WHY did the European Union need 25 years of talks to reach a trade deal with the Mercosur bloc of Latin American nations?
The EU markets itself as a global champion of free trade. Yet the rhetoric hides protectionism – protection of domestic industries, particularly agriculture, from competition. The operating euphemism since 2021 has been ‘open strategic autonomy’, balancing openness to trade with economic resilience.
A balance is fair, but the EU isn’t balanced: its bias remains protectionism. Such protectionism undermines the Rejoiners’ arguments that reversing Brexit would be good for free trade.
The EU-Mercosur agreement aims to align the EU’s 27 member states with Argentina, Brazil, Paraguay and Uruguay. The deal promises to eliminate tariffs on 91 per cent of EU exports to Mercosur and 92 per cent of Mercosur exports to the EU.
Proponents, including Germany and Spain, argue it will diversify supply chains, reduce reliance on China and open new markets for European automakers, pharmaceutical companies and machinery exporters.
However, the accord has faced fierce resistance, led by France, over fears it would flood the EU market with cheap South American beef, poultry, sugar and ethanol, undercut EU producers and undermine the EU’s standards for environmental and animal welfare.
Last week French President Emmanuel Macron announced that France would vote ‘no’ to the deal, citing ‘unanimous political rejection’ in the country. This stance was echoed by Agriculture Minister Annie Genevard, who pledged to fight the agreement in the European Parliament, where final approval is still needed. French farmers drove tractors into Paris to blockade roads around landmarks such as the Arc de Triomphe. Macron’s government, already fragile as a minority administration, faced no-confidence motions from far right and far left parties, underscoring the domestic political fallout.
Poland, Austria, Ireland and Hungary also threatened to vote against the deal.
Nevertheless, the deal secured a qualified majority approval from EU ambassadors, allowing European Commission President Ursula von der Leyen to proceed toward signing.
For now, member governments put unity before more embarrassing delay and sniping, what some organisations outlaw as ‘bringing the institution into disrepute’. But the EU’s fundamental tension remains: it’s always torn between free trade and protectionism. From the start, it opened trade internally but raised barriers externally. These barriers are difficult to negotiate down, partly because its economy and politicians are so dependent on protected businesses.
The EU frequently criticises protectionism elsewhere, such as US tariffs under Donald Trump or China’s subsidies. But hang on: since 2016, the EU has imposed anti-dumping duties on Chinese steel to counter alleged subsidies and overcapacity. Here, the EU is hypocritical. Subsidies of steel production are rife in Europe.
The European integration project was founded as a steel collective. Steel subsidies are dwarfed by agricultural subsidies. The Common Agricultural Policy subsidises farmers at a cost of around €387billion (£336billion) from 2021-2027 – about a third of the EU budget. These subsidies distort markets by enabling EU producers to undercut competitors abroad.
This pattern isn’t new. During the Uruguay Round of GATT negotiations (1986-1994), the EU and US limited agricultural reforms, preserving subsidies while pushing liberalisation elsewhere.
Meanwhile tariffs (up to 20 per cent on beef and 30 per cent on sugar) shield the EU from imports.
Most of the EU’s barriers are non-tariff barriers, although the EU imposes plenty of tariffs too. Barriers beget barriers. The costs trickle down to all consumers, but particularly EU residents, which is one of the reasons why the EU’s cost of living is so high.
Non-tariff barriers are the main barriers to free trade abroad. For instance, the EU-US Transatlantic Trade and Investment Partnership stalled in 2016 amid European fears over chlorinated chicken and GMOs, illustrating how public backlash over standards halts deals.
Now, the bloc’s stringent food safety and phytosanitary standards, while justified on health grounds, serve as non-tariff barriers to cheaper products from Africa or Asia.
So the EU excels in the combination of expensive subsidies at home and barriers to imports from abroad.
Critics argue that this combination hurts EU taxpayers, EU consumers and developing nations by blocking foreign exports while the EU cheaply offloads on to developing nations surpluses produced expensively at home.
The EU also sets quotas on imports and safeguard clauses that activate when imports surge. For instance, in 2023 the EU imposed emergency tariffs on Ukrainian grain to protect Polish and Hungarian farmers in the midst of Russia’s invasion, a war which the EU was funding financially.
The Mercosur deal itself includes a 99,000-ton beef quota phased in over five years. French farmers fear price drops of 20-30 per cent.
It’s not just agriculture. Take a non-tariff barrier on cheaper washing machines from Asia and America. The EU limits the machines by water capacity and electricity use, nominally to help the environment. The EU ends up with rarefied machines that don’t export well, and don’t benefit from the economies of scale through exports. Consumers hate them because they are more expensive, slower and less effective. They don’t help the environment because when your washing machine accepts half the volume of clothes that an American machine can hold, you run it twice as much. The inefficiencies of running twice what could have been done once leads to more operating costs and more consumption of water and electricity. You don’t need a smaller drum to reduce resource use: you just need buttons and sensors that adjust water level and runtime based on volume and dirt.
Similarly, the EU protects its automotive industry with emission standards that disadvantage non-EU vehicles.
The Carbon Border Adjustment Mechanism (CBAM), which entered its definitive regime this year (after a transitional phase starting in 2023), taxes carbon-intensive imports like cement and aluminium, effectively protecting European producers from cheaper, dirtier alternatives abroad. Proponents call CBAM a climate tool, but detractors see it as greenwashed protectionism that burdens EU consumers and developing economies.
The EU’s distorted, counterproductive regulations are rooted in protectionism and environmentalism, both of which are roads to hell paved with good intentions. The EU won’t step off these roads, so why on earth is Sir Keir Starmer’s government selling rejoining as good for free trade, producers and consumers?
Brexit gives Britain the freedom to reach its own deals with Mercosur without waiting for 27 other states to approve, without pandering to French farmers or German washing machine manufacturers.
The EU is a founding member of the World Trade Organization (WTO), but prefers to negotiate for itself without the WTO’s higher expectations for free trade. For instance, subsidies to Airbus have sparked decades-long WTO disputes with Boeing yet the EU defends them as necessary for competitiveness. In fact, they enable inefficiencies.
The EU negotiations with the US on tariffs prove the EU’s difficulties and dishonesty. In July, the EU claimed a deal that turned out to be not a deal, rather a list of intents (the euphemisms include ‘framework agreement’ or ‘mini trade deal’). Follow-up proposals were rejected.
If anything, the EU will be more difficult to negotiate with, partly because it still wants to punish Britain for leaving in the first place, partly because the domestic political pressures are growing.
French municipal elections loom in March. Alienating the farming lobby could be the final nail in Macron’s measured coffin. Starmer doesn’t face the coffin on the same schedule. He has postponed some local elections until 2028, although his party might ditch him first.
