Image Source: Fordham Political Review.
Last week’s elections for the European Parliament have sent shockwaves around the world. Its results could become a turning point for the future of international trade, especially between Europe and Latin America.
In recent years, the relationship between these two regions has been dynamic, prominently defined by the EU-LAC Global Gateway and the ongoing negotiations for a free-trade zone deal between the European Union and the countries of Mercosur (Argentina, Brazil, Uruguay, and Paraguay). It can be argued that the deal has been hanging by an ever-thinning thread, with constant delays in ratification and changing levels of opposition and support. With the polls closed and final votes counted, the new composition of the European Parliament could determine the long-awaited fate of the EU-Mercosur agreement.
The EU-Mercosur Deal
The history of the EU-Mercosur deal is a long and tumultuous one. Since 1999, the EU and Mercosur nations have been negotiating a deal with the objective of increasing free trade between the two regions. Two decades after beginning discussions, in 2019, the European Commission announced that an “ambitious, balanced and comprehensive trade agreement” had been reached, in principle. The deal promised to eliminate trade barriers, boost market access, and enhance regulatory cooperation, aiming to fuel economic growth, job creation, and sustainable development. It was envisioned to be one of the world’s largest free trade zones, covering nearly 800 million people and accounting for about 20 percent of the world’s GDP. And yet, five years later, ratification for the agreement remains elusive.
From the outset, environmental concerns have stood as a significant roadblock. Brazilian President Jair Bolsonaro’s 2019 ascension saw record-breaking levels of deforestation and forest fires, resulting in French President Emmanuel Macron threatening to “kill the deal” just two months after its announcement. Macron has since continued to be one of the most prominent voices of opposition to the deal’s implementation.
More recently, far-right libertarian Argentinian President Javier Milei’s remarks dismissing climate change as a “socialist lie” and attacking the country’s scientific community have also raised eyebrows in the EU. Milei has gone as far as to pledge to dissolve the Mercosur bloc entirely, further deteriorating relations between the EU and its Latin American partners.
Agricultural lobbies have also affected the delayed ratification of the deal, with EU agribusinesses concerned about competition from low-price imports from foreign countries. The start of 2024 saw a wave of farmer protests sweep across Europe, notably in Poland, Spain, Germany, France, and Belgium. These demonstrations stemmed from fears of unfair competition from abroad, low wages, and demands for increased production standards.
In France, the protests took center stage, with farmers staging a memorable tractor blockade of Paris streets. The upheaval prompted complaints from far-right leader Marine Le Pen, a staunch critic of the EU-Mercosur pact who has long pushed for greater protectionism in the country. From Le Pen’s ultra-nationalist National Rally to Macron’s centrist faction, a rare consensus seems to have emerged across the French political spectrum, with opposition to the EU-Mercosur agreement becoming a unifying factor.
Evidently, the agreement has been marred by considerable unrest and protraction. And despite the recent valiant efforts of Brazilian President Luiz Inácio Lula da Silva and German Chancellor Olaf Scholz to expedite a ratification process, a final verdict on negotiations still seems far off. As we approach the third decade of this agreement in limbo, the results of the 2024 parliamentary elections may end the deadlock. Will the new Parliament serve as the tipping point and put an end to negotiations – one way or another?
Parliamentary Winners and Losers
A potential lifeline for the deal may lie with the center-right European People’s Party (EPP), which scored big wins in this year’s elections. With 189 seats, the EPP holds over a quarter of the vote, giving centrists substantial sway in Parliament. As long-time advocates of the EU-Mercosur deal, the EPP champions stronger Euro-Latin American ties and believes the agreement would benefit the many sectors of Europe’s economy. Historically, the EPP has operated within centrist coalitions, and while new alliances may need to be formed to pass legislation, in the past it has traditionally avoided long-term alliances with far-right parties. Party leader Ursula von der Leyen has assured that the EPP will do its best to maintain its centrist position. However, with the significant gains made by far-right factions, it is uncertain whether this will be enough to save the EU-Mercosur deal.
Far-right parties, which have loudly opposed the EU-Mercosur deal to seize initiative from the 2024 farmers’ protests, surged in numbers after last Sunday’s vote. The most extreme-right groups, the European Conservatives and Reformists (ECR) and the Identify and Democracy (ID) group are set to control 131 seats, not including the 26 seats held by the non-aligned far-right Fidesz and extreme-right Alternative for Germany (AfD). With Italian Prime Minister Giorgia Meloni’s Brothers of Italy promoting ‘patriotic economics,’ AfD’s economic ultra-nationalism, and similar sentiments among other far-right factions, the region is likely to open the door to much more pronounced protectionist policies.
A far-right dominated Parliament may also amplify Milei’s opposition to the EU-Mercosur deal. Milei has already been seen cozying up to politicians like Spanish Vox leader Santiago Abascal, Giorgia Meloni, Marine Le Pen, among others. These relationships are likely to strengthen in the coming months, potentially increasing his influence in the region. Their shared commitment to protectionist trade policies could bolster Milei’s economic agenda, further jeopardizing the fate of the agreement.
Lastly, the performance of the Greens-EFA Group is also expected to continue influencing opposition to the EU-Mercosur deal. Although they did not perform as strongly as usual, losing more than a dozen lawmakers and dropping from the fourth to sixth largest party, they have long been ardent opponents of the deal. They are likely to push for more stringent environmental standards for the Mercosur agreement, which could lead to further delays or even a halt in its ratification.
Impact on the United States
The EU’s potential abandonment of the EU-Mercosur deal could have significant implications for U.S. foreign policy and trade. Were the deal to collapse, Latin American economies would once again look towards the U.S. with greater interest, and as the Biden administration seeks to diversify its trade relationships and reduce dependency on China, the result could be positive for all involved.
On the other hand, the EU’s potential retreat from Latin America could also create opportunities for China to expand its influence in the region. China, which has already been bolstering its economic ties with Latin America through initiatives like the Belt and Road Initiative (BRI), could see this trend accelerate if the EU reduces its engagement in the region. This could lead to a more complex and competitive trade landscape in the region, with the U.S., EU, and China vying for influence and trade agreements.
Carolina Hohagen is a research intern at Global Americans.
Next Generation Commentary is a Global Americans series offering fresh insights from young analysts on the Americas, including our talented staff and interns.
