at the latest.

Mercosur remains highly problematic
From AK’s point of view, the EU is under pressure to explain as to how the agreement is to be justified despite the rejection of the current version by significant forces of civil society and, above all, the objections of some Member States. The splitting of the Association Agreement envisaged by the EU Commission undermines democratic participation in AK’s opinion and was recently also classified as a violation of the rights of the individual EU Member States in an expert opinion commissioned by Greenpeace.

Further information:
AK EUROPA: Trade policy outlook for 2023
AK EUROPA: EU-Mercosur Agreement: Splitting as a risk to democratic participation
AK EUROPA: Does the EU-Mercosur Trade Agreement live up to its promise?
EU Commission: The EU-Mercosur agreement explained
EU Commission: EU-Mercosur