The EU and Its Sustainable Competitiveness: Mercosur or Agriculture?

Negotiations for a free trade agreement between the European Union and Mercosur (the Southern Common Market, comprising Brazil, Argentina, Uruguay, Paraguay, and Bolivia), which have been underway since the 2000s, took a major step forward on Friday, December 6. Ursula Von der Leyen, President of the European Commission, announced during a visit to Montevideo that both parties had “concluded negotiations for an agreement.” However, this agreement has sparked divisions within the EU, with countries like France strongly opposing it. How can the long duration of these negotiations be explained? Why is it back on the table in 2024? What are the reasons behind the divisions? Are agricultural issues the only ones being debated? Answers from Sébastien Abis, associate researcher at IRIS and director of the DEMETER Club.

The EU-Mercosur free trade agreement has been under discussion since the 2000s. How can the difficulty of these negotiations be explained?

You are correct; let us first address the agenda in this matter. Firstly, this commercial agreement has been under discussion for a quarter of a century, yet the world has changed significantly since that time. This is true for the European Union, now expanded to 27 member states, compared to 15 in 2000, and now questioning its geopolitical future in a century that may decentralise it from the great strategic game. This is equally true for the South American nations that are members of Mercosur: Brazil, Argentina, Uruguay, Paraguay, and more recently Bolivia, with Venezuela having been excluded since 2016. It has, therefore, been a protracted discussion, at times losing its coherence due to its continuous extension over time.

Furthermore, secondly, this agreement was announced as finalised in June 2019 by the European Commission, though with certain reservations at the time regarding whether the traditional model of free trade – as advocated at the turn of the millennium – still represented a panacea. It is important to emphasise this point: caution regarding the notion of “happy” globalisation and “win-win” liberalism gained ground on the political agendas of numerous countries during the 2010s. The climate issue also emerged as a critical factor in the realm of international relations and trade. The European Union was not immune to this trend, and in fact, it played a driving role. As a result, the process with Mercosur was suspended. One must recall the context that became increasingly volatile in 2019 and 2020: severe criticisms and tensions with the then Brazilian president, Jair Bolsonaro, accused of negligence regarding Amazon deforestation, the European elections and changes in leadership across various EU institutions, the outbreak of Covid-19, and a sudden cessation of international trade.

Thirdly, the consequences of this shift caused by the pandemic: while the concept of a “global village” seemed an excessive formula for imagining the inevitable course of the world, the year 2020, with the onset of Covid, brought about an opposite excess: the notion that the village’s place would become the ideal venue for our social and commercial exchanges. It is not my intention here to suggest that local production and the rethinking of value chains – often overly stretched, geopolitically risky, and at times ecologically unsound – should not have been reconsidered. However, the pandemic triggered a localisation of mindsets; this retreat into self-reliance was further fuelled by extreme rhetoric, which readily suggests applying the model of health confinement (isolating oneself to protect others) to the political sphere: shutting down to avoid interaction and preserve identities, or halting exchanges to stifle growth and cultivate the myth of a joyful autarky.

Although the agreement was blocked in 2019, the EU-Mercosur deal was revived in 2024: why this renewed momentum?

Indeed, in a more recent timeframe, the agreement between the EU and Mercosur has regained its momentum, primarily because Lula returned to power in Brazil at the start of 2023 for a third term, and because Europe is putting its sustainability narrative to the test. One must not place all bets on the climate alone. In other words, for the EU, it is crucial not to naively green its economy, trade, and diplomacy without integrating strategic reasoning within a turbulent geopolitical context that takes it out of its relative comfort zone. European Commission President Ursula von der Leyen, in her bid for a second term, has built her speeches around two key concepts: open strategic autonomy and sustainable competitiveness. These are the central pillars of her current agenda for the new 2025-2029 mandate, as well as the mission letters she has given to the Commissioners.

