European Union puts Mercosur trade deal in doubt

Brazilian president Luiz Inacio Lula da Silva has said that Brazil will walk away if the trade agreement between the EU and South American trade bloc Mercosur is not finalised this month.
He was reacting after Italy and France said they were not ready to back the agreement, which has been 26 years in the making. It dealt a blow to European Commission president Ursula von der Leyen’s plan to sign off on the trade deal last week.
Italian prime minister Georgia Meloni told law makers in Rome she will delay the Mercosur deal unless more is done to support Italy’s farmers. France is insisting imported food complies with EU rules on the use of pesticide and chlorine, before it will back the deal.
As the EU struggles to complete a trade deal with Mercosur, competitors eyeing South America’s consumer market and vast mineral resources are making note.
Talks between the South American bloc and partners such as the United Arab Emirates, Canada and India are gaining renewed importance while a divided EU wavers after more than a quarter century. The prospect of rivals locking in preferential access to Mercosur’s markets, including critical minerals is sharpening attention in capitals from London to Tokyo.
“We are determined to deepen our trade ties, Yasushi Noguchi, Japan’s ambassador to Brazil said. Japan is “very interested in how things happen” on the EU-Mercosur deal since Japanese companies often compete directly with European firms, he added.
Impatience surfaced at a recent meeting of Mercosur government leaders after resistance from European farmers once again caused a delay.
“Without political will and courage from its leaders, it will not be possible to conclude a negotiation that has dragged on for 26 years”, Brazilian president told the summit he hosted last week. “Meanwhile, Mercosur will continue working with other partners.”
European Commission president had been expected at the summit to sign the deal. But she cancelled her trip after the EU failed to muster the votes to approve it. European officials are now aiming for a mid-January ratification. Italian prime minister Meloni, who holds the key vote, told Lula da Silva last week she is confident she can support the agreement if she gets more time to rally domestic support.
Mercosur, which includes Brazil, Argentina, Uruguay, Paraguay and Bolivia, previously accepted a last-minute EU demand for safeguard measures to protect its farmers.

EU countries such as France and Poland have long opposed the deal, arguing that giving access to South America’s behemoth agricultural industry would hurt European farmers. Bloomberg Economics estimated the deal would trigger as much as a 0.7 per cent economic boost by 2040 for Mercosur countries, and 0.1 per cent for Europe.
While Italy has been hesitant on the Mercosur agreement, it is also involved on an entirely different issue with the UK. An Italian defence company has warned that it could shut up shop in Britain if it does not secure a £1billion helicopter contract.
Leonardo said it would have to reassess its UK operations if it did not win a Ministry of Defence contract to replace Puma, which has been used by the British military as a transport and military aircraft since the 1960s. This could put the country’s last helicopter factory at risk of closure.
Roberto Cingolani, the chief executive, has written to John Healey, the defence secretary, arguing that the potential contract was a cornerstone of its UK strategy and that its factory in Yeovil, Somerset, which employs 3,300 people, could be at risk of closure if the work was not secured.
“Any delay or cancelation in the programme would force a re-evaluation of Leonardo’s UK presence, including investment in electronics and cybersecurity,” Cingolani said in the letter.