The EU has been negotiating a trade deal with Mercosur for over 25 years. In recent weeks, significant progress has been made. Commission President Ursula von der Leyen met with Mercosur leaders in Asunción, Paraguay, on January 17th, to sign the deal.
Despite these developments, the European Parliament voted on January 21st to request the EU Court of Justice's opinion on various legal issues, introducing delays and halting any major progress for the foreseeable future. This article summarises the details and the significance of the agreement, outlines the major controversies underpinning it, and takes a look at the next steps before this long-awaited deal comes to fruition.
Why is the EU-Mercosur Agreement Controversial?
Farmers across the EU have been protesting the EMPA. They argue that the deal would lead to the import of South American products, such as beef, that do not meet the EU's standards for sustainability and food safety. Although the EMPA contains various provisions to ensure these standards are respected, questions have been raised as to whether these provisions are legally enforceable.
There have been protests in the past weeks in France, Spain, Ireland, and other EU countries. The FNSEA, a major French farm union, organised a protest in Paris last week, involving 350 tractors. Further rallies are planned outside the European Parliament in Strasbourg. Protesters argued that, in addition to risks to EU safety and environmental standards, the EMPA creates unfair competition with cheaper South American imports. Similarly, Spanish farmers' groups argue that the difference in costs and regulatory conditions between European and South American farmers will damage the Spanish agricultural industry.
Environmental groups and academics have also criticised the deal, arguing it may lead to an uptick in deforestation. Climate Action Network highlighted the risks of the rebalancing mechanism, which was advocated by the Mercosur countries. This mechanism could force EU nations to weaken environmental regulations, such as the EUDR.
Latest Updates on the EU-Mercosur Agreement
Following decades of negotiations, the Council of the European Union voted in favour of authorising the deal on Friday, January 9th. At least 15 countries representing 65% of the EU's population voted in favour. This comes despite opposition from the EU's largest agricultural producer, France, alongside Austria, Hungary, Ireland and Poland.
Having obtained the required majority, the Council adopted two decisions authorising the signature of the EMPA and the Interim Trade Agreement (iTA). The iTA reflects the trade and liberalisation aspects of the EMPA, and functions as a standalone agreement until the EMPA fully enters into force.
Following this, as mentioned above, Commission President von der Leyen and European Council President Antonio Costa joined the presidents of Mercosur countries and the foreign minister of Brazil, in Lula's absence, to sign the deal.
The CJEU to Review the Agreement
A group of 145 EU lawmakers have been arguing that the EU's Court of Justice (CJEU) should give its opinion on certain aspects of the EMPA before the European Parliament can approve it. This group was primarily concerned with the rebalancing mechanism, which could allow Mercosur countries to demand changes to the agreement if EU policies affect their economic benefit. Notably, this mechanism could allow Mercosur countries to take compensatory measures if future EU regulations, such as regulations on environmental and quality standards, restrict their exports to the EU.
These lawmakers put forward a parliamentary notion asking the CJEU to rule on whether the agreement can be applied before full ratification by all member states and on whether the agreement restricts the EU's ability to determine its environmental and consumer health policies. On Wednesday, January 21st, the European Parliament voted in favour of asking for a review by the CJEU. In Strasbourg, 334 votes were cast in favour of the notion, and 324 opposed it.
Next Steps for the EU-Mercosur Agreement
The EMPA must receive the consent of the European Parliament before it can be formally concluded by the Council. Following the vote to request advice from the CJEU, the process has been suspended. The European Parliament can only vote to approve or reject the agreement once the CJEU has delivered its opinion. The reference to the CJEU is expected to cause delays of approximately two years, and could even derail the deal due to growing frustration from Mercosur leaders.
Merz has described the European Parliament's decision as "regrettable" and argues that the EU-Mercosur agreement should immediately be provisionally implemented. The provisional application of the deal is possible, but the European Commission understands the political risks that would accompany this. An EU diplomat told Reuters that it is likely that the deal will be applied on a provisional basis once the first Mercosur country has ratified it. This is likely to be done by the government of Paraguay in March.
The agreement must be ratified by all EU member states as well as the Mercosur parties. Ratification by EU member states may be a long process. The EU-Canada Trade Agreement, signed in 2016, still awaits ratification by 10 EU states. The ratification process is expected to be smoother for Mercosur states, given that most of the bloc's governments currently hold a majority in their respective legislatures.
Therefore, although great progress has been made through the signing of the EMPA, the road ahead is not without obstacles. The CJEU's intervention adds major delays to the process, and the deal is yet to overcome the significant hurdle of parliamentary consent. This saga highlights the difficulties of reconciling the contrasting priorities of different EU stakeholders in the context of interregional trade. The EMPA promises economic benefits for Europe and South America alike, but it evidently remains controversial, and the wait continues.
