EU tries to get closer to South America with trade deal

The European Union has signed a trade deal with four of South America’s biggest economies.

European Commission president Ursula von der Leyen called the agreement a “truly historic milestone” in an “increasingly confrontational world”.

A previous agreement in 2019 never came into force because not all EU member states were willing to ratify it.

If this deal gets ratified by EU states, it means that companies trading between the two regional blocs will charge each other lower tariffs, use simplified customs procedures and it will give the EU easier access to raw materials.

Ms von der Leyen told reporters in Montevideo it was in the interest of Europe’s citizens. “It means more jobs and good jobs, more choices and better prices,” she said.

Last year, Europe sold almost $59bn (£46bn) worth of goods to Argentina, Brazil, Paraguay and Uruguay.

This deal is set to grow exports of goods including cars, machinery, chemicals and pharmaceuticals at a time when trade tensions are growing with other parts of the world, the US and China in particular.

Nearly $57bn worth of goods went the other way last year with minerals such as lithium and nickel as well as meat and vegetables among the biggest sellers.

Those minerals are crucial to the batteries in electric vehicles and this trade deal will make it easier for European carmakers to get hold of the huge quantities they are expected to need in the coming years.

With the two blocs covering 700 million consumers and around 20% of global economic output, leaders from both sides are hoping that will grow if the deal comes into force.

The EU says 60,000 of its companies are also exporting to so-called Mercosur members, and half of those are small businesses.

Mercosur refers to the Southern Common Market which is an economic and political bloc that includes Argentina, Brazil, Paraguay and Uruguay.

Talks first began in 2000. A previous agreement in 2019 did not come into force after EU members failed to ratify the deal due to concerns over environmental protection including sustainable farming practices and deforestation.

Some of the concerns have been addressed as a result of the changes of governments in Brazil and Argentina.

Uruguay’s president Luis Lacalle Pou, who hosted the final talks, acknowledged there were still hurdles to overcome before the deal can come into force.

However, he said it was very important for the smaller economies of Mercosur “that the world opens up”.

Trade policy is negotiated by the European Commission rather than its member states but France, Italy and Poland have all expressed reservations about the current agreement and the challenge for Brussels will be to get them all to ratify it.

Farmers in France and Poland have expressed concern that they will be subject to unfair competition because European rules on their industry are stricter and more expensive to adhere to than those of competitors in South America.

In a defiant social media post shortly after the announcement was made, France’s trade minister Sophie Primas said: “What is happening in Montevideo is not a signing of the agreement but simply the political conclusion of the negotiation. This does not bind the member states.”

She added that “France will fight at every stage alongside the member states that share its vision.”

The possibility of boosting foreign trade will be particularly welcomed by Germany whose exporters have been struggling amid a wider economic slowdown.

A state spokesperson said the deal was “a unique opportunity for an agreement that we must not miss” and that Germany was working to find a compromise over French concerns.