EU-Mercosur trade agreement welcomed by chemicals producers but loose ends remain

SAO PAULO (ICIS)–EU chemicals trade group welcomed on Friday the “political agreement” between the 27-country bloc and the five-country bloc Mercosur on their free trade deal but, after being 25 years in the making, loose ends for its ratification remain.

The agreement, yet to be published in full, must now be ratified by national parliaments as well as executive EU bodies.

Considering the backlash it has already caused among some constituencies, such as farmers in France, it is not certain the deal will be ratified swiftly. Deforestation concerns in the Amazon or the sharp differences in workers’ rights in the EU and Mercosur have in the past also presented stones on the way.

On Friday, the president of the European Commission – the EU’s main executive arm – told citizens of the 450-million people bloc their “livelihoods are protected”, addressing particularly farmers’ concerns.

“This is a win-win agreement, which will bring meaningful benefits to consumers and businesses, on both sides. We are focused on fairness and mutual benefit. We have listened to the concerns of our farmers, and we acted on them,” said Ursula von der Leyen.

“This agreement includes robust safeguards to protect your livelihoods. EU-Mercosur is the biggest agreement ever, when it comes to the protection of EU food and drinks products. More than 350 EU products now are protected by a geographical indication. In addition, our European health and food standards remain untouchable.”

She added new safeguards had been added to the deal to comply strictly with those standards to access the EU market.

Von der Leyen added EU companies will save €4 billion worth of export duties per year.

BREATHING SPACE FOR BELEAGUERED EU CHEMICALS?
The chemicals industry has always been in favor of the deal on both sides of the Atlantic. The EU’s chemicals trade group Cefic said on Friday its members should “gain an edge” in trade with Mercosur, paramount to compete against other global chemicals players.

The EU and Germany – its largest chemicals producer – are net exporters of chemicals. In principle, they have a lot to win with free trade agreements as they can allow them to expand markets as trade barriers are reduced.

At the same time, in the global game of trade, large companies also have more to win than small- and medium-size enterprises (SMEs), who do not have the same prowess in terms of reach and influence.

Chemicals majors also tend to carry commanding voices in trade groups such Cefic, Germany’s VCI or, within Mercosur, Abiquim.

In 2022, trade between the EU and Mercosur stood at €13.6 billion, with a trade surplus in favor of the EU of €5.2 billion, according to Cefic figures.

The figures are modest considering the EU’s chemicals industry’s exports stood at €553.0 billion in 2022.

The 27-country bloc imported chemicals worth €363.0 billion, so it posted a trade surplus of €190.0 billion, according to the EU’s statistics office Eurostat.

This landmark agreement marks a significant milestone in fostering free, fair, sustainable and resilient trade relations between the European Union and the four Mercosur countries Argentina, Brazil, Paraguay and Uruguay.

Both Cefic and the EU did not mention Bolivia as a Mercosur member, but the country joined the bloc in July. Venezuela used to be a part of it, but its membership was suspended under the current regime.

Cefic and other industrial trade groups in the EU had already urged a rapid conclusion of the agreement in November in an open letter to EU bodies.

“The EU-Mercosur Agreement opens tremendous opportunities for both regions. From an EU perspective, it is a crucial opportunity for companies to gain a competitive edge by accessing one of the world’s largest markets,” said Cefic’s deputy director general Sylvie Lemoine.

“This agreement enhances market access, enabling EU businesses to compete more effectively on the global stage, fostering economic growth and strengthening the EU’s industrial base. This is fully in line with the spirit of the Antwerp Declaration.”

“We now call upon all EU decision-makers to rapidly ratify and bring the agreement into force.”

Brazil’s chemicals producers’ trade group Abiquim had not responded to a request for comment at the time of writing, but in the past it has been supportive of the trade deal.

Front page picture source: Cefic