The MERCOSUR-European Union agreement: a multi-causal approach to the conclusion of the negotiating process

Abstract

On 28 June 2019, the Southern Common Market (MERCOSUR) and the European Union (EU) concluded the negotiations on the trade chapter of the Association Agreement that both blocs had been working on for twenty years. The conclusion of the negotiations, announced at the G20 summit in Osaka, surprised everyone. They had begun in 1999 but were interrupted (and subsequently retaken) on several occasions due to differences in key issues such as agriculture, services and government procurement. Although a trade agreement was reached in June 2019, we should note that this does not mean the end of the process, as ratification by the parties and entry into force is still pending.

At the time of the conclusion of the “agreement in principle”, the EU faced the consequences of a multiplicity of overlapping crises and concentrated its foreign policy mainly on its eastern and southern neighbors, while the South American bloc had diverted its external relations to Asia. When everything suggested that MERCOSUR and Europe were drifting apart, they managed to reach the agreement. What were the determining factors for this outcome?

The explanation of why countries decide to close a trade agreement leads to a diversity of factors. In the case of the agreement between MERCOSUR and the EU, it was exhibited as an instrument for market access, and as an opportunity to increase the well-being and efficiency of different economic sectors. From the strategic and geopolitical point of view, the agreement was presented as a milestone for the preservation of the international liberal order. With regard to the identity element, the agreement contributes to the consolidation of a bi-regional common identity around a set of shared values.

The MERCOSUR-EU agreement, then, does not allow a single appraisal, but it can be elucidated by the presence of at least three kinds of explanatory factors: economic, strategic and geopolitical, and also ideational. A large and growing body of literature on international cooperation, economic integration and inter-regionalism has investigated the selected factors.

Liberal intergovernmentalists and international political economy scholars have studied the interaction between economic and geopolitical interests. In the economic integration process, according to these approaches, economic interests take precedence. However, they recognize that in cases where economic interests are indeterminate or diffuse, other objectives might be relevant (such as geopolitical, strategic and, we will add, ideational). In this study, we analyze how these three factors have been present to account for the agreement reached and what their implications are.

The aim of this research, then, is to investigate the factors that explain the conclusion of the agreement between MERCOSUR and the European Union, in June 2019, after twenty years of negotiations. Similarly, it attempts to examine whether any of these factors have an impact on the strategic uses that the parties make of the negotiated agreement and its (possible) ratification.

Our hypothesis is that the conclusion of a deal between MERCOSUR and the EU is a multi-causal process involving simultaneously three types of factors: economic and trade material interests, strategic and geopolitical interaction, and bi-regional identity. The convergence of factors implies that the trade-off that allowed the agreement to be reached is multivariate, which does not suggest that it is necessarily harmonious. Each of these factors contributes to giving a different meaning or perspective, making available different strategic uses of the agreement by the countries involved. These different uses and meanings attributed to the negotiated agreement on the basis of the factors involved may also affect the dynamics of the ratification process.

In methodological terms, the article follows the logic of a qualitative case study. The study is longitudinal, seeking to understand the conclusion of the negotiations while still considering the phenomenon over time. The techniques of data collection and analysis were qualitative, relying on the review of official documents, statements and speeches of the various actors involved, as well as on secondary statistical and bibliographic sources.

The study shows that multi-causal analyses with eclectic conceptual frameworks have advantages, in a context where international trade negotiations are becoming more complex and where trade has ceased to be a low agenda issue. Therefore, the research carried out makes it possible to shed light on the tensions underlying the signing of the agreement, which also appear in the ratification process. Moreover, it shows that different actors’ viewpoints and motivations coexist regarding the same international policy event –the trade agreement–.

This study provides support for our initial argument. On the economic and commercial dimensions, the parties involved managed to bring their positions closer on the most sensitive issues, which –until then– appeared as insurmountable differences. While the structural characteristics of trade and investment did not change and nor did the trade preferences of the sectors, there was a change in the political dimension of these elements. From this perspective, the ratification of the agreement is imperative, but it is precisely because of the sensitivities involved that a higher level of politicization is expected.

Geopolitics has also played a relevant role, especially in the strategic use of the announcement of the agreement at the Osaka Summit. Thus, it was presented as a milestone for the preservation of the international liberal order, in contrast to the dynamics of the Sino-American trade war. This strategic game, however, is satisfied with the mere announcement of the arrangement and the geopolitical variable does not generate the same incentives for ratification as it did for the conclusion of the negotiations.

Finally, the explanation based on the identity element is constructed from inter-regionalism and makes it possible to argue that the agreement between MERCOSUR and the European Union represents a milestone in the consolidation of a common identity around a set of shared values. However, these are a precondition for the agreement to take place, and do not fully explain the 2019 outcome.

Putting these three variables into dialogue has proved indispensable to apprehend the complexity of a long-standing process, and the implications of an eventual ratification. These findings, however, raise new questions. Future work could enrich the study of the MERCOSUR-EU agreement, including the challenges of politicization. Also, since the study suggests a link between the three explanatory factors and the uses of the trade agreement, in future investigations it might be possible to undertake comparative studies between different processes of international trade negotiations.

The article has been organised in the following way. After the introduction, the paper goes on to present the definitions related to the conceptual framework and research design. In the first section we focus on the hypothesis regarding material economic and commercial interests. The second section evaluates the geopolitical and strategic variable. The third section presents the characteristics and implications of the interregional link. Finally, we present the conclusions of the investigation.