According to Euractiv, the EU-Mercosur trade agreement should be split into two distinct parts to bypass France's resistance based on agricultural issues, proposed the German automotive industry, in an attempt to boost export markets other than China.

Bypassing France

As farmer protests spread across the country, the French government has reiterated its opposition to the EU-Mercosur trade agreement, an agreement that would boost trade between the EU and the Latin American bloc (Brazil, Argentina, Uruguay, and Paraguay).

French President Emmanuel Macron emphasized on Tuesday that France "asks that the agreement, as it stands, not be signed." This comes after previous statements indicating it could not impose environmental standards on farmers while allowing more agricultural imports of goods that should not have to adhere to the same rules.

However, the German automotive industry, hoping for the agreement to boost its exports to Latin America through lower tariffs, is calling for the agreement to be concluded as soon as possible.

"Negotiations for a Mercosur agreement have been going on for over 20 years," said Hildegard Müller, head of the German Association of the Automotive Industry VDA. While the official negotiations for the EU-Mercosur agreement were concluded in 2019, its finalization currently depends on a secondary agreement where the EU wants to address some environmental concerns, including forest protection.

No progress

"There is practically no progress regarding free trade agreements," lamented Müller, referring not only to EU-Mercosur but also to the failed conclusion of a trade agreement with Australia, a planned update to the EU-Mexico agreement, as well as difficult negotiations with India.

"There is talk of 'risk reduction,' but it is not possible," she said, referring to the EU's strategy to reduce its economic dependence on China, the world's largest automotive market, and one of the main export destinations for German car manufacturers.

"Any agreement that is not concluded strengthens others and weakens us," Müller warned. Mercosur bloc member states have already signaled their aim to promote a free trade agreement not only with the EU but also with China.

French Prime Minister Gabriel Attal and parliamentarians from all sides of the political spectrum have reaffirmed France's opposition to the EU-Mercosur agreement in a timely political move, as farmers vehemently opposing the agreement have intensified protests and intend to march to Paris.

Splitting the business in two?

As a potential solution to expedite the agreement, Müller proposed splitting the EU-Mercosur agreement in two, which could see parts of the agreement, including tariffs, applied provisionally, while more controversial parts could be initially omitted.

"We make agreements too complex and end up harming ourselves because we cannot achieve anything in any of the economic areas," Müller said.

"Sometimes you can see that people get stuck on a single issue. In [negotiations with] Mexico, it's energy policy, in Mercosur, it's agricultural policy, and all other sectors suffer as a result," she said.

"That's why we should also consider whether these trade agreements should be divided into parts so they can have an effect," she said, adding that this could make critics see the positive impact of the agreement, so "concerns in other areas can also be reduced."

A similar idea was previously put forward by German Economy Minister Robert Habeck, who stated in November that comprehensive agreements dealing with multiple sectors, known as "comprehensive agreements," often complicate negotiations.

"I make no secret of the fact that these comprehensive agreements, that is, doing everything together, mechanical engineering and services and agriculture, only cause problems and, in fact, the agricultural sector is always the one that causes problems," Habeck said in response to the EU's failure to conclude an agreement with Australia over beef and sheep meat disputes.

A similar approach was followed with the Canada-EU Comprehensive Economic and Trade Agreement (CETA), which provisionally entered into force in 2017 regarding tariffs, although the more controversial parts of the agreement still need to be officially ratified by all member states before they can take effect.

However, it is not clear whether the idea of ​​splitting the agreement could work with the EU-Mercosur agreement.

Germany and Brazil struggle to keep EU-Mercosur agreement alive

German Chancellor Olaf Scholz and Brazilian President Luiz Inácio Lula da Silva pledged to conclude the EU-Mercosur trade agreement in Berlin on Monday (December 4), despite the negative blow received from France and Argentina.

"The German government continues to be firmly committed to concluding negotiations with the Mercosur countries, Brazil, Argentina, Uruguay, and Paraguay, as soon as possible," a spokesperson for the German Ministry of Economy told Euractiv, referring to the European Commission leading the negotiations.

Unlike France, the German government has always been a strong supporter of the EU-Mercosur free trade agreement, hoping it can boost the country's export-oriented industries, such as car and machinery manufacturers.

Earlier this month, German Chancellor Olaf Scholz held a telephone call with Argentine President Javier Milei, whose support for the deal was previously unclear, where both "agreed that negotiations on the agreement should be concluded quickly." (Photo: Pexels)