Business puts pressure on Merkel to back controversial EU-Mercosur pact

Industry bodies have urged German Chancellor Angela Merkel to continue pursuing a large EU free trade agreement with South American countries after she expressed concerns over deforestation in Brazil. The Association of German Chambers of Industry and Commerce (DIHK) and the Mechanical Engineering Industry Association (VDMA) both said the EU-Mercosur deal, due to be signed this year, must be ratified quickly. “The sooner the agreement is implemented, the sooner the EU can formally request consultation with Brazil on sustainability issues,” said VDMA boss Thilo Brodtmann.

The comments came after Merkel expressed “considerable doubts” about the EU deal with Brazil, Argentina, Paraguay and Uruguay, which would create the world’s largest free trade zone. Deutsche Welle reported that her spokesman, Steffen Seibert, said her biggest problem was with growing illegal deforestation in the Amazon, something Brazilian President Jair Bolsonaro has denied. It was unlikely a deal could be agreed “given current developments and the terrible loss of forests”, Seibert added. More than 9,000 square kilometers of Brazilian rainforest were cleared in the year to July, 35 percent more than in 2019.

There is widespread unease over the Mercosur deal, which in addition to trade would aim to improve environmental regulations in South America. France has threatened to veto the deal unless Bolsonaro does more to protect the Amazon, for example, and many EU politicians share Merkel’s concerns. “It is already foreseeable that Brazil, for example, will not comply with the regulations," Bernd Lange, a German member of the European Parliament's Trade Committee, told Tagesspiegel Background.

The EU-Mercosur deal is being prepared for ratification by the 27 EU member states. It was due to be signed in the summer but was delayed by the coronavirus pandemic. Environmental groups have called on the EU to discard the deal to help save the rainforests. Bolsonaro has claimed he is already protecting the Amazon. Big business is keen for the two blocs to reach an agreement as a zero-tariff South American market offers attractive growth potential.