The EU's ambitious trade liberalization agenda is back in motion with recent deals and objectives announced. But policy makers must navigate political headwinds to turn agreements into reality. Poland, leading the body that represents EU governments until July, is unlikely to advance contentious deals like Mercosur, fearing backlash from its farming sector. Will the European Commission have to use the first draft of the EU’s next long-term budget to increase its contingency fund for farmers?
After some years of economic uncertainty, the EU has dusted off its free-trade playbook to bolster its status as a global powerhouse. But with mounting political pushback in key capitals, the European Commission will need to play its cards wisely.In just a month, the EU’s executive arm has concluded a landmark agreement with the Mercosur bloc to create a free-trade zone of 700 million people (see here) and revamped the EU-Mexico deal (see here). In addition, it has resumed talks with Malaysia after a 13-year hiatus (see here) and designated India as a new top priority for a trade deal (see here).
The pressing question for EU officials now is what’s the right moment to present the newly negotiated deals for formal adoption to cut the risk of resistance from the likes of France, Italy and Poland jeopardizing their success (see here).
These EU countries have repeatedly echoed concerns from the farming sector, which sees the Mercosur agreement as opening the door to unfair competition from cheaper imports that don’t meet the bloc’s green standards.
In addition, the uncertain geopolitical landscape, driven by US President Donald Trump’s tariff threats and protectionist agenda, could push EU policy makers to change their plans overnight.
“My understanding is that the commission is not planning to put the [Mercosur] agreement up for ratification this year,” André Sapir, a trade expert at Brussels think tank Bruegel, told MLex last week.
The overhaul of the EU-Mexico deal is considered less contentious by EU officials, though, so it will be presented to member states and lawmakers ahead of the Mercosur agreement, most likely this spring.
— The role of Poland —
But why is this first semester of 2025 so delicate for the Mercosur process?
Poland is currently responsible for steering the legislative agenda and setting priorities for EU governments as holder of the Presidency of the Council of the EU for the first six months of this year. The council, which represents the 27 member states in Brussels, will be under Poland’s influence until the end of June.
Free trade is likely to remain taboo for the duration, with Warsaw reluctant to push forward major deals. Prime Minister Donald Tusk is a vocal critic of the Mercosur deal, leading national governments' opposition alongside France (see here).
The farmers’ lobby has strong influence in Poland, and Tusk is unlikely to soften his position on the EU’s trade liberalization agenda before Polish citizens head to the polls on May 18 for presidential elections. That election "will dominate Tusk’s decisions on anything controversial in Poland,” Sapir said. “So the Polish [council] presidency is not going to even touch it. Low-level and low-visibility discussion, nothing political.”
With the Mercosur deal requiring support from a qualified majority of member states — meaning 15 out of 27 governments, representing at least 65 percent of the bloc’s population — there simply isn't enough certainty that the commission will get enough support while Poland wields such outsize influence.
This week, Polish economy minister Krzysztof Paszyk gave EU lawmakers a preview of the country’s trade priorities for the coming five months, confirming its antipathy to the Mercosur deal.
Free-trade agreements may be desirable for “boosting economic security by diversifying supply sources,” Paszyk said, but Poland will nevertheless push to shield its farmers from what it sees as “excessive competition” from foreign imports.
At the core of the agricultural protests is the stark contrast in farm sizes, as well as the use in South America of chemical and phytosanitary products that are banned in the EU.
Jan Kazmierczak, leader of Poland's National Association for the Defense of Farmers' Rights of Agricultural Producers and Processors, said earlier this month that in Mercosur countries, "there are farms with over 800,000 hectares each, while in our country the average farm is 10 hectares."
In addition, the EU farming sector has identified “more than 100 active substances [that] have been withdrawn from the EU” but are still present in Mercosur imports, he told Polish outlet OKO.press. "Poland and Europe produce the best food in the world, but we are pulling grain and food products through the back door," he said.
— Reserve fund and beyond —
As farmers’ concerns are the biggest hurdle, the commission is ready to offer a compensation plan for sectors hit hardest by imports. Earlier this month, EU trade chief Maroš Šefčovič told lawmakers that the Mercosur deal would be accompanied by a reserve of 1 billion euros ($1.05 billion) “for the unlikely event that the agriculture sector in Europe is negatively impacted.”
“We see this like giving a warranty for a product, as the producers give a warranty when they consider that their product is faultless,” he said in the European Parliament (see here).
Assuming that the commission does wait out the Polish presidency, it won't be out of the woods. It will soon face a key test of its commitment to balancing trade ambitions with farmers' concerns. This summer, it is expected to present the first draft of the 2028-2034 Multiannual Financial Framework, the 170 billion-euro long-term budget for the bloc.
The draft, which will be negotiated between the council and parliament, is seen as a prime opportunity to assess how far the commission can sweeten the compensation offer that the reserve fund represents beyond 1 billion euros.
Feeding in to that calculation will be the commission's longer-term desire to seal a trade deal with India, one of the world's largest agricultural powerhouses, which could one day make opposition to the Mercosur deal look like a hill of beans.
Bruegel's Sapir reasons that while the Mercosur agreement's ratification will be postponed, the commission will have to push it through eventually "for the sake of credibility." What it takes to get there will be interesting to watch.
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