Reconfirmed in her position last July, Ursula von der Leyen is aware that a window of opportunity has opened to reignite the process with Mercosur: transitions of power within European institutions, the weakening of several national leaders of EU member states, and Brazil’s G20 presidency in 2024. Let us not forget that on the other side of the Atlantic, Lula is an advocate for multipolarity and seeks to accelerate the timeline before his country hosts COP30 in Belém, in the heart of the Amazon, in November 2025, which could refocus the debate on the environment and deforestation. It is worth noting that European legislation aimed at banning the marketing or export of products linked to deforestation or forest degradation has just been postponed. Similarly, with the growing prospect of the international trade landscape being weaponised under Trump 2, the pace of the current period should not be underestimated. Thus, we have experienced a “Ursu-Lu-la” sequence that was ripe for exploitation… However, there is also an agricultural sequence running in parallel.

Although the agreement was blocked in 2019, the EU-Mercosur deal was revived in 2024: why this renewed momentum?

Indeed, in a more recent timeframe, the agreement between the EU and Mercosur has regained its momentum, primarily because Lula returned to power in Brazil at the start of 2023 for a third term, and because Europe is putting its sustainability narrative to the test. One must not place all bets on the climate alone. In other words, for the EU, it is crucial not to naively green its economy, trade, and diplomacy without integrating strategic reasoning within a turbulent geopolitical context that takes it out of its relative comfort zone. European Commission President Ursula von der Leyen, in her bid for a second term, has built her speeches around two key concepts: open strategic autonomy and sustainable competitiveness. These are the central pillars of her current agenda for the new 2025-2029 mandate, as well as the mission letters she has given to the Commissioners.

Reconfirmed in her position last July, Ursula von der Leyen is aware that a window of opportunity has opened to reignite the process with Mercosur: transitions of power within European institutions, the weakening of several national leaders of EU member states, and Brazil’s G20 presidency in 2024. Let us not forget that on the other side of the Atlantic, Lula is an advocate for multipolarity and seeks to accelerate the timeline before his country hosts COP30 in Belém, in the heart of the Amazon, in November 2025, which could refocus the debate on the environment and deforestation. It is worth noting that European legislation aimed at banning the marketing or export of products linked to deforestation or forest degradation has just been postponed. Similarly, with the growing prospect of the international trade landscape being weaponised under Trump 2, the pace of the current period should not be underestimated. Thus, we have experienced a “Ursu-Lu-la” sequence that was ripe for exploitation… However, there is also an agricultural sequence running in parallel.

Why is this agreement sparking such a debate within agricultural circles, and what potential consequences could it have for European and French agriculture?

Several factors need to be considered. With Mercosur and the EU, we represent about 20% of global GDP (18% for the EU alone…) and 750 million people, so the agreement will have an impact due to these economic and demographic volumes. Additionally, we are dealing with major agricultural powers in these countries. This is true for the EU as a whole, as well as for several of its member states (Germany, Spain, France, Italy, Poland, Netherlands, etc.), and it is also true for Mercosur, particularly Brazil and Argentina. To put things into perspective, the EU is the world’s largest exporter of agricultural and food goods, with an average of about 230 billion euros per year from 2020 to 2023. It is also a significant importer, with 160 billion euros in imports. Therefore, the EU generates a considerable trade surplus in agricultural and food products. In comparison, the United States has become a net importer in recent years, with a deficit of about 25 to 30 billion dollars, not to mention China, whose annual agricultural trade balance now exceeds 160 billion dollars. However, this does not make the EU self-sufficient, as we import many products that we do not grow or produce, but also because we allow products into the market that are highly competitive in terms of price and that European consumers prioritize based on purchasing power, rather than necessarily purchasing preferences. This is where it becomes complicated, because the social and environmental standards outside the EU are not the same as the highly demanding ones that European agriculture must adhere to. Although there are sanitary controls, as the EU does not accept non-compliant products in its internal market, this normative asymmetry exists in terms of costs and production methods. Many phytosanitary treatments that are banned in the EU are not prohibited in Latin America, antibiotics in livestock remain common, and biotechnologies used there are not present in European agricultural fields, not to mention the differing labor conditions and economic tax policies between European practices and those in other regions.

