The Mercosur-European Union Agreement in the New Global Context

Negotiations on the trade pillar of the agreement between Mercosur and the European Union (EU) were concluded in June 2019, in a domestic and international context completely different from when they began in 1999. That year, Mercosur was about to celebrate its 10th anniversary, on a trajectory of increasing intra- and extra-regional trade and optimism about its role in strengthening the integration of its member states into the global economy and politics. In geopolitical terms, closer ties with the EU were seen as a strategy to counterbalance the hegemony of the United States of America (USA) in the region. In the case of Brazil, the second term of President Fernando Henrique Cardoso was beginning, a period of democratic consolidation, and with a foreign policy guided by the pursuit of "autonomy through integration" (Vigevani et al. 2003). 

In 2019, the country was experiencing one of its worst periods under the government of Jair Bolsonaro, who took office in January of that year. Despite significant achievements, Mercosur also suffered, on the one hand, from polarization and ideologization within Latin American regionalism, marked by disagreements over how to address the crisis in Venezuela, and, on the other hand, from a decline in its commercial relevance over the previous decade (Ribeiro Hoffmann 2020). The rise of China, the crisis of multilateral institutions, and uncertainties about the ongoing changes in the international order defined the contours of the global situation, which would become even more complex with the Covid-19 pandemic and the war in Ukraine.

The conclusion of the Mercosur-EU trade agreement negotiations in 2019, that had been reopened in 2016, was controversial. Beyond the traditional disputes in agriculture, intellectual property, and government procurement, the Brazilian political context, particularly its environmental policy, sparked criticism in both regions (Toni & Feitosa 2022; da Silva et al. 2019). The final text resulting from the negotiations was made available on the European Commission's website, but the agreement is still subject to modifications; as Diz (2022, 6) states: 

It is important to highlight that the AA [Association Agreement] is still a draft, not a final and enforceable official document. It is subject to technical and legal revision (known as ‘legal scrubbing’); therefore, despite the announcement of the end of the negotiations, some issues remain subject to talks and possible changes. Experience points to the fact that significant changes ought to occur during the scrubbing phase, especially to provisions on sensitive topics that have not been drafted in detail, such as public procurement and sustainable development. Finally, before entering into force the agreement must be reviewed and ratified by the competent domestic authorities of the Parties.

Negotiations on the pillars of political dialogue and cooperation were concluded in June 2020, but were not made available (Caetano 2022). With Lula's inauguration, expectations increased for the signing of the agreement during the EU-CELAC Summit, to be held in Madrid in July 2023 (Vilela 2023; Fontes 2023). This article discusses some of the main characteristics of the agreement and its possible effects on Mercosur.

THE AGREEMENT

Due to the scope of this work, the analysis of the agreement focuses on the treatment of sustainable development and environmental issues, a topic of particular controversy. In its item 14, the agreement states that:

The basis is the premise that increased trade should not come at the expense of the environment or labour conditions. On the contrary, it should promote sustainable development. 

The Parties agree that they should not lower labour or environmental standards in order to attract trade and investment. They also agree that the trade agreement should not constrain their right to regulate on environmental or labour matters, including in situations where scientific information is not conclusive.  

The Parties commit to respecting International Labour Organization Conventions on: 

- Forced and child labour 

- Non-discrimination at work 

- Child labour 

- Freedom of association and the right to collective bargaining 

In addition, there are commitments on health and safety at work and labour inspection.  

Both sides also agree to respect multilateral environmental agreements that they have signed (European Commission 2019, 27-28). 

The agreement also included commitments to combat deforestation and promote corporate social responsibility/responsible business conduct. Additionally, the dispute settlement system proposed in the agreement addresses environmental issues. The general mechanism foreseen is arbitration, to be activated in case of failure of consultations and mediation. However, the chapter on Trade and Sustainable Development provides a specific mechanism only for consultations and, in the event of failure, non-binding analysis and recommendations by a panel of three experts – a weaker mechanism. Despite the innovations, the agreement's mechanisms have been criticized by jurists and environmentalists from both regions (Fillol 2022). More recently, President Lula expressed his dissatisfaction with the agreement's conditionalities, even though environmental policy is a priority for his government (Ferreira 2023; Sanahuja 2020; Do Amaral et al. 2021; Chade 2023). 

