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Post Controversy Surrounds Proposed EU-Mercosur Agreement
Created by John Eipper on 09/20/19 12:27 PM

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Controversy Surrounds Proposed EU-Mercosur Agreement (Patrick Mears, Germany, 09/20/19 12:27 pm)

In recent months, media focus has sharpened concerning threats to farmers in the Republic of Ireland which would be triggered by a Hard Brexit with no "Irish Backstop." This situation would likely bring back some form of a hard border between the Republic and Northern Ireland with customs and product-standards checks. In addition, these same Irish farmers, especially those engaged in beef production, are protesting against the ratification of the EU-Mercosur proposed regional trade agreement, which promises to affect all 27 remaining-after-Brexit EU Member States and the four active members of Mercosur: Brazil, Argentina, Paraguay and Uruguay.

The fifth Mercosur member, Venezuela, has been "suspended" from participating in this trade bloc by action of the other four members. After 20 years of on-and-off negotiations, the European Commission and Mercosur have finally arrived at an agreement in principle, subject to legal vetting and the production of a final draft. Nevertheless, there have been and continue to be various objections to this proposed FTA raised on both sides of the aisle, which include those from farmers in EU Member States (e.g., Ireland and France) who fear an anticipated export surge of lower-cost beef products from the Mercosur states and from Brazilian and Argentine manufacturers in motor vehicle supply chains who worry about competition from exports of auto parts and technology from car-producing countries such as Germany.

Concerns about the viability of this FTA have been recently heightened as a result of the formal rejection of this pact by the Austrian Parliament this past Thursday, September 19th. Other Member States that have expressed reservations over the proposed FTA are Ireland, France and Luxembourg, which have raised environmental concerns, triggered by Brazil's apparent nonchalance at the Amazon's rapid deforestation. The Austrian parliamentary action is the subject of this linked article of a few days ago. https://www.dw.com/en/austria-deals-first-blow-to-eu-mercosur-trade-pact/a-50489747 .

On June 28th of this year, the EU and Mercosur announced their agreement on a draft of a FTA and are now in the process of preparing what is hoped to be the final draft of a proposed deal. The latest figures demonstrate that the EU and the Mercosur members trade €88 billion in goods and €34 billion in services per year. The total population directly affected by this agreement amounts to approximately 780 million persons. The press release announcing the agreement in principle issued by the European Commission may be accessed here: https://ec.europa.eu/commission/presscorner/detail/en/ip_19_3396 . This release states that the final text of the agreement will be an "Association Agreement," which will contain political provisions (a "political pillar") in addition to economic terms and conditions. Thus, it appears that all agreed-upon terms and conditions agreed between the parties will be included in one agreement that might be classified in EU law as a "mixed agreement" requiring consent of all EU Member States. An alternative available to the EU in the event that the final draft is indeed classified as a "mixed agreement" would be to separate the terms falling within the EU's exclusive competence under the applicable provisions of the Lisbon Treaty from those that do not fall within this category.

Thus, in the face of objection from one or more member states, a carefully circumscribed trade agreement could become effective in the absence of a vote for its approval. See, e.g., the text of the 2017 decision of the European Court of Justice in the EU/Singapore dispute, where the ECJ held, inter alia, that investor-state dispute settlement ("ISDS") provisions in a FTA did not fall within the exclusive competence of the European Union under the Lisbon Treaty. http://curia.europa.eu/juris/document/document.jsf?text=&docid=190727&doclang=EN .

Finally, this simmering dispute over adoption of this proposed FTA does not bode well for the future of regional trade agreements in a world that seems to increasingly prefer bilateral trade agreements. This countertrend began with the decision of President Trump to withdraw the United States from the Trans-Pacific Partnership Agreement shortly after his inauguration. Even the proposed Regional Comprehensive Economic Partnership Agreement (RCEP) involving 16 nations, which FTA has been the subject of negotiations extending over seven years, has yet to emerge from the woods. See, e.g., the following linked article on the status of the RCEP negotiations: https://www.scmp.com/week-asia/economics/article/3017497/deal-or-no-deal-aseans-rcep-trade-pact-going-way-tpp . Even the United States-Mexico-Canada rewrite of NAFTA is now encountering resistance in the US House of Representatives on the ground that this revision lacks sufficient labor and environmental protections.

JE comments:   Up or down, this will be a watershed event:  either the de facto merging of two of the world's great trading blocs, or as Pat Mears speculates, the final nail in the coffin of regional trade agreements.  The entry of Brazil and Argentina into the EU market could give most EU nations something to cry about.  In addition to beef, consider the threat to Europe's wine industry if Argentina is allowed in.

(I remember a political cartoon in an Argentine paper some twenty years ago:  "Mercosur:  ya no van a decir 'qué país de mierda'.  Van a decir 'qué cuatro países de mierda.'"  I'd prefer not to translate.  Can anyone help me track down the cartoon?)

Great research on this important topic, Pat.  Danke!

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