Czech Business Today

It has been over a year since the EU and Mercosur reached a political agreement on a trade deal between the two, which is part of a broader Association Agreement. Originally, the agreement should have been forwarded to the Council and the European Parliament for their approval by the end of the year; however, the European Commission informed that the process will most probably be delayed and the ratification won’t happen in 2020.

While the Commission claimed the delay is caused by lengthy legal scrubbing and the translation processes, the situation is more complex and questions related to sustainability are without doubt behind the postponement of the ratification schedule. However, Executive Vice-President of the Commission Valdis Dombrovskis, who recently acquired the trade portfolio, mentioned during his hearing in the European Parliament that the Commission does not intend to re-open negotiations with Mercosur.

At the same time, he ensured MEPs that the Commission needs to address the concerns related to deforestation in Brazil raised by various stakeholders. Furthermore, he mentioned that he’s aware that under current circumstances, the agreement would pass neither the European Parliament nor the Council. Therefore, the Commission will aim for further engagement from Mercosur countries not only on deforestation, but also on the Paris Agreement commitments.

The European business community has been a strong supporter of the trade deal. It is the first one of its kind for Mercosur and it would be the biggest trade agreement in the world with respect to tariff savings. Apart from that, it would be a huge stimulus for European companies, would open new markets for them and would give them a significant advantage over companies from other parts of the world. It is especially important in the current global trade environment which is characterised by the continuous rise of protectionist and restrictive measures. Given the size of the agreement, it would be a strong signal for the whole world that the EU stands behind an open world trade environment. On the other hand, the business community understands that the concerns raised by various stakeholders over sustainability issues are serious ones and need to be taken care of.

Therefore, European businesses call on the European Commission to engage with partners from Mercosur countries and find a compromise solution that would address concerns over sustainability issues in a manner that would enable the deal to be ratified. In this context, EU business organizations welcome the fact that the Commission recently approached its counterparts from Mercosur countries to negotiate additional text on climate and deforestation, and hope that an agreement in this area, that would give a green light to the whole trade agreement, could be reached soon.