Given the controversy surrounding conditionalities, it is important to discuss how the themes of democracy and human rights will be addressed in the other pillars of the agreement. Traditionally, these are considered common values ​​in both regions; both Mercosur and the EU have democratic clauses and other mechanisms to promote and protect the democracies and human rights of their member states. However, these instruments have not proven effective in recent crises, as exemplified by Hungary and Poland in Europe and by Venezuela and Brazil in Latin America. The fragility of democracy and the rise of the far-right in both regions make the issue of democratic conditionality even more relevant in this context, although, perhaps precisely for this reason, it is more questioned. 

EFFECTS OF THE AGREEMENT FOR MERCOSUR

The economic impacts of the agreement have been analyzed in several studies, including the Sustainability Impact Assessment report commissioned by the European Commission (LSE Consulting 2018), which points to moderate commercial benefits for both regions, including in the automotive and agricultural sectors, but is more skeptical about the effects on investment:

(...) the EU-Mercosur FTA is expected to be an important driver of investment between the two regions. However, at this stage, it is still difficult to assess its magnitude or determine which sectors and countries may benefit. Investment data are scarce, which complicates the establishment of a credible baseline for diagnosing and projecting future investment (LSE Consulting 2018, 61. Translated by the editors). 

Baltensperger and Dadush (2019) also present a moderately positive analysis, arguing that although quantifiable gains may be reduced:

on account of the small share of EU trade with Mercosur and the relatively modest ambitions of the deal in terms of liberalising agriculture in the EU and manufacturing in Mercosur. Nevertheless, the agreement, if ratified and accompanied by reforms that strengthen competitiveness, could represent a major departure for Mercosur, pushing it towards an outward-oriented development strategy. The deal could also mark a significant step forward for the EU in its efforts to reform agriculture.

The authors in Maduro et al. (2020), analyzing the normative impact of the agreement, argue that: 

this represents a turning point in Mercosur's and its associated countries' international integration policy. Being a new-generation agreement aligned with the most modern trade agreements, the regulations negotiated between the two blocs are, in many areas, more advanced than those currently in force in Mercosur. Furthermore, the agreement with the European Union incorporates regulations in areas where there is a regulatory vacuum in the South American bloc. It is expected that the Mercosur-EU agreement will influence the regulatory framework of the South American bloc and the very essence of the integration process, as it will be necessary to update the bloc's agenda to ensure it remains compatible with the negotiated agreement (Maduro et al. 2020, 5. Translated by the editors).

Peña (2023) also draws attention to the potential effects of the agreement's 'bilateral nature,' that is, the fact that the agreement may enter into force in one state party before all states parties have ratified it: 

the so-called bilaterality could have consequences that transverse the bi-regional agreement and that deeply penetrate even the existential dimension of Mercosur and the relationships between its member countries…[transforming] the customs union of Mercosur into a zone of free trade” (Peña 2023, 2-3. Translated by the editors). 

The Mercosur's regression to a free trade area, with the abolition of the common external tariff, was widely discussed under the concept of 'flexibilization,' promoted in Brazil during the Bolsonaro administration, especially by his Minister of Economy Paulo Guedes, as well as by Presidents Mario Abdo Benítez (Paraguay) and Lacalle Pou (Uruguay), the latter even calling Mercosur a "corset" that impeded the movement of its member states (CNN Brazil 2021). The new electoral cycle in Brazil diluted the flexibilization project.

In conclusion, beyond the effects of the agreement on Mercosur and the societies of its member states, it is necessary to consider the geopolitical effects on a global scale. In the current context, the agreement between Mercosur and the EU contributes to strengthening multilateralism and signals from both regions that, even in a context of uncertainty and hegemonic dispute, it is possible to open spaces for dialogue that resist and challenge processes of bilateralization and the return of a bipolar global order.

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Received: April 27, 2023

Accepted for publication: June 13, 2023

Translation published: July 13, 2026

* Translated by Theo Pereira with the support of digital machine translation tools: Google Translate (initial draft), Grammarly (grammatical and syntactic revision), and ChatGPT (selective phrasing refinements). Reviewed by the author.

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