At Rio G20 summit, Olaf Scholz looking for trade allies

When Olaf Scholz returns to Germany from the G20 summit in Rio de Janeiro, Brazil, on Wednesday, the crisis-ridden chancellor could be returning with something truly historic: a free-trade agreement between the European Union and the Mercosur states of Argentina, Bolivia, Brazil, Paraguay and Uruguay. That is, if he can seal the deal after decades of negotiations.
“This free-trade agreement would be liberating for the German economy. It’s almost impossible to imagine a more difficult situation geopolitically, we have to use this opportunity,” said Volker Treier, the foreign policy leader of the German Chamber of Commerce and Industry.
“Right now the window is open — you can’t negotiate for 25 years, not have a deal, and still believe you can just keep stretching it out like chewing gum. If not now, when?”
Treier spoke with DW about a recent business survey from the Association of European Chambers of Commerce and Industry in Brussels. The result, he said, was “pretty dismal.”
Faced with looming US protectionism under the incoming Trump administration, Treier said the EU-Mercosur agreement would be an important signal for EU and German businesses. When it comes to batteries, solar panels, wind energy and green hydrogen, Europe, he said, could achieve its green transformation more quickly and sustainably with the help of South American raw materials.
In return, European businesses would no longer pay €4 billion ($4.2 billion) in tariffs to export their goods to Mercosur countries, according to Treier. “We already have good relations with Mercosur, but there’s no real dynamism. In part, that is because Mercosur countries are imposing 25-30% tariffs on classic German export products like cars, but also electronics or machined goods,” said Treier.
Kaja Kallas, the EU’s incoming foreign affairs chief, echoed those sentiments. “If we don’t do a trade agreement with them, then this void will be filled by China,” she said during her confirmation hearing before the European Parliament this week. China has increased its investment in the region by a factor of 34 between 2020 and 2022, and the first Chinese-controlled mega-port in South America has just opened for business in Chancay, Peru.
In the event the agreement isn’t signed at the G20, proponents are aiming to get it wrapped up at the Mercosur summit taking place in Montevideo, Uruguay, in early December.
At the same time, opposition to the deal is also gaining momentum in Europe and South America — and it’s not just coming from environmentalists. European farmers are livid, criticizing double standards and unfair competition with their South American colleagues.
In an appeal printed in the French daily newspaper Le Monde, some 600 French parliamentarians called for European Commission President Ursula von der Leyen to refrain from signing the agreement. Moreover, and potentially more ominously, French Prime Minister Michel Barnier has said Paris would not agree to the deal in its current form.
“The agreement between Mercosur and the EU is far more advantageous to Europe than it is to South America,” as Raul Montenegro, an Argentine biologist and 2004 Right Livelihood Award winner, told DW. “The main losers in an eventual agreement will definitely be biological diversity in South America, as well as the small and midsized businesses and poor in both regions.”
G20 host Luiz Inacio Lula da Silva, who hopes to enshrine the fight against hunger and climate change in the Rio summit’s final communique, is facing a herculean task when it comes to the endless discussion of free-trade agreements, yet remains upbeat.
“I have never been so optimistic about the EU-Mercosur,” the Brazilian president said on the sidelines of the UN General Assembly in New York in September. Lula is determined to heave Brazil into the role of a global player in his third and likely last term in office.
That is yet another reason that Treier of the German Chamber of Commerce and Industry said time is fleeting.
“Self-confidence is increasing among the Mercosur countries, the same way it is across the Global South. We were in India two-and-a-half weeks ago for our Asia conference and the same thing is happening there: They are still willing to reach out to us, but things won’t stay that way forever,” he said.
This article was originally written in German.