The importance of an equal footing

It is complete – finally. More than 25 years on since the start of negotiations, the President of the European Commission, Ursula von der Leyen, signed a free trade agreement between the EU and Mercosur states in Paraguay. It heralds the birth of one of the world’s largest free trade areas where the countries involved have a combined population of around 700 million and account for a fifth of the global economy.

It is nigh on impossible to overestimate the importance of this partnership. The signing of the agreement is a strong, extremely positive signal of multilateralism in times that are characterised by protectionism and it would be prudent for the German government to support the project as fully as it can. From an economic, sustainability and political point of view, there are also obvious advantages for partners on both sides of the Atlantic.

Benefits: A win all round

1. Economy

The name of the Mercosur Treaty – “Free Trade Agreement” – is clear evidence that it facilitates trade. In fact, the Federation of German Industries (BDI) has predicted that companies will save 4 billion euros per year in customs duties. The agreement also improves investment conditions and access to critical raw materials such as lithium and copper, while opening up new markets. In brief, it should provide a shot in the arm for the economy.

2. Sustainability

Europe’s environmental and social standards could become an interesting export commodity through the Mercosur, benefiting people in South America – provided that their implementation is negotiated in a joint political dialogue. Nevertheless, it would be sensible to exercise caution since the deal only makes sense for citizens of Mercosur states if they do not also import the excessive level of bureaucracy surrounding sustainability from the EU.

3. Politics

Europe’s reputation as a player on the world stage has been fading for years. The Mercosur Treaty is therefore a beacon of light that proves the EU can build sustainable geostrategic connections in a world where the USA, Russia and China are vying for political zones of influence. It is also desirable to introduce further initiatives that bring together Europe and the emerging countries of the Global South such as India, Indonesia and the United Arab Emirates.

Development: the EU must not repeat its mistakes

The free trade agreement with the Mercosur states has been signed. Great, so everything is fine now? Not exactly. The success of this fledgling partnership will depend on whether Europe has learned from the mistakes of the past. First presented five years ago, the EU’s “Global Gateway” initiative was intended to link the countries of the European Union more closely with newly industrialising and developing countries, but has remained a paper tiger.

There are various reasons for this resounding failure: the EU connectivity strategy was introduced far too late compared to the initiatives of the USA and China, it was far too underfunded, and remained far too bureaucratic. However, there was also something else that caused the initiative to fail before it had even begun: "Global Gateway" was not created on an equal footing with the potential partner countries. You cannot build bridges if you are always pointing the finger at your partners.

For a contract to become a genuine partnership, all parties must benefit in both Europe and South America alike. Anything else will lead to the newly created link coming to a premature end. After all, the Mercosur states, just like the Global South as a whole, have never had such good opportunities as they do now to help shape geopolitics and geoeconomics in their favour. We can be certain that they will make use of them.