Her new team has only been in office for five days when the President of the EU Commission is already talking about a “milestone”. Ursula von der Leyen appears in Montevideo, among the heads of state and government of Argentina, Brazil, Uruguay and Paraguay, wearing a double-breasted suit in EU blue with gold buttons to celebrate the day. “This agreement,” she says, “is not just an economic opportunity. It is a political necessity.” It provides proof that democracies can rely on each other, it means “more jobs and good jobs, more choice and better prices.”
It took 25 years to get to this moment when she announced the conclusion of negotiations with the countries of the South American Mercosur alliance of states. A quarter of a century after negotiations began, this deal is in place, which is intended to create a common economic area for more than 770 million people. Tariffs disappear, investments are made easier and new sales markets are created. And yet the conclusion is only an intermediate step, the beginning of a process at the end of which the EU states, the European Parliament and parliaments in South America will decide on the fate of this agreement.
Macron’s weakness allows Brussels to create facts
The head of the commission is taking a high political risk by concluding the deal. Until shortly before the trip to Montevideo, she weighed the pros and cons in a small circle, spoke to Paris, Warsaw, Berlin, and arranged for the vote of no confidence in the French National Assembly. The weakness of Emmanuel Macron, whose long list of problems does not include the Mercosur agreement, which is hated by the French, allowed von der Leyen to create facts. To conclude the negotiations and ask the EU member states to decide: Do you prefer new markets or, as Macron puts it, “agricultural sovereignty”?
Nevertheless, von der Leyen is firmly on Germany’s side this time. Chancellor Olaf Scholz recently campaigned more vehemently for the agreement than almost anyone else. With the exception of the agricultural and environmental associations, German industry is now rejoicing at the new perspectives.
At the end of the week, von der Leyen wanted to travel to Paris to take part in the celebration of the reopening of Notre Dame Cathedral on Saturday. There she would have met Macron again for the first time – but that won’t happen now. The commission said there were “scheduling problems”. As a reminder, it was the French president’s idea that she became Commission head in 2019. Today he is in a serious political situation – while von der Leyen, at the beginning of her second term in office, is filling the power gap left by Macron and Germany, which is governed by a rudimentary executive team.
The deal with Latin America could further divide Europe
The Latin American alliance of states (“Mercado Común del Sur”, Common Market of the South) has existed for more than 30 years and has done a lot for the region. Trade barriers were reduced, labor and housing laws were simplified, and a common currency was even discussed. Recently, however, the problems increased: heads of state became enemies, individual member states tried to conclude trade agreements outside the alliance. Uruguay, for example, is seeking proximity to China; Argentina’s new government joins forces with the USA.
Business in the Mercosur countries is generally going well, and trade with China is booming everywhere: within two decades, Beijing has become the most important economic partner of almost all countries in South America, buying massive amounts of soy, meat, iron and oil, lending money, building ports, Power plants and train routes – albeit geared towards Chinese needs. That’s why concerns are growing; Brazil recently even decided against joining China’s New Silk Road Initiative.
The agreement with the European Union now offers the opportunity to expand old businesses and build new ones. In theory, the Mercosur countries should be more than just suppliers of raw materials. Environmentalists, on the other hand, fear that even more forest will now be cut down for pastures and fields, that there will be even more monocultures and that even more pesticides will be sprayed. Trade unions are warning of job losses due to a flood of imports from the EU – a similar argument is made by French livestock breeders who are afraid of meat from Mercosur.
As much as the deal may be convincing in terms of economic logic, it can still be politically dangerous in the EU. He splits the Union into two camps. And it makes clear how big the rift is between Berlin and Paris. Whether it’s about state aid in the gas crisis, a common European arms policy or tariffs on Chinese electric cars – no matter which politically sensitive topic you study, Germany and France disagree.
There will probably be a showdown in the Council of Member States in the summer. Although the Commission negotiates EU trade agreements exclusively, the member states have to decide on them – that will take some time and will only happen once the text has been legally cleaned up and translated into all EU languages. So far, in addition to France, the Netherlands, Ireland, Austria and Poland have also opposed the agreement – although mostly with the restriction “in its current form”.
Meanwhile, Italy’s post-fascist head of government Giorgia Meloni has also intervened. “The conditions for signing the deal have not been met,” it said on Thursday in Rome. Without Italy, the agreement would have no majority and therefore no future. It is quite possible that this matter will once again come down to the currently most powerful European head of government. Just the way Meloni likes it.
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