EU-Mercosur trade deal goes against tide of Trump protectionism

Paris (AFP) –


The huge trade deal struck between the EU and a bloc of South American nations on Friday goes against the tide of protectionism fuelled by US President Donald Trump's aggressive policies.

Since arriving at the White House in 2017, Trump has lambasted multilateralism, renegotiated trade deals and imposed tariffs on Chinese goods and foreign steel and aluminium -- all part of his "America First" platform.

"The message conveyed by this agreement is that there are still people who count more on cooperation and open trade," said Arancha Gonzalez, director of the International Trade Centre, a WTO agency.

The Mercosur deal sent a strong signal ahead of the G20 summit in Japan where Trump and Chinese President Xi Jinping will meet on Saturday in the midst of a bruising trade war.

Among his decisions, Trump has renegotiated the North American trade agreement with Canada and Mexico, and withdrawn from the Trans-Pacific Partnership (TPP), signed by his predecessor Barack Obama with 11 countries.

Those decisions mean announcing the Mercosur deal during the G20 summit when the leaders of the world's powerful economies will meet takes on a symbolic dimension.

"We mustn't forget that many of the G20 states, including Japan, which hosts this year's summit, have signed the TTP" and decided to move forward without the United States, Gonzalez said.

Canada, which has concluded the CETA trade deal with the EU, will also be president at the Japan summit.

- Argentina, Brazil gain -

Trump and his Chinese counterpart meet Saturday in a bid to work out a deal in their long-running trade war that has seen hundreds of billions of dollars in tit-for-tat tariffs.

Economists are warning about the crippling impact of a lengthy trade war on the global economy.

For Ward McCarthy, chief financial economist for US investment bank Jefferies, key now will be that trade tensions subside as soon as possible so they do not impact growth.

"There is no winner in a trade war. The only way you can justify something like that is if it's a means towards to an end," he said.

"If by going through this very uncomfortable period you really end up with a much broader and more free trade environment, then you can say it's worth it. But the longer this process, the worse it is, not just for China and the US, the worse it is for global economy."

The EU-Mercosur agreement comes at a good time for Brazilian President Jair Bolsonaro and his Argentinian counterpart, Mauricio Macri.

According to the OECD, Brazil and Argentina are Mercosur's two main economic drivers, and among the "least open" countries globally.

Macri, under pressure at home over the economy, in May called rival party leaders together to thrash out a series of policy reforms to stabilize the crisis.

The agreement is an opportunity for Macri to show international support for reforms, said a European source, who added that Bolsonaro also needs this treaty after a meeting with Trump at the White House.