On December 6, 2024 the President of the European Commission and the representatives of the four MERCOSUR countries finalized trade talks for the EU-Mercosur partnership agreement in the Uruguayan capital of Montevideo. While the agreement is still to go through several stages of approval before the start of the implementation stage, the finalization of trade talks (after 25 years of negotiations) is a crucial milestone in the development of North-South trade ties and the evolution of the “integration of integrations” channel of trade liberalization in the global economy. At the end of 2023 we projected the finalization of EU-MERCOSUR talks as the key development in global regionalism in 2024[1].
According to the European Commission, the trade deal “will boost strategic trade and political ties; … it will support economic growth, boost competitiveness and strengthen resilience on both sides by opening up trade and investment opportunities and securing sustainable access and processing of raw materials;… [it also] represents a major milestone in fighting climate change with strong, specific and measurable commitments to stop deforestation”[2].
The clinching of the MERCOSUR-EU deal is likely to deliver impulses for more such agreements to be concluded between regional integration blocs. One of the next ones in line may be the EFTA-MERCOSUR deal – in March 2024 EFTA and MERCOSUR agreed to resume talks on an FTA (that has previously gone through 10 rounds of talks) with the first meeting on the possible trade deal taking place in April 2024 for the first time since 2019[3]. There may be other impulses to such “RTA-to-RTA” deals with the participation of some of the other regional arrangements such as ASEAN or GCC. In effect, the EU-MERCOSUR blueprint by serving as a reference point for other regional blocs will significantly facilitate the conclusion of “RTA-to-RTA” agreements in the global economy going forward.
With multilateral trade liberalization via WTO trade rounds stalled for decades, one of the key channels of trade liberalization in the world economy becomes regional integration and trade openness across regional integration blocs. With the launching of the MERCOSUR-EU trade deal the “mega-regional” format is taking on greater prominence in the world economy. The EU effectively positions itself as one of the key drivers of mega-regional deals, with China and ASEAN in Asia potentially serving as an alternative pole of the formation of such platforms (RCEP being the largest mega-regional in Asia-Pacific (APAC)).
In the evolving competition in building alliances with Global South economies, the EU is likely to further prioritize the trade channel via building FTA networks, while China is likely to further explore the potential to scale-up the Belt and Road Initiative (BRI) as well as other investment platforms. This may present a certain complementarity between trade and investment-led channels of building economic alliances for the Global South, though one may well expect China to increase its activism in forging trade alliances in the developing world as it seeks to boost its flagging growth via exports. For its part the EU may complement the agreement with MERCOSUR with accords concluded between the regional development institutions of the two blocs with the view to boosting investment cooperation.
Another important implication of the EU-MERCOSUR Partnership agreement may be the strengthening of the North-South connection in the global economy. With this trade deal the EU positions itself as the key gateway in the advanced world for building cooperative economic platforms with the Global South. In fact, the EU-MERCOSUR agreement if expanded further may serve as an alternative center of gravity for the Global South in building its network of trade alliances in the global economy. By finalizing the trade deal with MERCOSUR the EU is in a position to exploit the first-mover advantages in forming new platforms of “integration of integrations” with trade blocs from the developing world.
For BRICS the EU-MERCOSUR agreement may also be a reference point in exploring the modalities of “integration of integrations” among the regional trade blocs led by BRICS members. In the past several years the return of the BRICS+ format was accompanied by the expansion in core membership, but not (as was discussed back in 2018[4]) via the creation of a platform for regional integration arrangements. The 2024 summit featured the invitation of several regional blocs (EAEU and SCO), but no full-fledged platform for regional arrangements has been created. Brazil’s presidency in BRICS in 2025 and the likely invitation of MERCOSUR members to take part in the BRICS+ format may offer another opportunity to launch such a platform.
[1] https://brics-plus-analytics.org/regionalism-in-2024-new-platforms-to-emerge/
[2] https://www.eeas.europa.eu/delegations/brazil/eu-and-mercosur-reach-political-agreement-groundbreaking-partnership_en
[3] https://cancilleria.gob.ar/en/announcements/news/mercosur-and-efta-agree-relaunch-negotiations-free-trade-agreement
[4] https://tass.ru/politika/4931502
Yaroslav Lissovolik, Founder, BRICS+ Analytics
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