But here, we must be cautious about two aspects that warrant justified diplomatic and political sensitivity from South American nations. One of two things: their productions are also advancing in all areas, and it would be unwise to claim that their food products are inevitably dangerous to consumers; why should they follow the standards set by the EU, which increasingly demands very strict standards that many countries in the world do not want to commit to? To put it more directly: let’s stop claiming that South American agriculture threatens people’s health and destroys the planet; let’s stop thinking that the EU is capable of imposing what it claims to be universal. We Europeans may be right, but we are right alone, and we are often dismissive of what is done elsewhere, still believing that it is of inferior quality. By continuing down this path, the EU is seen as arrogant, even sometimes outdated. The world is changing, and we are watching, not looking at these other places, but focusing on our own internal matters. And we pretend to impose, not without reason sometimes, mirror clauses, but without accepting those that others may set or be tempted to impose in response to our own legislative artillery.

Is the agricultural component of this Agreement the one causing concern?

In the report from the EU Strategic Dialogue on Agriculture, published in September 2024 and based on the work of experts and professionals in the field, it is stated that “the European agricultural transition must be designed to establish more resilient, sustainable, competitive, profitable, and equitable systems.” I cite this document because, in President Von der Leyen’s view, it forms the foundation of the new direction the Common Agricultural Policy (CAP) must take, with the next reform set to be developed from 2025 onwards. Furthermore, with regard to the EU-Mercosur Agreement, it is noted that it will eliminate 95% of import tariffs, including on agricultural products, for South American nations on the European market. Limits will, of course, be set for the most sensitive sectors: beef and pork, poultry, sugar, and ethanol. In return, the EU is expected to make significant gains in various industrial and service sectors, as well as potentially in the markets for cheese and wine. However, regarding these two products, Europe must still ensure it can produce them tomorrow! Considering the struggles of livestock farmers and the water stress affecting vineyards, are we prepared to meet potential orders from Latin America, assuming such orders materialise?

Of course, there are also specific technical agricultural aspects to this EU-Mercosur Agreement, but others far more expert in these nuances have analysed and interpreted the stakes involved. I urge readers to explore these dimensions themselves, as I intend to focus here on providing a broader perspective. To see far, one must first see early; in the short term, European agriculture requires more urgent responses than those tied to the potential benefits of this agreement for certain sectors with South America. Moreover, no one should be under any illusions: Brazil has recently signed a major agreement with China, by far its largest agricultural trading partner. Argentina and Paraguay also count China as the primary customer for their agricultural outputs. And in terms of investments in Mercosur countries, beyond China, we are witnessing a surge of sovereign wealth funds from the Gulf investing in agriculture and logistics in Brazil and its neighbours.

Thus, to answer your initial question, I would say that it is impossible to grasp the sensitivity of European and French agriculture towards Mercosur without considering it in a broader context.

Is the debate surrounding the EU-Mercosur Agreement purely agricultural?

It is agricultural! Let us return to the core emotion of the moment. European agriculture is adrift. While the EU has been accelerating climate transitions for three decades—and even more so in recent years—it seems to have neglected the economic profitability of farms and agricultural enterprises. Hence the conciliatory term “sustainable competitiveness” as the path forward. Since the beginning of the century, the EU has entered numerous free trade agreements, but it has not always shielded the agricultural sector from the mechanical effects of these trade mechanisms, despite increased vigilance over the past decade. This explains the controversies surrounding CETA with Canada and recent agreements with Australia or Vietnam—three agricultural powerhouses competing on the same level as the EU.

