The prospect of a free-trade agreement between the Common Market of the South (Mercosur) and the European Union (EU) has been on the agenda of politicians, businessmen and researchers for many years. In fact, the attempt to formalize a free-trade agreement (FTA) between Mercosur and the EU dates back to 1995, when the Framework Agreement on Interregional Cooperation (FAIC) was signed. Since then, despite repeated remarks of mutual interest on the conclusion of the agreement, the parties have not reached an understanding on the issue yet, so there are still doubts about the concrete possibilities for its implementation. Recently, with the election of Mauricio Macri in Argentina, Michel Temer’s inauguration in Brazil and the suspension of Venezuela in Mercosur, it has been speculated that the agreement might be closer to its conclusion. In our view, however, despite these events, several obstacles to a positive outcome for those in favor of the treaty remain.

In general terms, the main obstacles to the viability of the free-trade project between Mercosur and the EU are threefold: (a) there is a significant fear by European agricultural producers that the agreement entails insurmountable damage, for they see the competition with South American producers as a risk to their very existence on the market; (b) as a result of this fact, some South Americans have misgivings about a positive outcome, even if they support the agreement, believing that the Europeans will not give up their agricultural protectionism; (c) finally, in South America, there are political groups that express a general opposition to the signing of an FTA with the European Union, since they consider that it represents a capitulation of national interests to those of the Europeans, making it impossible for South American countries to implement an autonomous regional development strategy.

Contrary to what is often suggested by media analysts and pundits, the biggest obstacle to the conclusion of the agreement between Mercosur and the EU has always been the resistance of European farmers, who are fearful of South American competition. Ever since the very start of the negotiations, agricultural sectors in Europe have expressed concern that this treaty would prevent them from competing in the food market. In fact, these producers already receive protection and subsidies within the European Union, through the Common Agricultural Policy (CAP), one of the most important policies of the EU.

The CAP was established in 1962, and its main goals are to ensure the regular supply of foodstuffs, maintaining a balance between the city and the countryside, valuing natural resources, preserving the environment and granting farmers an income in accordance with their productivity. By doing that, the CAP aims to consolidate a single large common market within which agricultural products can move freely, but with preference for products produced in the European Union. While the CAP is intended to increase agricultural productivity, safeguard regular supplies to consumers and ensure the stabilization of reasonable prices, its central objective is to protect European farmers from international competition so as to prevent rural exodus.

The importance of the agricultural sector to the European Union is clear when the data provided by the European Union Statistics Office (Eurostat) are analyzed. In 2016, for example, there were 8.73 million individuals employed in agricultural activities in the rural area, which represented 3.99% of all employees.¹ In absolute terms, Romania (19.37%), Poland (18.94%), Italy (9.45%), Spain (8.71%) and France (8.32%) were the most important countries. In terms of total employment, Romania (20.73%), Greece (11.74%), Poland (10.41%), Lithuania (7.68%) and Latvia (7.60%) were the largest ones.

As regards the labor force in the agricultural sector, it is important to highlight the fact that most of these people are allocated in the form of family farming. Fifteen out of the twenty-nine countries in the bloc employ more than 80% of the labor force in this modality, and in only four of them the family farming sector corresponds to less than 60% of the total. This way, we can see the importance of this segment, which could become quite vulnerable without the existing protection in the EU. It is for this reason, therefore, that the European Union’s public policy makers give centrality to the CAP in order to avoid negative economic and social impacts which would most likely weaken the European agricultural sector.

As the primary sector in South America is much more competitive than in Europe, it is in the best interest of the Mercosur countries to liberalize the European Union’s agricultural market, given the vast possibilities this process might entail in terms of exports to this region. Consequently, this is precisely the point that represents the biggest obstacle to the adoption of a free-trade agreement between the two blocs, since European agricultural producers are strongly pushing for the maintenance of the current barriers. These, in turn, are justified because they are seen as essential for the survival of the CAP, which was so painstakingly built. In addition, the European Union is still feeling the significant effects of the 2008 economic and financial crisis, which has led to double-digit unemployment rates in several countries. In these circumstances, there is a strong fear that the disruption of the agricultural sector will have a negative impact in terms of job losses and income if agricultural markets are opened up.

Due to the EU’s stance, skepticism among members of Mercosur about the viability of the agreement has increased. Regarding that, we should note that Paraguay and Uruguay — because of the representativeness of their agricultural sectors — have always been more favorable to the implementation of the agreement, while Brazil and Argentina, although having never renounced the project, have become hesitant about the benefits of the negotiations. In general, especially in media outlets, South American resistance is associated with the rise of progressive governments in the region, especially those of Luís Inácio Lula da Silva and Dilma Rousseff in Brazil and those of Néstor and Cristina Kirchner in Argentina.² This ideological characterization, however, does not truthfully represent the negotiations, although bearing some resemblance to reality.

Regarding Brazil, for example, some signs of discredit could already be noted during Fernando Henrique Cardoso’s (FHC’s) second term, when, in 2001, in a speech at the French National Assembly, he stated that he hoped for a trade association between Mercosur and the European Union, but pondered the risks that protectionist aspirations could supplant the spirit of free trade. In fact, FHC’s remark had a strong symbolic component, since France had already made explicit its opposition to the agreement. In the French perspective, the FTA would be extremely damaging to its farmers and jeopardize the very meaning of the CAP, a position not welcomed by the Brazilian government. Despite the occasional differences, FHC’s stance was kept during Lula’s administration, which also emphasized the benefits of free trade and pointed to European protectionism as the main obstacle to the progress of the negotiations.

Dilma’s administration expressed willingness to resume the negotiations on the agreement, which had been interrupted between 2004 and 2010. However, although some conferences to discuss the viability of the process had been held, resistance to the openness to the European agricultural sector remained, which hindered a broad understanding on the subject. Despite this, there has always been some reluctance among some groups of the Workers’ Party (PT) to the treaty, interpreted as a gesture of subservience to the large European capitalist groups, which would preclude an autonomous development project. It should be observed, however, that these sectors have always been outnumbered within the Brazilian government, which has never abandoned the rhetoric of defending free trade and the benefit of an FTA with the European Union, provided that the Europeans agree to liberalize their agricultural market.

As for Argentina during the Kirchners’ administrations, a different situation is seen. Rather than welcome the supposed benefits of free trade, the Argentinians were suspicious of the benefits of the agreement for assuming that it would block their attempts at reindustrialization and jeopardize the survival of their remaining industrial groups, such as auto parts, chemicals, electrical equipment and capital goods. Thus, in addition to demanding a longer term for the implementation of the agreement, the Argentinians demanded the inclusion of an ample list of industrial sectors that would not be part of it, which was considered unacceptable by the European representatives. Because of this posture, Cristina Kirchner’s position in Argentina was considered a major obstacle for the parties to arrive at an understanding, so her departure and Macri’s inauguration were seen as a trigger for the agreement.

In fact, the political transition in Argentina is a favorable element to the progress of the negotiations between Mercosur and the European Union, since the list of restrictions of the Argentinian government no longer constitutes an obstacle for the treaty to be signed. However, as already stated above, the biggest obstacle for the talks to move forward is the European agricultural protectionism, which will hardly cease to be an impediment. Although some analysts prefer to hold the Kirchners’ governments accountable for hampering the process, a more thorough look reveals that negotiations have been stalled since the late 1990s, years before the emergence of a wave of progressive governments in South America.