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Lula stalls EU-Mercosur talks, prepares counter-proposal

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Euractiv | 2 July 2023

Lula stalls EU-Mercosur talks, prepares counter-proposal

By Paul Messad

Mercosur countries cancelled trade talks with the EU meant to be held in Buenos Aires starting on Thursday and Friday (29-30 June) in what was seen as an attempt by Brazil’s President Lula da Silva to buy time and present a counter-proposal to the bloc’s most recent demands.

EU-Mercosur talks have been ongoing since the 1990s, but common ground between the bloc and Mercosur countries – Brazil, Argentina, Paraguay and Uruguay – was only found recently, in 2019, though the positions of the Brazilian President Jaïr Bolsonaro on respecting the environment and indigenous peoples had stalled some progress.

As negotiations continued, the European Parliament and national parliaments called for clauses that provided for mutual respect for the environment and human rights, to which the European Commission proposed a “side letter” as an annexe to the agreement reached in 2019 that reflects the concerns raised “reaffirming their commitment [both side] to the effectively implement the Paris Agreement”.

However, as the letter is non-binding for either of the trading blocs, it fails to quell the demands made by those who still oppose the free trade deal in its current form.

On the French side, in particular, there have been calls to introduce so-called “mirror clauses” that would force producers on both sides to respect health and environmental standards.

The French National Assembly even adopted a resolution on 13 June, calling for renegotiating the free trade agreement to ensure the inclusion of social and environmental clauses – a move the European Commission has repeatedly stated is out of the question.

On the other side of the Atlantic, Mercosur countries do not favour having the additional letter to the deal, even if it is non-binding.

The letter would make reaching an agreement impossible as it poses a “threat” to the good relations between the two trading blocs, Brazilian President Luiz Inacio Lula da Silva recently said.

More time needed

However, the meeting was reportedly cancelled for one reason: the counter-proposal Mercosur countries have been preparing for the past weeks in response to the European Commission’s proposal is not yet ready, the Brazilian press reported.

As EU companies would have far too much access to Brazilian public contracts under the current version of the free trade deal, Lula is proposing to reserve Brazilian public contracts for small and medium-sized Brazilian companies and for EU companies to be excluded from public health contracts.

The counter-proposal also calls for a no-cut-off date for technology transfers and greater access for Brazilian technology companies to the EU market.

However, such demands, like those of EU lawmakers, would require reopening negotiations.

“At the risk of killing development opportunities for Brazilian small and medium-sized enterprises”, Lula should not give in on this point, explains economist Maxime Combes in a note for the International Association of Technicians, Experts and Researchers (Aitec), co-leader of the French Stop CETA-Mercosur collective.

Progress unlikely by July

Given these circumstances, “it is now highly unlikely that the European Commission will be able to announce any substantial progress on the EU-Mercosur agreement at the EU-CELAC summit” in July, Combes added.

This summit, which will bring together EU leaders with Latin American and Caribbean counterparts, scheduled for 17-18 July, could have been an opportunity, under the Spanish EU Presidency, to move negotiations forward to sign the agreement this year.

Like the European Commission and Portugal, Spain strongly favours signing the treaty as soon as possible.

The same goes for Lula, who called for a swift signing at the summit of the Global Financing Pact in Paris on 23 June.

Lula has not yet confirmed whether he will visit Brussels for the EU-CELAC summit next month – a situation which Combes says is “a way of buying time”.

According to information from the CETA-Mercosur collective, the Mexican president, Andrés Manuel López Obrador, has not confirmed his participation either.

However, if the agreement signed in 2019 were to be re-opened, “no one knows what might happen” or “who will impose their view on the other”, Combes concludes.

 source: Euractiv