The EU needs a trade agreement for more than 700 million people

The trade agreement between the EU and the Mercosur economic area formed by Argentina, Brazil, Paraguay and Uruguay falls at a particularly tense moment in both European and international politics.

Already a year ago, the agreement signed by the Commission and the South American Mercosur countries has badly divided the EU countries. Among the big countries, Germany is in favor and France is against.

The reason is agriculture. France is seeking to postpone this week’s European Council vote until next year, but there is a risk that delaying ratification could topple the entire deal.

France has gained Poland and Hungary, and probably Austria and Ireland. However, the share of these countries in the EU’s population remains below 30 percent, when 35 percent is required for postponement. Italy is in the decisive position.

For Finland, rejecting or even postponing the biggest trade agreement in EU history would be a big disappointment. The agreement between the EU and Mercosur would unite and create a free trade area of ​​more than 700 million inhabitants, where 90 percent of the area’s tariffs would be reduced to zero in 15 years.

Director of Trade Policy of the Confederation of Finnish Business Timo Vuori speaks directly of a strategic partnership. When trade with China and the USA becomes difficult, the EU and Finland must intensify trade with other key markets.

In the Mercosur countries, there is a growing demand precisely for Finland’s main export products, industrial products and services. In addition, the countries also contain critical earth minerals, the export of which is now restricted by China.

The Commission estimates that EU exports to Mercosur countries could increase by around 40 percent by 2040. The EU’s export of goods and services to treaty countries was 82–90 billion euros last year, of which Finland’s share was just under a billion euros.

The Mercosur agreement emphasizes the far-reaching benefits of the geoeconomy for Europe, when there are many political and economic uncertainties associated with both China and the USA.

If the agreement that has been prepared for 25 years fails, then who wants to make deals with the EU? According to Vuori, the EU will hardly get a better deal than this from the point of view of trade and sustainable development, because the weight of the EU in world trade has decreased.

Europe has been seen as an arrogant dictater of the rules. Now we have to get rid of this reputation. The world’s geopolitical situation calls out for the common good to come before the farmers of France, Poland or Italy.

It is clear that there are problems in agriculture and food security in the Mercosur countries. However, in the concluded agreement, they have been able to be tackled quite well by including quotas for key agricultural products for beef and poultry meat. In addition, an opportunity has been created to implement other protective measures.

This should be enough. In the midst of global geoeconomic uncertainties, the Mercosur agreement would be a big strategic win for Europe, which it needs.