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EU and Mercosur trade bloc ramp up talks in bid to close deal in coming weeks

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The EU and the Mercosur bloc of South American nations are pushing to finalise a long-delayed trade treaty by early December, according to diplomats involved in the negotiations, as both sides seek to capitalise on a moment of converging political interests.

“It is important for the Brazilian presidency of Mercosur to try to seal it before the end of our term [on December 7],” said a senior Brazilian diplomat. “It is down to a few details . . . we will need a political decision on a couple of issues. [President Luiz Inácio Lula da Silva] will certainly get involved.”

An EU official, meanwhile, said Brussels had “ramped up the frequency and intensity of negotiations in the belief that a landing zone for political agreement is only achievable under the Brazilian Mercosur presidency”.

Despite progress in the talks, the outcome of presidential elections in Argentina on Sunday cast fresh doubt on the process. The winning candidate, radical libertarian Javier Milei, has previously pledged to withdraw the country from Mercosur.

Negotiations over the landmark “cows for cars” accord between the EU and the Mercosur bloc of Brazil, Argentina, Uruguay and Paraguay have dragged on for more than 20 years.

A treaty was agreed in principle in 2019, but was derailed when the EU demanded additional environmental commitments from South America before signing. The Mercosur nations rejected this as protectionism from European nations fearing competition from South American agricultural and wine exports.

Brazilian President Luiz Inácio Lula da Silva and European Commission President Ursula von der Leyen discussed possible partnerships and an agreement between Mercosur and the EU this year © Ton Molina/NurPhoto/Getty Images

Brazilian diplomats involved in the negotiations also say that the 2019 agreement was not “adequately balanced” and had been rushed by the previous rightwing Jair Bolsonaro administration to chalk up a political win.

Some remain sceptical that a deal can finally be reached, including Paraguayan President Santiago Peña, who has warned that Mercosur would walk away if the EU did not finalise the treaty by December 6.

“It doesn’t look good and this is very sad,” Peña told the Financial Times earlier this month. “I know the feeling of most of the countries in the European Union and they are not willing to move. That’s why we have not concluded this agreement. The more we push from the side of Mercosur, apparently there is less interest from the side of the European Union.”

However, officials in Brussels say the falling through of its trade deal with Australia has boosted momentum on both sides.

“The failure to reach a deal with Australia has jolted the EU into action — both in Brussels and national capitals — to deliver a meaningful trade win before European parliament elections in June,” an EU official said.

“The political instructions are converging,” said another EU official. “At the same time, there is not much time and there are still some issues on the table.”

Among the outstanding issues to be negotiated at talks this month are a timetable for the free trade of electric vehicles; the use of export duties; competition in public procurement; as well as the parameters of the EU’s anti-deforestation legislation, which obliges companies to prove their goods have not been produced on recently deforested land.

“Mercosur is demanding some instrument to eventually take remedies if the EU blocks certain exports. They see this as an issue that they would like to solve,” said a diplomat involved in the talks.

In the spring, the EU drew the ire of Mercosur officials when it issued a side letter requesting both sides commit to measures contained in the Paris Climate Agreement. This would require signatories to halve deforestation by 2025, as well as reverse forest loss and the misuse of land by 2030, with trade sanctions if they failed to do so.

Brazilian diplomats said this was beyond the scope of a side letter. Both sides now hope to overcome this issue by the crafting of what another official close to the talks describes as “middle ground instrument, with elements from both the original EU proposal and the reply sent by Mercosur countries”.

EU officials also said they have given Mercosur assurances that producers in regions far from the Amazon rainforest will face lower compliance demands under the deforestation law.

Even if the treaty is concluded, it faces a ratification process in each of the Mercosur national parliaments as well as the European parliament and by EU governments.

Additional reporting by Michael Stott

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