European commissioner sees “window” for EU-Mercosur deal
Oct, 25, 2024 Posted by Gabriel MalheirosWeek 202442
The European Union and the Mercosur have “a window of opportunity to conclude negotiations” on the free trade agreement by the end of the year, European Trade Commissioner Valdis Dombrovskis told Valor.
A former prime minister of Latvia, Mr. Dombrovskis is the EU authority leading the negotiations. He also serves as the executive vice president of the European Commission and met on Wednesday (23) in Brasília with Brazil’s Vice President Geraldo Alckmin, who additionally holds the position of minister of Development, Industry, Commerce, and Services.
Following the meeting to discuss the free trade agreement, Mr. Dombrovskis acknowledged the challenges, notably the traditional opposition from European farmers and environmental issues, but he highlighted that possible solutions are on the table. In this sense, adopting “compensatory measures,” such as a fund for potentially affected farmers, is a possibility if the agreement causes “disruptions” in the European market. However, Mr. Dombrovskis noted that he does not believe such measures will be necessary.
Should the agreement be concluded, it will still need to pass further stages, including the review of new rules by the European Council—negotiations on the agreement began in 1999.
Outside the EU and Mercosur, Mr. Dombrovskis noted concerns over potential import tariff hikes proposed by former U.S. President Donald Trump, should he win the presidential race. “We are ready to defend our economic interests, if necessary,” he said.
Below are the main excerpts from the interview:
Valor: Is it possible to conclude the EU-Mercosur free trade agreement negotiations by the end of the year?
Valdis Dombrovskis: We genuinely believe there is a window of opportunity to finalize negotiations by year-end. Of course, there are still matters we need to discuss and agree upon, as well as additional elements we are debating, such as the sustainability instrument focused on deforestation [a document reinforcing anti-deforestation efforts]. The rules under the Paris Agreement are also essential to the deal’s sustainability. We are also addressing topics on the economic front, and we have made progress; concluding the negotiations is feasible.
Valor: How do you plan to address the opposition from France and European farmers? Is a fund to compensate them a possibility?
Mr. Dombrovskis: The deal is basically what we agreed upon in 2019 [when both parties reached an initial agreement]. But there were obstacles in moving forward with ratification, with many criticisms. One was tied to policies adopted during [former President Jair] Bolsonaro administration, allowing deforestation to continue. This is where the idea of an additional sustainability instrument originated. There has been significant progress under President Luiz Inácio Lula da Silva administration. Deforestation has already been cut by half, with a goal [established with the United Nations] to achieve zero deforestation by 2030. Another criticism involved [Mercosur’s] access to the agricultural market [in Europe]. With the EU taking a cautious stance to balance expanded Mercosur access with our farmers’ interests, the deal will not create disruptions. Still, should disruptions arise, they can be addressed or compensated.
Valor: How does the geopolitical context impact these negotiations?
Mr. Dombrovskis: Many EU members support completing the negotiations. Strong proponents, such as Spain and Germany, along with other countries, are on board. The debate is challenging because there is opposition. Hence, it’s essential we communicate the economic benefits that the deal can unlock. It is also an important geopolitical agreement that brings together partners and regions with similar viewpoints. Especially in these turbulent times, working together and cooperating is crucial.
Valor: Is Brazilian industry’s opposition to public procurement rules an issue?
Mr. Dombrovskis: There are still some industrial matters we are discussing, such as public procurement. But we are quite close to wrapping up those negotiations too. Both sides are pragmatically engaged, and the differences we are debating are solvable.
Valor: Could the possible delay in Europe’s new anti-deforestation legislation impact the deal?
Mr. Dombrovskis: What we are hearing from our partners worldwide, including Brazil, is that a one-year delay would allow more time to prepare [for the new legislation]. We are addressing deforestation in the agreement’s context, such as with the new sustainability instrument. So, I do not expect the delay to significantly affect the negotiations.
Valor: The Brazilian government sees the new anti-deforestation legislation as “unilateral and coercive.” How does the EU respond to this criticism?
Mr. Dombrovskis: Trade is often a difficult topic in public discourse. However, we are addressing these criticisms. The goal of the anti-deforestation legislation is to ensure that EU demand does not lead to deforestation elsewhere. It limits the import of specific agricultural commodities from newly deforested areas without affecting imports from traditional agricultural regions. In terms of public policy against deforestation, we are aligned with Brazil. Broadly speaking, we are on the same page, and I am confident we will find ways to align our instruments. Of course, we are doing more in trade that also does not contribute to climate change or environmental degradation. This is why all modern EU agreements include ambitious trade, development, and labor chapters.