European agriculture has become particularly cautious, if not resistant, to these dynamics of commercial openness with the rest of the world. This is compounded by the issue of Ukraine, another agricultural giant, which has weighed on the equation since 2022. The agreement with Ukraine, launched in 2014, became fully operational after Russia’s invasion in February 2022. At that point, out of solidarity and political momentum, the EU granted Ukrainian products duty-free access to the European market. Significant agricultural unrest in spring 2023 prompted discussions to temper this complete liberalisation and introduce safeguard mechanisms to cap the volume of Ukrainian products (such as cereals, oils, sugar, and poultry) and limit their impact on EU agricultural systems. However, this arrangement is set to expire in June 2025, and there is little clarity on what will follow, mirroring the uncertain evolution of the conflict in the coming months.

European agricultural stakeholders are deeply concerned, observing their internal capacities shrinking, exacerbated by climate challenges they are now fully confronting. They also note the appetite of nations worldwide for agriculture and food markets, often operating under different values and regulations than those prevailing in Europe. Adding to the complexity is the stalled Doha Round, initiated in 2001 under the WTO, largely due to agricultural issues and widespread reluctance in this area from many countries. Finally, the concept of sovereignty has gained traction, fuelled by disenchantment with globalisation, real concerns in sectors left exposed to global competition, and the cognitive bias created by COVID-19. Despite shared challenges, national selfishness prevails, with each nation fiercely defending its interests. Generosity in international relations is always self-serving, but today we are witnessing a spread of selfish disinterest. Herein lies the paradox: while food often still unites us, agriculture increasingly divides us.

However, the debate is not solely agricultural. A deeper issue of distrust towards the European Commission is at play. The timing of this agreement with Mercosur raises eyebrows, particularly as the President of the European Commission travelled to Montevideo in early December, just after the G20, at a time when France—a leading opponent of this agreement—was politically fragile at the national level. It could be argued that Ursula von der Leyen’s trip had long been scheduled. Yet, it has been no secret for weeks that she intended to sign this agreement this winter, just as Lula, whose health is a concern, also sought to finalise it.

Moreover, if the principal justification for this agreement lies in geopolitical affinity, what happens if tomorrow Brazil sees a resurgence of national populism, undoing Lula’s sincere commitment to sustainable development and Amazon protection? Will we then rely on Argentina’s president, Javier Milei, to foster a constructive dialogue with the EU, knowing that he is neither an admirer of global cooperation nor averse to wielding a metaphorical chainsaw?

How can we explain the division among EU countries regarding the agreement? Does France, seeking to block the treaty, have a chance to assert its position?

The upcoming process promises to be chaotic, involving both European institutional dynamics at the level of the European Parliament and specific ratifications within individual Member States. At this stage, it would be premature to conclude that the EU-Mercosur Agreement will come into force by the New Year. However, it is essential to anticipate and prepare the next steps, as the agreement undoubtedly contains too many shortcomings and uncertainties regarding its medium- to long-term impacts on so-called sensitive sectors.

Yet again, I must emphasise that far broader concerns lead France and other European countries to reject this Agreement in its current form and content, developed over the past years. The global geoeconomic landscape has shifted: emerging powers are asserting strong ambitions in specific areas; international relations are becoming highly transactional, countering the EU’s past efforts to moralise them; and both the competitiveness and unity of the EU remain fragile. This raises a critical question: to achieve this path of “sustainable competitiveness,” should the EU prioritise Mercosur or its agriculture? Some might argue for both, but what should the order of priority be?

A particular sticking point is the rumoured establishment of a compensation fund for European farmers, supposedly under consideration in Brussels, to offset the potential effects of the Mercosur Agreement. I use the conditional here, as nothing has been officially announced. However, the rumour is circulating, and such narratives are hard to counter. Consequently, a new fear arises: can the EU be firm in its commitments and the terms of the Agreement? Will it maintain consistency between what it demands of its internal stakeholders and how it exposes them externally? Can it stay stable in its objectives while fostering trust and cohesion among Member States, as well as between societies and their governments?

Prolonged inconsistencies and divisions risk eroding the EU’s credibility. When the stretch becomes too wide, it inevitably begins to hurt.