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ARGENTINA | 29-06-2019 08:29

“Historic” EU-Mercosur trade deal gives Macri a G20 victory

The deal was first proposed in 1999 but has been held up due to disagreements over agro-products. The deal must now be approved by the 28 EU-member states.

President Mauricio Macri continues to reap greater benefits from his international excursions than at home. The signing of the historic MercosurEuropean Union free trade agreement while at the G20 summit in Osaka, Japan, provides much needed respite for an embattled president who has overseen a severe economic collapse that has put his re-election in jeopardy.

Brokering the deal, which included Macri’s own personal diplomacy to convince Brazilian President Jair Bolsonaro and French Prime Minister Emmanuel Macron to cede ground and move forward with the agreement, is further proof of Macri’s success in international relations. This is even more valuable in the context of rising global protectionism, particularly as US President Donald Trump’s global trade war with China threatens the stability of the global economy. While the spectre of former president Cristina Fernández de Kirchner continues to haunt him, as her political space still leads in the polls, Macri can take a victory lap that he will surely seek to capitalise politically upon his return to Buenos Aires.

The President arrived in Osaka on Wednesday after an official visit to Indonesia where he met with president Joko Widodo. Macri’s objectives ahead of the G20 summit were clear, which is why several key members of his administration made their way to Brussels, Belgium, on order to try and seal a trade agreement that had been in the works for 20 years. With the summit set to begin on Friday, Macri spent Thursday in a bilateral meeting with Japanese Prime Minister Shinzo Abe and then on a visit to Ito Yokado supermarket where Argentine products had recently began to be offered to the public.

The real action began on Friday. After the “family picture,” the world’s leaders made their way to the round table at the Osaka International Centre. Macri, who presided over last year’s G20 summit in Buenos Aires, was flanked by host Abe and Trump. “Argentina wants to contribute to dynamic global growth in order to generate equitable and sustainable development,” the President said during his opening speech. “We can only do that by workingtogether, through greater connections between our economies that promote job creation, quality education, innovation, and the insertion of small and medium-sized businesses into global value chains,” Macri added. The Argentine delegation also counted with the presence of Cabinet Chief Marcos Peña, Strategic Affairs Secretary Fulvio Pompeo, G20 sherpa Pedro Villagra Delgado, Ambassador to Japan Alan Beraud, and Laura Jaitman, negotiating representative for the Economy Ministry. First Lady Juliana Awada also made the trip to Japan, while Foreign Minister Jorge Faurie and Production Minister Dante Sica remained in Brussels.

Macri began his informal lobbying the minute he set foot in the Convention Centre. German Chancellor Angela Merkel and Spanish Prime Minister Pedro Sánchez, who had been pushing for the deal, were seen chatting with the Argentine president, as well as Jean-Claude Juncker, President of the European Commission. The most important meeting, though, was held in a private room with Bolsonaro and Macron. At issue was Brazil’s potential withdrawal from the Paris Agreement. Bolsonaro and Ricardo Salles, Brazilian Environment Minister, are public climate change skeptics, with the latter calling it a “secondary issue.” Yet, Macron had indicated products from any country not upholding the Paris Agreement would be barred from entering the European Union. At the three-way meeting, differences were ironed out and concessions were quickly communicated to the negotiating teams in Brussels.

The deal was formally closed around 7pm in Brussels, 2am in Osaka. Argentina’s representatives, Faurie and Sica, sent the president a voicenote on WhatsApp to inform him the agreement had been signed, Macri’s own Twitter page revealed. “Historic! Our team, led by Ambassador Ernesto Araújo, has just closed the MercosurEU deal, which had been in negotiation since 1999. It will be one of the most important economic agreements of all times and it will bring enormous benefits to our economy,” Bolsonaro tweeted well into the Osaka night. In the European Union’s official press release, Juncker called it “a historical moment.” “In the midst of international trade tensions, we are sending today a strong signal with our Mercosur partners that we stand for rules-based trade,” Juncker added, in a clear message to Trump and Chinese Premier Xi Jinping.

THE FINE PRINT.

The deal can be traced back to a summit held in Rio De Janeiro on June 28, 1999, where the intention to move forward with a free trade agreement was first made explicit. As time went on, though, it seemed farther and farther away. The biggest issue always revolved around agricultural products, one of the competitive advantages of the Mercosur bloc—composed of Argentina, Brazil, Paraguay, and Uruguay—and a particular sticking point for European farmers. Recently France, Ireland, Belgium and Poland had sent a formal letter to Juncker expressing their “deep concern” over the impact on the European agricultural sector. Environmentalists also opposed the deal, particularly in response to Bolsonaro’s skepticism of climate change.

The agreement will generate a market of some 800 million people, according to the Argentine Foreign Ministry, which includes a quarter of global GDP and that already counts with more than US$100 billion in bilateral trade of goods and services. “The agreement guarantees the main objectives sought by the Mercosur nations by improving access of our exports in terms of goods and services,” it adds.

According to the European Union, the agreement will make EU companies more competitive by saving them more than US$4 billion worth of duties every year. The industrial and agri-food sectors will benefit from a “slashing” of existing Mercosur tariffs, some that had been “high and sometimes prohibitive.” At the same time, the agreement will protect 357 high-quality European food and drink products from imitation. Products like Jabugo ham from Spain and Polska Wódka from Poland, recognised under geographical indications, will be safeguarded.

The European agricultural sector will also benefit from protective quotas for Mercosur products. “For this agreement to be win-win,” explained EU Commissioner for Agriculture and Rural Development Phil Hogan, “we will open up to agricultural products from Mercosur with carefully managed quotas that will ensure that there is no risk that any product will flood the EU market and thereby threaten the livelihood of EU farmers.”

Macri and Bolsonaro can take ownership of a new political victory for the time being. As the agreement enters a bureaucratic phase in which it must be stress-tested legally and then passed by all 28 members states, both South American leaders can turn their attention to the domestic front. For Bolsonaro, it is only the beginning of his presidency, with tanking approval ratings and a menacing legislative branch. Macri, on the other hand, must now concentrate on the campaign ahead of the PASO primaries to be held in August where he is expected to be defeated.

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