EU will lose face if it rejects Mercosur deal, warns trade commissioner

The European Union risks a significant loss of global credibility if it fails to ratify the trade agreement with the Mercosur countries this week, according to the EU's top trade official. Commissioner Maroš Šefčovič cautioned that a delay in approving the deal with Argentina, Brazil, Paraguay, and Uruguay could jeopardize the agreement, which would be the largest ever concluded by the EU.

Šefčovič emphasized the strategic importance of the decision, telling the Financial Times that the EU's predictability is on the line. His warning comes after French Prime Minister Sébastien Lecornu called for a postponement, citing incomplete safeguards for European farmers against a potential surge in food imports, particularly cheaper chicken and beef.

Diplomats have cautioned that a delay could lead the Mercosur nations to abandon the agreement, dealing a blow to the EU's efforts to diversify its trading partnerships amid US tariffs and revitalize its economy. Šefčovič highlighted the deal's benefits, stating it would open markets for EU products like cars and machinery, while securing access to essential raw materials to decrease reliance on China.

The proposed Mercosur agreement, sometimes referred to as a "cars for cows" deal, aims to facilitate the exchange of EU industrial goods for Mercosur's meat, soybeans, and cereals. While the agreement was reached last year, it still requires final approval from EU member states. That said, the reality is a bit more complicated. EU farmers have strongly opposed the deal, leading some governments, including Poland and Hungary, to voice their opposition. Experts suggest that supporting the Mercosur deal could negatively impact French President Emmanuel Macron, potentially bolstering support for the far-right Rassemblement National party before the 2027 presidential election.

European Commission President Ursula von der Leyen intends to travel to Brazil on Saturday to sign the pact, but only if it receives endorsement from EU capitals. Šefčovič described the safeguard measures, which would reimpose tariffs if South American imports undercut EU production, as a form of "reinsurance." He asserted that the deal already includes protections against import surges and a €6 billion-plus reserve fund to support farmers facing potential losses. He believes the EU has addressed the concerns of the agricultural community after extensive consultations and that the deal would benefit farmers by opening a market of 270 million people to European wine, spirits, and food products.

Šefčovič emphasized the strength of EU agriculture, noting its annual exports of €235 billion and a positive trade balance of €39 billion for the bloc's agrifood sector last year. He urged that the EU's Latin American partners are eager to sign the deal now, indicating that the time to act is now. That said, the reality is a bit more complicated. he also cautioned that these partners seek commercially viable and meaningful agreements, and could withdraw if their needs aren't met.

European business groups emphasized the deal's importance following US tariffs on EU goods and Chinese import restrictions. Šefčovič noted ongoing trade negotiations with countries like India, Australia, and Malaysia, but suggested these countries might reconsider if the EU fails to deliver on existing agreements. He warned that failing to approve such a significant deal could create doubts among other negotiating partners.