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Portugal warns EU trade ‘credibility’ on the line over Mercosur

Portugal has warned that the EU’s “credibility” is on the line because of the stalled ratification of its trade deal with the South American Mercosur bloc.

Foreign minister Augusto Santos Silva told the Financial Times in an interview that there were “huge differences between member states, among our civil societies and also within the European Parliament” over the deal, struck with Brazil, Argentina, Uruguay and Paraguay in June 2019. 

The agreement has been hailed as historic by countries including Portugal and Spain, which both have strong ties to the region, but it has faced fierce opposition from Europe’s farm and environmental lobbies because of deforestation in the Amazon and the prospect of increased Mercosur beef exports. 

France has been in the vanguard of the critics, with president Emmanuel Macron ruling out ratification of the deal until concerns over environmental protection are resolved. 

Santos Silva said that he backed efforts being made by Brussels to secure additional guarantees from Mercosur, but warned that an indefinite blockage of the deal would be a strategic mistake. 

“You cannot lose the opportunity of this kind of enhancement of geopolitical relations between Europe and Latin America,” he said. “There is also a question of credibility. If you don’t comply with your own commitments, what will be your capacity of negotiating something with a third party in the future?”

Opposition in Europe has intensified since 2019 amid anger at Brazilian president Jair Bolsonaro’s failure to take determined action against deforestation. 

EU diplomats said that there was widespread recognition that the deal would not be approved by the European Parliament — a significant step for ratification — until its environmental concerns were addressed. Discussions between Mercosur governments and the European Commission on possible solutions have been under way since late last year. 

The diplomats said that the plan was for a negotiated arrangement that would potentially involve an EU offer of financial and technical support for Mercosur’s green transition in exchange for stronger environmental commitments. 

This would be a parallel deal to the trade accord: EU trade commissioner Valdis Dombrovskis has ruled out any renegotiation, warning that reopening the trade agreement itself would be to court disaster by calling into question finely balanced compromises on market access.

The impasse coincides with a broader review of EU trade policy, a subject discussed at a meeting of EU trade ministers on Tuesday chaired by Santos Silva. Portugal, which holds the EU’s rotating presidency, wants ministers to agree a joint statement on the review in May. 

The European Commission and other supporters of the deal point to the competitive advantage EU companies will enjoy over foreign rivals that would still face Mercosur’s traditionally high tariffs and other trade barriers. The agreement will ultimately remove duties on 91 per cent of goods that the EU exports to Mercosur.

Santos Silva told the FT that the tensions over the deal were a prime example of EU governments’ different perspectives on how the bloc’s trade policy should evolve, despite “a very broad consensus in theoretical or doctrinal terms”.

He said that governments were essentially split into two camps. One, including Portugal, believes the EU can best use trade policy to promote its geopolitical influence and fair competition if it seeks to negotiate modern market-access deals.

“This is a process in which you can help countries and influence countries in getting closer to European standards by the fact that you trade with them,” he added.

“For other member states it seems like it is time to stop or suspend [trade talks], and for some of them it seems that it is time to reopen negotiations that were already concluded.”

Trade politics in Brussels has long been defined by this split: France and its allies — notably those with powerful agriculture lobbies — are often wary of the impact of EU trade deals on sensitive sectors, while others, including the Nordic countries, Portugal and the Netherlands, emphasise the economic benefits and strategic gains.

“It’s so important to review our trade policy and seize the opportunity of this review to try to reconstruct this consensus among us,” Santos Silva said.

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