Asuncion (Paraguay) (AFP) – South American and European Union officials on Saturday signed a major trade deal, which they hailed as sending a powerful message at a time of tariff threats, global uncertainty, and protectionism. The deal between the 27-nation European Union and Mercosur bloc members Brazil, Argentina, Uruguay, and Paraguay creates one of the world’s largest free trade areas after 25 years of tricky negotiations. It was given fresh impetus amid the sweeping use of tariffs and trade threats by US President Donald Trump’s administration, which has sent countries scrambling for new partnerships.
Trump on Saturday threatened multiple European nations with tariffs of up to 25 percent until he manages to gain control of the Danish territory Greenland. “We choose fair trade over tariffs, we choose a productive long-term partnership over isolation,” EU chief Ursula Von der Leyen said at the signing ceremony in Asuncion, Paraguay. Paraguay’s President Santiago Pena also praised the treaty as sending “a clear signal in favor of international trade” in “a global scenario marked by tensions.” European Council head Antonio Costa said the deal stood in contrast to “the use of trade as a geopolitical weapon.” Brazil’s Foreign Minister Mauro Vieira said the deal was a “bulwark …in the face of a world battered by unpredictability, protectionism, and coercion.”
Brazil’s President Luiz Inacio Lula da Silva — a key architect of the accord — was unable to attend the ceremony due to scheduling conflicts and met with Von der Leyen in Rio de Janeiro on Friday where he praised it as a victory for multilateralism. In Paraguay, leaders said the treaty would bring jobs, prosperity, and opportunities to people on both sides of the Atlantic.
Together, the EU and Mercosur account for 30 percent of global GDP and more than 700 million consumers. The treaty — which still needs to be approved by the EU parliament and ratified by each Mercosur nation — eliminates tariffs on more than 90 percent of bilateral trade. It is expected to come into force by the end of 2026. The deal will favor European exports of cars, wine, and cheese, while making it easier for South American beef, poultry, sugar, rice, honey, and soybeans to enter Europe.
This has angered European farmers, who have rolled tractors into cities like Paris, Brussels, and Warsaw to protest a feared influx of cheaper goods produced with lower standards and banned pesticides. “We have good quality Irish beef and good standards here, and they don’t have the same standards in South American countries,” said Trisha Chatterton, a 50-year-old farmer at a protest in Ireland earlier this month. “It’s not fair,” said Luis, a 24-year-old Belgian cattle farmer who took part in a December protest that turned ugly, as demonstrators set piles of tires on fire and hurled potatoes at police.
Key power Germany, as well as Spain and the Nordic countries, strongly support the pact, eager to boost exports as Europe grapples with Chinese competition and a tariff-happy administration in the White House. Some in South America are also wary about the impact of the treaty. In Argentina, it is estimated that there could be a loss of 200,000 jobs just from the dismantling of the local automotive industry, trade and investment researcher Luciana Ghiotto told AFP.
In a bid to allay fears, the European Commission announced a crisis fund and safeguards allowing for the suspension of preferential tariffs in case of a damaging surge in imports. However, Argentina’s libertarian President Javier Milei warned against quotas and safeguards, which “will significantly reduce the economic impact of the agreement and will go against its essential objective.” According to EU estimates, European exports to Mercosur are expected to rise by 39 percent, while Mercosur exports to the EU could increase by 17 percent. By 2040, the agreement is projected to boost EU GDP by 77.6 billion euros and Mercosur GDP by 9.4 billion euros.
© 2024 AFP
