The EU-Mercosur Partnership Agreement has entered a state of legal limbo following a challenge by the European Parliament.
The agreement with Argentina, Brazil, Paraguay and Uruguay, which was officially signed on 17 January in Asunción, but originally concluded in December 2024 after two and a half decades of negotiations, is controversially made up of two distinct parts.
Inter-institutional conflict
The first part is a comprehensive agreement covering political dialogue, cooperation and trade, which needs to be approved by the European Parliament and ratified by member states. The second is a more immediately applicable ‘interim trade agreement’, as Ave Schank-Lukas, head of the Commission Representation in Estonia, tells Kuku Raadio.
Ave Schank-Lukas, Head of the European Commission Representation in Estonia (in Estonian):
“There are actually two agreements – one is a broader partnership agreement, which must also be ratified by the parliaments of the member states. In this sense, it is a very inclusive agreement, as we are asking for everyone’s opinion and no one is being left out. The other is purely a trade agreement. The EU has exclusive competence in trade matters. We can negotiate them on behalf of member states, and this part could therefore enter into force in advance.”
Far from being celebrated as a big win for the Commission, though, the finalisation of the long-awaited agreement has only served to expose deep political divisions within the bloc. Divisions at all levels: within member states, between member states, and even between EU institutions.
On 21 January, the European Parliament voted by a narrow margin to refer the deal to the European Court of Justice for an opinion on its legality under the EU Treaties. MEPs are primarily concerned that this splitting of the agreement into two parts is an attempt to bypass parliamentary scrutiny, at both EU and national level.
While the legal review is underway – a process that could take up to two years – the EU is unable to formally ratify either part of the agreement. The question is whether the Commission will try to ‘provisionally apply’ the interim trade deal in the meantime – something that is legally possible under the Treaty on the Functioning of the EU, and which Brussels has done for a number of other agreements. The answer to this question is far from clear, as can be gleaned from Schank-Lukas’s comments.
Ave Schank-Lukas, Head of the European Commission Representation in Estonia (in Estonian):
„We are currently in very close contact with both member states and the Parliament to find a way to move forward and proceed with ratification as quickly as possible. […] These consultations are ongoing, so we cannot give a clear final answer at this stage.”
With the Council of the EU having approved, by qualified majority, the signing of the agreement last month, should it decide to greenlight the provisional application of the trade agreement, this could happen a couple of months from now, as soon as the first Mercosur country ratifies it.
Such a move would, though, be extremely contrkkoversial. First and foremost, it could cause a major political rift between the European Parliament and the other two main EU institutions. Any sidelining of the Parliament could also be seen as undemocratic – as the Brussels executive imposing its will on Europe’s citizens. Moreover, given that the trade agreement’s very existence is legally questionable, having been referred to the European Court of Justice, what happens if the Court deems it to have violated the EU treaties?
Then, at a national level, it goes without saying that several member states would be up in arms.
Opposing voices
France is probably the deal’s most vocal opponent, citing environmental concerns – primarily deforestation-related – and the potential impact on Europe’s farming sector. Austria, Hungary, Ireland and Poland echo these concerns.
There are also plenty of dissenting voices in member states more favourably inclined towards the deal. One such voice belongs to Jorge Pisco, president of the Portuguese Confederation of Micro, Small and Medium-Sized Enterprises (CPPME).
In an interview with Renascença, Pisco warns of the risks of agricultural and agri-food production being abandoned by family farms and small producers as a result of competition from South American imports. Indeed, he fears that the benefits of the EU-Mercosur agreement will not reach small businesses full stop.
Jorge Pisco, President of the CPPME (in Portuguese):
“We believe that the EU-Mercosur agreement is designed to serve the interests of large companies, notably in the agribusiness, industry and service sectors. This means that the benefits are not automatically accessible to small and medium-sized enterprises, nor are they distributed in a balanced way, because, in most cases, exports by micro and small enterprises are carried out through intermediaries, which, in this specific case, significantly reduces the likelihood of any gains from the agreement reaching small businesses.”
And Jan Jonckheere, professor of international trade at Spain’s OBS Business School, outlines the environmental issue in an interview with esRadio Castilla y León.
Jan Jonckheere, Professor of International Trade at OBS Business School (in Spanish):
“What happens if the agreement is implemented and, as a consequence, the Brazilians start cutting down more trees – deforesting – and then start introducing more pesticides and so on into other products, which runs completely counter to the premise of the EU’s Green Deal?”
