European Union leaders are worried that Brazilian President Luiz Inácio Lula da Silva’s stance on the war in Ukraine could potentially ruin the prospects of a historic deal between the EU and South America’s Mercosur trading bloc. They’re concerned because a failure to reach an agreement could allow China to snatch the opportunity. This situation was revealed in a leaked Council brief on Wednesday, April 19th, obtained by Politico.
As mentioned in The European Conservative, Brazil’s celebrated social democrat president angered the West last week by suggesting that NATO’s weapons shipments to Ukraine are the primary obstacle to peace negotiations and therefore urged the bloc to promptly end them. His comments came during a friendly meeting with China’s President Xi Jinping, the purpose of which was to strengthen their cooperation within the BRICS group.
As the leaked Council document—prepared for the European leaders’ upcoming summit, scheduled for next week—suggests, President Lula’s Beijing remarks prompted greater outrage than was publicly aired. However, the possible short-term consequences regarding the prospective EU-Mercosur trade deal—which occupies an important place on the summit’s agenda—could easily do more harm to Europe than to Brazil.
How the Deal Could Go South
The historic trade and cooperation deal with the members of Mercosur—a Spanish abbreviation for Southern Common Market, consisting of Argentina, Brazil, Paraguay, and Uruguay as full members—has been evolving since 2000 with numerous issues slowing the process. In early 2023, however, the stars finally appeared to align, as EU lawmakers declared that a rare “window of opportunity” had opened—in no small part due to Lula’s 2022 election victory over Brazil’s famously protectionist “Tropical Trump,” ex-President Jair Bolsonaro.
The deal, which has been sought after for decades, is supposed to open the two trading blocs to each other, slashing considerable duties to allow South American agricultural products much better access to Europe, while granting the same export advantages to EU industrial manufacturers. While concerns for sustainability and deforestation were frequently brought up as obstacles before, an increasing number of EU countries now lean towards supporting the pact after the supply chain disruptions of the pandemic and the war made the need for diversification away from Asia painfully apparent.
But the year’s high expectations may end rather abruptly. According to the leaked Council brief, the EU considers closing the Mercosur deal a top priority but worries that Brazil’s lack of sufficient support for Ukraine could become an issue at the negotiation table. “Moving ahead on the EU-Mercosur agreement will be of key importance,” the document reads, but because of Lula’s recent behavior, EU leaders are “concerned about Brazil’s position on Russia’s war on Ukraine and Brazil’s lack of delivery on climate [and] environment.”
A Minute After Midnight?
Even though the deal still has ample support within the EU—including from Spain, the next member state to assume the Council’s rotating presidency in July, with a top priority to strengthen the bloc’s relationship with Latin America—Europe might have already dropped its approval of the trade agreement. While the EU was sitting on the proposal for twenty years, China was busy investing billions in the region, and not without clear expectations.
The leaked Council brief also addresses the challenge of having to outbid Beijing if Brussels wants to close the deal, which will not be easy. In an oblique reference to China, the document admits that in “our engagement with third countries, we find ourselves in a competitive geopolitical environment: not only a battle of narratives but also a battle of offers.”
The primary concern here, too, is Brazil. With China already the South American powerhouse’s biggest trading partner, we now see a political shift toward Beijing taking place too. While Lula’s Ukraine remarks signal only an ideological misalignment with the West (and, therefore, one that could be looked over in theory), the president’s key announcement over the weekend—saying that Brazil will drop the dollar in favor of trading in yuan with China—is a more serious matter.
According to the Spanish El País, this move proves that China’s dominance over Brazil has already reached epic proportions. From this point of view, Lula’s Ukraine remarks are “not a sign of Brazil’s strength as a regional power but rather of its enormous economic dependence on China to the point of determining its foreign policy and, more seriously, on the use of the global reserve currency for a country with such a high foreign debt as Brazil.”
Another sign that the EU realizes it may be running out of time is that EU chief trade negotiator, Rupert Schlegelmich, is currently touring South America to advance talks on the trade deal. The results of his efforts will probably be made public after next week’s Council summit, as well as the willingness of EU members to work with Brazil after Lula’s problematic comments. But if the EU lets this “window of opportunity” pass, it might never get a second chance to close the deal, having to witness two decades of diplomatic efforts go up in smoke.
