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Without a pact with Mercosur, the EU risks leaving China free in South America

Without a pact with Mercosur, the EU risks leaving China free in South America

The agreement EU-Mercosur It has been a banner of the recent protest by French farmers, who denounced unfair competition on the part of South Americans. However, if Paris closes the door to this pact, the way will be left clear to China, warn politicians and analysts consulted by EFE.

The European agricultural crisis, which has been especially prominent in France, has targeted free trade agreements with other economic blocs, but that of Mercosur, which includes Brazil, ArgentinaUruguay and Paraguay and which is yet to be closed, has been the most paradigmatic.

Several European capitals, led by Paris, have taken up the farmers’ argument and have accused these countries of “unfair competition” due to the absence of equivalent rules – more lax in South America and stricter in Europe -, especially environmental ones.

But what impacts would it have for the European and South American bloc if an agreement that has been negotiated for more than 20 years is not finally signed?

The researcher at the French Institute of International Relations (IFRI) Marie Krpataco-author of a report on the impasse of the EU-Mercosur agreement, points to an increase in China’s economic weight to the detriment of the EU in a region rich in raw materials necessary for the ecological transition, since Argentina and Brazil are among the countries with the most lithium reserves in the world.

For Krpata, defenestrate the agreement with the Mercosur It would further strengthen Beijing’s commercial position, which currently already represents 25% of all exports of the four South American countries, compared to 14% for the EU. The Asian giant is, in fact, the main trading partner of both Brazil and Argentina.

China positions itself as an alternative for the Mercosur countries, valuing investments and without such strict regulations” like the European ones, Krpata tells EFE.

The researcher recalls that in 2015 Beijing announced investments in Latin America worth US$250 billion until 2025, an amount much larger than that announced by the European Commission (EC), estimated at 45 billion euros in its Global Gateway plan.

While France leads the group of European countries (with the Netherlands, Ireland or Austria) that oppose the current agreement, arguing that Mercosur does not offer environmental guarantees, Germany has become, since the war in Ukraine, one of the main champions of the pact to depend less on Russia and China.

Germany wants diversification, while France defends reindustrialization and European agricultural sovereignty”, explains the specialist.

French wines and cheeses, benefited by the pact

During the last two weeks of agricultural protests there have been very few voices in France in favor of an EU-Mercosur agreement. The macronist deputy Éléonore Caroit, chosen by French voters in Latin America, has been one of them.

The protection of designations of origin and the elimination of customs duties would be positive for important sectors of French production, such as producers and exporters of wines, cheeses and pharmaceutical products.“, the parliamentarian, who also has Dominican nationality, underlines in statements to EFE.

Caroit, who in a June 2023 resolution voted in the French Assembly in favor of an EU-Mercosur agreement, contrary to his Macronist colleagues, alleges that there is a certain lack of knowledge of some points of the agreement, such as the beef entry cap. South American in Europe, a measure designed to preserve the EU livestock sector.

This is just one illustration of the disconnect between the fears that the agreement raises in Europe and its economic reality“, remember.

The representative, who makes official trips to South America very frequently, also warns that China’s shadow is long.

Several countries of the Mercosur indicates– have expressed interest in concluding a free trade agreement with China. For example Uruguay. Brazil has also indicated that it was not opposed to this eventuality”.

One of the most complete studies on the effect of an EU-Mercosur agreement is from the London School of Economics (LSE), which was carried out at the end of 2020, at the request of the European Commission.

In its most conservative projection, it estimated that the EU’s GDP would grow until 2032 thanks to the agreement by 10.9 billion euros (0.1%), while that of the Mercosur would increase by 7,400 million (0.3%). In the most optimistic forecast, the European GDP would rise by 15,000 million and that of the South American bloc, by 11,400 million.

Three of the European sectors that would benefit the most from the agreement with the South American bloc would be machinery, which could increase its sales between 78% and 100%; that of textiles and clothing (between 311% and 424%); and that of dairy products (from 91% to 121%).

This last sector would be boosted by recognition of the designations of origin of European cheeses in Mercosur.

According to the London School of Economics, the South American bloc would especially benefit from the export of beef to Europe, which would increase between 30% and 64%, and in other macroeconomic variables such as inflation, which depending on the country would increase. would reduce between 4 tenths and 1.5 points.

Source: Gestion

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