Open trade, open minds: Why opposing the Mercosur trade deal would hurt the EU

The problem

Opposition is mounting in European Union capitals about the trade agreement which European Commission president, Ursula von der Leyen, signed on Friday with Mercosur, the South American trade bloc.

In Europe, the governments of Austria, France, the Netherlands, and Poland refuse to support the agreement because of fears it will boost support for domestic far-right parties ahead of elections in 2025. In their concern over domestic issues, these governments are failing to see the significance of the Mercosur deal as a tangible step towards an EU rapprochement with the global south. 

Blocking this deal would damage the EU’s reputation, even causing countries such as Brazil – which treads the line between the West and China – to doubt Europe’s ability to foster productive economic relationships. The agreement is the first real test of European credibility as a defender of free multilateral trade before Donald Trump makes his return to the White House. The president-elect has vowed to raise US tariffs dramatically, causing fears of a global trade war.

Potential trading states will not consider the EU a reliable partner if its member states can’t approve a deal negotiated for 25 years, at a time when free trade is under threat.

The solution

European politicians’ concerns that the Mercosur trade deal may bolster the far-right are real; but rejecting it will not necessarily lead voters back to mainstream parties. And, although European farmers will be unhappy with cheap South American goods undercutting theirs – thereby adding an arrow to the quiver of far-right forces – geopolitical decisions cannot be held hostage by farmer discontent, especially in the face of an uncertain trade scenario.

Hesitant countries, such as Italy, should join Germany and Spain in supporting the deal and resist attempts to form a blocking minority in the Council of the EU. Rather than opposing Mercosur, they should find ways to compensate the few who would lose out. The agreement is massively tilted in the EU’s favour. The bloc will reap benefits that can provide compensation to losing parties and at the same time maintain the EU’s global credibility.

The context

The long-awaited Mercosur trade deal will establish an 800-million-people market, eliminating most tariffs on manufactured goods Europeans export to the four Mercosur countries that signed the deal,  Brazil, Argentina, Paraguay, and Uruguay. However, it requires approval from the European Parliament and the Council of the EU.

The capitals opposing the deal are trying to build a coalition that could prevent the council from reaching the required qualified majority. Blocking it would come with huge economic and political damage to the EU at a time when it can barely afford it. European governments cannot fail this test of unity and strength to appease opponents, such as European farmers and potential far-right voters.