The agreement does include legally binding commitments in an attempt to ensure that Mercosur countries halt deforestation and align with the Paris Agreement, though many NGOs argue that these are insufficient.
Supporting voices
Despite such concerns, and ongoing protests by their own farmers, Portugal, Spain, Italy and Germany are in favour of going ahead. They cite the need for new markets for European goods, geopolitical alternatives to China and the US, and access to raw materials.
Jan Jonckheere, who we just heard from, stresses that although the agricultural sector has long been of great importance in Europe, and the EU must of course safeguard its farmers, it should not be allowed to monopolise the political and public discourse.
Jan Jonckheere, Professor of International Trade at OBS Business School (in Spanish):
“We are talking here about something, agriculture, that represents between three and five per cent of the global treaty. And in fact, beef only accounts for 1.5 per cent. So we are talking about blocking a very large, important contract for just 1.53 per cent of the value of the treaty. This should not be the case.”
https://www.esradiocastillayleon.es/castilla-y-leon/programas/es-europa/audio?a=5YG541A36E83
With his feet firmly in the pro-Mercosur camp, Vilnius University economist Algirdas Bartkus gives Žinių Radijas one reason why the Lithuanian government should rethink its current negative stance on the agreement. In a word: exports.
Algirdas Bartkus, Lithuanian Economist (in Lithuanian):
“Mercosur is important so that we can try to distribute our products there. The Germans have one intention; industrialists in France, who are also in favour of this agreement, have another. Certain of our engineering industries in Lithuania – for example, biotechnology, lasers, electronics – already have a good reputation. But one thing that is needed now is to actively break into the supply channels in those countries.”
On the other side of the coin, Indrė Genytė-Pikčienė, chief economist at Lithuania’s Artea Bank, notes that these agreements are vital for diversifying Europe’s import sources.
Indrė Genytė-Pikčienė, Chief Economist at Artea Bank (in Lithuanian):
“There are indeed many sensitive issues related to agriculture, but the main and fundamental benefit of these agreements lies in the diversification of import channels. This means the ability to establish closer ties with countries rich in rare earths and the many other resources that Europe does not itself possess. The market [for these resources] is currently entirely dependent on China. The desire to diversify our import options is therefore strategically sound, and these agreements are aimed precisely at strengthening our strategic autonomy in this way.”
It was actually Italy’s green light in the Council that ultimately tipped the balance in favour of approving the 17 January signing. Our colleagues at Radio 24 share Italian PM Giorgia Meloni’s take on the situation.
Giorgia Meloni, Prime Minister of Italy (in Italian):
“I commend the work Italy has done to make the agreement more balanced. We believed that the agreement was unbalanced, especially in certain sectors such as agriculture. We worked closely with the Commission. Thanks to the willingness of the Commission, but also that of our partners, we achieved some very important changes to reassure a fundamental asset of the European economy – namely agriculture. At that point, the agreement became more balanced and Italy gave the green light.”
Yet some of the concessions Rome extracted in order to provide the qualified majority required in the Council are controversial in their own right. These include securing a pledge from the Commission that will mean increased funding for Italian agriculture in the bloc’s next long-term budget.
The latest
While the future of the interim trade deal remains up in the air, just this week in Strasbourg, the European Parliament adopted a series of measures designed to protect EU farmers from potential risks in the agreement. This suggests that the Parliament will not ultimately block it.
Under the new rules, the Commission will have to consider taking protective measures if imports of so-called ‘sensitive’ agricultural products, including poultry and beef, increase beyond a certain level, or if import prices undercut domestic prices by more than a set amount. Romanian EPP member Daniel Buda gives Radio România more information.
Daniel Buda, Member of the European Parliament – EPP, Romania (in Romanian):
“Farmers in Romania and throughout the European Union will be protected from the possibility of Mercosur products entering the market in volumes or at prices that would create difficulties. If the volumes entering the market increase by five per cent, compared to the average over the last three years, these imports will be blocked. If prices deviate by more than five per cent from the three-year average, these imports will be blocked. And if these two clauses do not have the desired effect, we have one billion euros available to compensate farmers.”
The Commission had actually pushed for a ten-per-cent tolerance, but the Parliament was not willing to agree to this.
When the time comes, the Brussels executive will also be obliged to monitor the market and present a six-monthly report to Parliament assessing the impact of agricultural imports.