Valor: What is the best way to reform the World Trade Organization? Has this topic been discussed with Brazil?
Mr. Dombrovskis: We have had discussions with Brazilian authorities, and it will be a topic tomorrow [Thursday, October 24] at the G20 meeting on trade and investment in Brasília. Regarding the WTO, it is essential for the EU to preserve free and fair international trade rules. However, the WTO is facing a crisis, such as with its dispute resolution system, which is not functioning. There are several issues we need to address, but the WTO will continue to play a significant role.
Valor: Why?
Mr. Dombrovskis: The EU has the most extensive free trade agreement network worldwide. Still, more than half of our trade is conducted through the WTO. Additionally, it’s important to note that, despite the current trend toward trade fragmentation, with many countries implementing protectionist measures, the principle of most-favored-nation [which aims to prevent discrimination in international trade] accounts for much of the resilience in the international trade system. We are committed to reforming and working closely with like-minded partners.
Valor: How could the U.S. presidential election impact these discussions?
Mr. Dombrovskis: It is hard to speculate at this moment, but former President Donald Trump has announced plans to impose [import] tariffs, potentially triggering trade wars. This poses a risk to the international trade system. During Trump’s first term, we saw the imposition of tariffs on steel and aluminum, which forced the EU to adopt measures to counterbalance [those tariff hikes]. We are prepared to defend our economic interests if necessary. Certain statements by a presidential candidate are cause for concern.
Valor: The Brazilian government is considering joining China’s Belt and Road Initiative. What is your assessment?
Mr. Dombrovskis: Countries are, of course, free to choose [their partners] according to their geopolitical orientations and cooperation preferences. I don’t think there’s a direct contradiction between concluding the EU-Mercosur agreement and Brazil joining or not joining the Belt and Road. The EU and Brazil are like-minded, so we will continue our cooperation.
Valor: Brazil is a growing market for cars produced in China. What lessons can be learned from the European experience?
Mr. Dombrovskis: Brazil is taking action, such as raising import tariffs for electric vehicles. In the EU, we had the same concern, observing Chinese brands quickly gaining market share. Last year, we launched investigations into Chinese subsidies [for cars], as we saw this market share being gained at artificially low prices. We found sufficient evidence of state subsidies, and member states supported the introduction of new tariffs. Our aim, of course, is not to impose tariffs arbitrarily, so we are negotiating with China for alternative solutions. We have been transparent in stating that we do not intend to close the European market to Chinese producers but to ensure fair competition.
Valor: There is growing foreign investment in Brazil and other countries for securing critical minerals…
Mr. Dombrovskis: This is certainly an important issue now, as economies transition toward green and digital futures. A few years ago, when Russia invaded Ukraine, it attempted to use natural gas as a tool of coercion and manipulation [against Europe]. It did not succeed, as we made infrastructure adjustments to receive gas from other sources. However, it taught us a vital lesson. Currently, over 19% of our critical minerals come from China. This is why we are seeking to diversify our raw material sources and create mutually beneficial cooperation arrangements, helping countries not only with extraction but also with processing so they can add value to their resources. We are launching initiatives in this regard, like the Partnership and Security Minerals Forum. This topic is also being discussed with Brazil, which is particularly rich [in critical minerals].
Valor: The BRICS summit took place this week. What is your opinion on the group’s actions?
Mr. Dombrovskis: As I mentioned, we respect the sovereignty of other countries and their initiatives to join different groups. We certainly have our issues with Russia, as discussed. China, a dominant BRICS member, has taken an ambiguous stance, not directly supporting Russia, yet components from Western countries like the U.S. and Europe have been found in Russian weaponry, often routed through China. We are monitoring these channels and speaking with involved countries, but we encounter challenges in regions like Central Asia, Turkey, and the UAE. We have also engaged in talks with China, yet, regrettably, we observe these flows continuing.
Source: Valor International
Full original interview available at: https://valorinternational.globo.com/economy/news/2024/10/25/european-commissioner-sees-window-for-eu-mercosur-deal.ghtml
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