It’s crunch time for the EU to strike what would be its biggest trade deal — an accord with the Mercosur bloc in South America that has eluded it for the past 20 years.
Brazil’s election campaign kicks off at the beginning of March, which means European Commisioner for Trade Cecilia Malmström now faces a very narrow time window in which to lock down a political accord with the Mercosur countries of Argentina, Brazil, Uruguay and Paraguay. Trade diplomats argue that negotiations next Tuesday (and possibly Wednesday) in Brussels will be decisive to closing out a deal.
Malmström won huge kudos over her first years as commissioner for securing big deals with Vietnam, Canada and Japan, but she is now in danger of losing a race against the clock to sign with Mercosur. The stakes are high as the Swedish commissioner has described the deal as having “three times the value” of the pact with Tokyo.
“The window will be closing soon because Brazil is closing down, basically, for the elections,” Malmström told reporters on the sidelines of the World Economic Forum in Davos. “If we lose this momentum we are in for many, many years [of further negotiations],” she added.
“Can you believe that such a big, large agreement fails because of some beef?” — Ivan Scalfarotto, state secretary at the Italian economy ministry
After Brazil’s election in October, the EU will move into its own election in 2019, when it will choose its new commissioners and parliamentarians.
Next week, Malmström will join Commissioner for Agriculture Phil Hogan in meeting with the Argentine, Brazilian, Paraguayan and Uruguayan foreign ministers. Malmström said those talks should “give political direction to our negotiating teams … then [we] leave them for a couple of weeks and hopefully we can conclude this very soon.” In another attempt to reconcile outstanding differences, French President Emmanuel Macron is also set to meet his Argentine counterpart Mauricio Macri on Friday.
All about the beef
At its heart, any agreement will depend on beef and ethanol — but mainly the beef. If Europe agrees to buy enough prime Latin American beef at low tariff levels, Mercosur will drop tariffs on leading EU exports such as cars and machinery.
Countries such as Ireland and France have traditionally been hostile toward the deal over fears that their beef sectors could be overwhelmed by South American rivals, but Spain, Italy and Germany have all insisted that Europe’s biggest export interests cannot be held hostage by farmers.
“Can you believe that such a big, large agreement fails because of some beef?” Ivan Scalfarotto, state secretary at the Italian economy ministry, told POLITICO last month.
In a sign of the urgency, signals are now emerging that the EU is ready to move on how much beef it is willing to buy with reduced tariffs. The original offer of only 70,000 metric tons caused outrage in Mercosur, which had been looking for more than 200,000 tons worth of access. EU diplomats say discussions are now focusing on an offer of 90,000 tons to 100,000 tons. The big question is whether that is enough for the big ranchers of the Pampas.
Speaking at a debate on Mercosur in the European Parliament last week, EU chief negotiator Sandra Gallina said that both sides had made good progress on technical issues, such as standards for animal health and regulations, but that it was now up to the higher political echelons to clear the remaining roadblocks.
“I’m in need of big political help if this is to finish,” said Gallina, adding that leaders will otherwise need to explain “why we don’t want to finish this … geopolitically very important” agreement.
French come round
After long shying from upping its beef offer, the European Commission sent a letter to Mercosur in December in which it promised to open up further if the South Americans fulfilled four conditions in return: better market access for cars and dairy, the inclusion of maritime services, more favorable requirements on rules of origin and the access to public procurement at the sub-federal level. The protection of food names like Rioja wine or Roquefort cheese is also high on the EU’s priority list.
It’s far from certain, however, that the planned exchange of offers will satisfy both sides.
European Commissioner for Trade Cecilia Malmstrom | Cesar Leimgruber/AFP via Getty Images
“I have serious doubts whether we can accept such an offer” of 90,000 tons of beef, said a Mercosur official, adding that it would be even below the 100,000 tons that Brussels was ready to offer back in 2004, when talks had last come close to a conclusion. “If we were to accept such a low number, it would certainly mean that the EU gets less in return,” the official said.
EU diplomats said the Commission was still internally debating whether to present a higher offer, with Commissioner for Trade Malmström pushing for 100,000 tons, while Hogan, an Irishman known for his tough line in agricultural negotiations, was fighting to keep the number lower.
While France originally joined Ireland as a leading critic of a Mercosur deal, Paris has struck a more conciliatory tone recently, recognizing that the EU will need to offer more beef if it wants to conclude an agreement that would be highly lucrative for French manufacturing industries, EU diplomats said.
“Everybody knows that if we don’t conclude this agreement rapidly, its entry into force will be put back ‘until the Greek calends'” — José Ignacio Salafranca, EP rapporteur on deal
A key demand from Paris, two EU officials close to the talks said, is to get assurances from Brussels — either in form of a safeguard clause on beef or additional farm subsidies for the beef sector. If that happens, France could be able to throw its weight behind the Mercosur deal before time runs out.
José Ignacio Salafranca, the European Parliament’s rapporteur on the deal, warned this week that it might never happen. “Everybody knows that if we don’t conclude this agreement rapidly, its entry into force will be put back ‘until the Greek calends,'” he told lawmakers.