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Talks on a\u00a0landmark free trade deal\u00a0between the European Union and four South American countries started so long ago that the euro wasn\u2019t even in circulation, China hadn\u2019t yet joined the World Trade Organization and Venezuela was still America\u2019s top oil provider.<\/p>\n
But against a starkly different geopolitical background and tough odds \u2014 including\u00a0backlash from powerful protectionist lobbies\u00a0\u2014 the EU and the South American alliance known as\u00a0Mercosur\u00a0are expected to formally sign their\u00a0quarter-century-in-the-making\u00a0trade pact this Saturday at a ceremony in Paraguay.<\/p>\n
This is the first major trade agreement for Mercosur, which includes the region\u2019s two biggest economies, Brazil and Argentina, along with Paraguay and Uruguay. Bolivia, the newest member, was not involved in negotiations but can join the agreement in the coming years.<\/p>\n
The\u00a0trans-Atlantic trade deal\u00a0\u2014 lifting tariffs on products ranging from Argentine steaks and Brazilian copper to German cars and Italian wine \u2014 still has to be ratified by the\u00a0European Parliament.<\/p>\n
The significance of creating one of the world\u2019s largest free-trade zones \u2014 home to more than 700 million people and accounting for a quarter of global gross domestic product \u2014 while\u00a0President Donald Trump\u00a0yanks the United States\u00a0out of the international economy\u00a0is not lost on the signatories.<\/p>\n
European Commission President\u00a0Ursula von der Leyen\u00a0hailed the deal last week as a powerful endorsement of multilateralism \u201cin the face of an increasingly hostile and transactional world.\u201d Brazilian President\u00a0Luiz In\u00e1cio Lula da Silva, 80, called it a rare \u201cvictory for dialogue, negotiation and the bet on cooperation.\u201d<\/p>\n
That victory comes at the expense of the U.S. and China, experts say, as Trump aggressively\u00a0asserts American authority\u00a0in the resource-rich region and\u00a0Beijing uses its massive trade\u00a0and\u00a0loans\u00a0to build influence.<\/p>\n
\u201cIt\u2019s a signal that South American economies are seeking to hedge away from this great power competition between the U.S. and China,\u201d said Lee Schlenker, a research associate with the Global South program at the Quincy Institute for Responsible Statecraft, a Washington think tank.<\/p>\n
\u201cIt shows that South America can continue to flex its muscles in the international sphere, to diversify its trade partners and exert a certain level of autonomy it\u2019s often denied.\u201d<\/p>\n
The accord grants South American nations, renowned for their fertile land and skilled farmers, increased access at a preferential tax rate to Europe\u2019s vast market for agricultural goods.<\/p>\n
Here in Argentina, exporters reckon they\u2019ll save tens of millions of dollars a year thanks to the deal\u2019s immediate elimination of a 20% tariff on the EU\u2019s long-standing quota scheme for high-quality meat imports.<\/p>\n
It\u2019s a breakthrough for Argentina, a nation dominated for decades by\u00a0left-leaning populist\u00a0governments that kept the economy\u00a0closed\u00a0to the outside world and prioritized the domestic market to the extent of imposing taxes on farm exports to keep food prices down.<\/p>\n
\u201cWe\u2019re in the midst of a paradigm shift here,\u201d said Carlos Colombo, the president of Ca\u00f1uelas Cattle Market in Buenos Aires province where over 12,000 cattle are sold daily, many destined for Europe and China. \u201cArgentina has reopened itself to the world.\u201d<\/p>\n
Argentine President Javier Milei may be Trump\u2019s strongest\u00a0ideological ally\u00a0in Latin America \u2014 sharing his\u00a0disdain for the United Nations\u00a0and the\u00a0Paris climate accord\u00a0\u2014 but no one can call the radical libertarian a\u00a0protectionist.<\/p>\n
At first\u00a0he derided\u00a0the notoriously slow-moving Mercosur as irrelevant and threatened to ditch it. But he changed his tune since realizing the bloc\u2019s potential to sweep away tariffs and slash customs red tape.<\/p>\n
\u201cHe sees this agreement as a way to revitalize and re-signify Mercosur,\u201d said Marcelo Elizondo, an Argentine economic analyst specializing in international trade.<\/p>\n
The free-trade fever has also infected Brazil\u2019s long-closed economy. Apex, a Brazilian government investment agency, estimates that EU-bound agricultural exports like instant coffee, poultry and orange juice will rake in $7 billion in coming years.<\/p>\n
Squeezed by environmental regulations and fearing a flood of cheap food products from across the Atlantic, farmers have\u00a0blocked highways\u00a0and\u00a0descended on the streets\u00a0of European capitals in an explosion of outrage against the agreement.<\/p>\n
The EU has scrambled to soothe their concerns over decades of negotiations, adding environmental and animal welfare\u00a0safeguards to the accord\u00a0and imposing strict quotas for South American exports of meat and sugar to ensure homegrown produce stays competitive.<\/p>\n
Even so, the angry farmers\u00a0ultimately persuaded France, Poland and a few other states to oppose the deal in last week\u2019s internal EU vote, depriving the accord\u2019s supporters of what they hoped would be a show of unity. Italy and other agricultural powerhouses only\u00a0came around\u00a0after the EU offered farmers generous subsidies to the tune of $52 billion.<\/p>\n
\u201cIt\u2019s a sizable bribe,\u201d said Jacob Funk Kirkegaard, nonresident senior fellow at the Peterson Institute for International Economics. \u201cEU leaders decided that the deal is so important at this moment, it\u2019s worth it.\u201d<\/p>\n
Some have dubbed the deal \u201ccows for cars,\u201d reflecting the perception that Europe\u2019s auto industry will also win big.<\/p>\n
Clobbered by\u00a0growing competition\u00a0with China and sky-high\u00a0U.S. tariffs, vaunted German auto giants like Volkswagen and BMW are glad for the boost, as are producers in Europe\u2019s pharmaceutical, construction and machinery sectors gaining access to hundreds of millions more consumers.<\/p>\n
Experts say that the elimination of 35% tariffs on auto parts and cars gives European industrial exporters a rare chance to claw back their South American market share from cheaper Chinese rivals.<\/p>\n
\u201cFailing to sign the EU-Mercosur free trade agreement risked pushing Latin American economies closer to Beijing\u2019s orbit,\u201d said Agathe Demarais, a senior policy fellow with the European Council on Foreign Relations.<\/p>\n
But many are still are holding their breath, having watched negotiations lumber along for years only to trip up at the last minute.<\/p>\n
\u201cThere are still several steps that have to be taken \u2026 and Europe continues to be very careful,\u201d Colombo said, straining to be heard over the hollers of cowboys prodding hundreds of bellowing cattle into trucks.<\/p>\n
\u201cLet\u2019s not forget, this is historic. We\u2019ve never reached an agreement like this before.\u201d<\/p>\n
____<\/p>\n
Associated Press writer Mauricio Savarese in Sao Paulo contributed to this report.<\/p>\n<\/div>\n
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