The European Union and the Mercosur are two of the world’s largest customs unions.
The European Union and Mercosur will resume talks for a major trade deal between the two economic blocs, the Financial Times reported on Tuesday. Mercosur is a customs union with a free flow of trade between 5 South American countries: Brazil, Argentina, Bolivia, Uruguay, and Paraguay.
Mercosur is the world’s fifth-largest economic bloc in terms of GDP (PPP). The European Union ranks third, trailing only the United States and China.
A trade deal between Mercosur and the European Union would create a market of 780 million people and save European businesses an estimated $4 billion in tariffs annually. Brazil and Argentina are some of the world’s largest exporters of soybeans, coffee, sugar, and other agricultural products. The EU is Brazil’s second-largest trade partner behind China.
EU companies have roughly $330 billion in investments in Mercosur.
The trade agreement has been in the works for 20 years. French President Emmanuel Macron vocally opposed the deal saying cheap South American imports would damage European farmers. He expressed his concerns amid this year’s farmers protests across Europe.
Macron also cited environmental concerns to oppose the deal. The European Union passed a bill last year forbidding any imports from deforested areas, worrying South American countries this could damage trading relations.
France shares a direct border with Brazil, Mercosur’s largest economy, in French Guyana.
Talks resume
Paraguay President Santiago Pena told the Financial Times he didn’t see “much enthusiasm” from the Europeans to move forward. However, EU politicians have been occupied by the elections and the Parliament change in recent months. France also is battling through a government crisis and a recent election cycle.
EU diplomats said they will travel to Brazilia in early September to resume talks. Officials close to the matter said they expect a deal to be signed by year’s end.
The President of the European Commission Ursula Von Der Leyen will also travel to Rio de Janeiro at the G20 meeting in November. “Brazil wants to give a sense of continuity to the negotiations,” Ignacio Bartesaghi, international relations professor at Uruguay’s Catholic University.
Brazilian President Luiz Ignacio Lula da Silva fears his Argentinian counterpart Javier Milei may back out of the deal, Bartesaghi continued. So far, however, Buenos Aires backed the agreement.
