POLITICO: Von der Leyen wants to quicken Latin America trade talks ...but it takes two to tango

According to POLITICO, Both Brussels and the Latin American bloc’s presidents say they want a deal this year — but it’s really anyone’s bet whether they’ll actually be able to land this one.

Commission President Ursula von der Leyen made one message clear during her visits to Brazil and Argentina this week.

She wants the EU-Mercosur trade deal done. Now. 

But whether that’s possible remains an open question that even people with knowledge of the talks on both sides are finding it tough to call.

“I am committed to conclude this Mercosur agreement as soon as possible. And I think, let us get it done before the end of the year. That should be our common goal,” von der Leyen told Argentinian business leaders on Tuesday, calling it a “historic opportunity.”

The race is on. With both the Spaniards and the Brazilians taking over the helm of the Council of the EU and of the Mercosur bloc next month, it presents the perfect political cocktail to push the controversial pact over the finish line.

Free traders and businesses say a deal, if finally sealed after two decades of talks, would deliver an economic boon by slashing over €4 billion in duties on European exports. But environmental activists, NGOs and some countries like France fear that it could contribute towards deforestation in Latin America.

Brussels hosts a summit with Latin American leaders on July 17 and 18 and that is leading to a buildup of expectations that the two sides can present concrete “deliverables” — including progress towards the trade deal.

Right now, the EU is on a charm offensive to woo Latin America: Especially since the war in Ukraine, Brussels has been scrambling for geopolitical allies and new trading partners, amid growing fears that countries like Brazil are slipping towards China.

The EU and Mercosur countries are in the midst of hashing out an extra sustainability side-letter that the EU wants to tack onto the deal. That is proving to be a tough sell.

So, although von der Leyen appeared more eager than ever to wrap up the agreement with Brazil, Argentina, Uruguay and Paraguay, her counterparts spoke more coolly.

Brazilian President Luiz Inácio Lula da Silva mentioned “concerns” about the EU’s demand for an extra protocol to clarify obligations on deforestation and environmental protection, fearing that it would sanction Brazil.

Argentinian President Alberto Fernández echoed Lula’s words, highlighting “asymmetries” in the agreement. That referred to the EU’s implementation of tighter environmental standards after the two sides wrapped up technical talks in 2019 — although he did emphasize that he would be “very happy” to sign the deal this year.

“We all have the will to reach an agreement. The obstacles are within us and we have to start removing them. It is not so difficult to eliminate them if there is political will. And it exists on our part. We only ask for a balanced agreement, in which we all win,” stressed Fernández.

Dramatic finale

Diplomats on both sides think that the grandstanding and political drama are part and parcel of the endgame.

But it’s nerve-wracking, with the Mercosur side still in internal talks amongst its member countries over how to respond to the EU’s green demands.

On top of that, there appear to be internal discussions going on within Brazil’s coalition government over what exactly to ask for in exchange for the extra sustainability conditions — Brasilia remains the key player within the group of four countries.

“A Mercosurian colleague was telling me that engaging with Mercosur is like playing soccer,” Paolo Garzotti, a senior EU trade official who is involved in the negotiations, told the Belgian parliament on Wednesday. Brazil has the ball, he explained, and “if the player that has the ball decides that the game should stop, it becomes tough.”

Whereas Mercosur is expected to push the EU to soften how applies its new green laws like the deforestation regulation, due diligence or the renewable energy directive’s exclusion of soy, Lula has also recently spoken about resisting Brussels’ pressure on opening up public tenders.

Brussels could also try to sweeten the deal by investing more in development and infrastructure projects to cushion the impact of EU’s green requirements. But whether extra funding will make a difference to close the deal has yet to be seen.

Mercosur trade officials met in Buenos Aires on Wednesday, so a clearer vision of their coordinated response to the EU’s demands should emerge soon.

The clock is ticking: Brussels pressed Mercosur countries to respond by mid-June — or now — ahead of meeting between negotiating teams on June 29 to 30 in Buenos Aires.

“Right now, I can’t tell you whether the meeting of June 29 and 30 will be maintained. Today, it’s still in our agendas,” said a person with knowledge of the talks who was granted anonymity because they’re not authorized to speak about the sensitive negotiations.

“We started with a super ambitious calendar. We’re in the middle of the journey, not because we lack the willpower, but Brazil is a coalition, each party has different visions for this — it’s necessary to give time so that all the negotiators are on board.”

Whereas one EU diplomat said that the talks faced “lots of complications,” another took a step back, commenting wryly that “all negotiations go up and down until they land,” adding that von der Leyen’s message to Mercosur leaders was on point.

A sure sign

In a sign that the political winds are now shifting, even the deal’s fiercest opponent — France — is signaling that it could swing round and finally back the deal if the additional protocol meets its demands.

Just before von der Leyen’s trip, France’s trade minister Olivier Becht also traveled to Latin America and, after meeting with Brazilian officials, said Paris was open to a deal and that its concerns had to do with strengthening environmental commitments, not protecting French farmers from competitors.

"There are clearly provisions in the Mercosur agreement that are very favorable to our companies. That's why we've never been against signing this agreement," the French minister told POLITICO on his return.

Then again, the French power to influence this deal as well as others appears to be waning, as the Mercosur agreement is very likely to only need the European Parliament’s sign-off and a qualified majority of EU countries in the Council. So even if France and a few other countries voted against the deal, it would still get the green light.

Now, everything’s down to political will and the planets aligning.

“All of the negotiators are very conscious of the window of opportunity,” the person with knowledge of the talks said. “We’re working on it.”