interview
Postponement of Mercosur contract
“Could have been a blueprint for other partners”
After the EU Parliament has the EU-Mercosur agreement examined by the European Court of Justice, economist Martin Lück advises Europe not to waste any time – and to look for more partners.
Evidence Network.de: The agreement between the EU and the Mercosur countries has just been signed. Now the setback. The European Court of Justice should check whether the agreement is compatible with EU law. Did you expect that?
Martin Lück: No I haven’t. I also did not expect that so much political opportunism would come from the right-wing populist parties, but also from some Green MPs, that this political opportunism would win and hinder an agreement that makes absolutely sense and is necessary for Europe.
Evidence Network.de: So in other words, votes are more important than thinking globally?
Luck: Political opportunism is part of it to some extent, as is protecting the interests of one’s own electorate. Of course, many farmers went to the barricades against this EU-Mercosur agreement. That may be understandable in one place or another, but the fact is that, in principle, the particular interests of a few are hindering progress for the whole of Europe, and that is simply harmful.
Martin Lück is an economist and has worked as a capital market economist and strategist for around three decades. He works as managing director at his consulting firm Macro Monkey, founded in 2024, and as chief strategist at Franklin Templeton in Germany and Austria.
Voting result a sign of disunity
Evidence Network.de: Trade with the world’s two largest economies, the USA and China, is becoming increasingly difficult. The signing of the Mercosur agreement would create one of the largest free trade zones in the world. Now there is a pullback in the last few meters. What signals does this give?
Luck: Fatal signals. We fear threats from the United States to the rules-based order. This Mercosur-EU agreement in particular could have been a reinforcement of rules-based trade and free trade, and perhaps also a blueprint for agreements between the EU and other partners, such as in Southeast Asia or South Asia. All of this is now a sign of the EU’s disunity, that we cannot get our political disunity here at home under control. This makes it less attractive for other regions of the world to enter into discussions with Europe.
“Then the farmers traded in lemons”
Evidence Network.de: Can European farmers really breathe a sigh of relief now?
Luck: No, they can’t do that. One can only hope that there is at least enough sense left to put this agreement into effect at least provisionally until the European Court of Justice has made a decision. If that happens, then the farmers have traded in lemons. The point is that this is simply a political signal, and unfortunately to the detriment of Europe.
Evidence Network.de: What does this mean for other sectors of industry, for example for the automotive industry or for mechanical engineers? They are losing sales opportunities in many places.
Luck: That is absolutely correct. The export industry is coming under pressure due to deglobalization and the aforementioned difficulties in trade with the large economic blocs. It would have been very important to find new sales markets with more favorable conditions in South America – especially in the largest Mercosur country, Brazil. This may now be hindered. In any case, this setback caused by the EU Parliament’s decision is also a threat to these export sectors.
Not an equalizer, but a first impulse
Evidence Network.de: Could Mercosur really compensate for the goods no longer being delivered to the USA or China?
Luck: No, you have to be that honest. Mercosur accounts for around 2.5 percent of the EU countries’ total foreign trade. In comparison, it is around 17 percent in the case of the USA and 15 percent in the case of China. This means that even if India were to be added to the mix, India and Mercosur together would only account for about a third or less than a third of the trade with China. A balance cannot be created in any way. But it’s about giving at least a hopeful initial impetus, then perhaps continuing to work from there with other agreements and, of course, above all, sending a signal to the world that the rules-based order is not yet at an end.
Evidence Network.de: How important are free trade zones?
Luck: They are important. Economic studies have repeatedly shown that trade with as few barriers as possible is beneficial for both sides. Trading partners, importers and exporters on both sides can rely on this working.
“It could start soon”
Evidence Network.de: What’s next?
Luck: Next there will be a decision, probably also from the European Court of Justice, on whether the trade agreement can be put into force provisionally, although the European Parliament has commissioned the European Court of Justice to examine it. After weighing up the interests, one could also come to the conclusion that this makes sense. I would also strongly recommend it. Then it would start soon. Trade barriers would be removed accordingly between the EU and Mercosur. At the same time, the European Court of Justice would begin its review process and there would only be a long delay in making a final decision.
Evidence Network.de: But getting rid of trade barriers doesn’t happen overnight.
Luck: Reducing tariffs from a certain percentage to zero, as is normally provided for in a freedom agreement, can be done relatively quickly. It gets a little more complicated when comparing any regulations. But in any case, that would be an important signal to start now. Every process begins with the first step. We must not forget that this agreement was negotiated for 26 years before it was finally decided – and in this respect, yes: if implementation takes a while, then we should be patient.
“That would be a fatal signal”
Evidence Network.de: What if the European Court of Justice says the agreement is not compatible with EU law?
Luck: That would be the biggest possible accident from today’s perspective. That would be a fatal signal. However, this decision will only be made after a thorough examination, i.e. probably after many months. The South American countries, especially Brazil and President Lula, were already disappointed that it had taken so long, and they would then actually threaten and say, ‘Well, if you Europe don’t get this done, we’ll leave you behind for good’. That’s why I once again plead for this agreement to be put into effect quickly and quickly, at least provisionally.
Evidence Network.de: Do you see any chances of this happening?
Luck: Yes, I’m an optimist and that’s why I hope that reason will prevail here in the end.
The interview was conducted by Claudia Wehrle, ARD finance editor. It was edited and shortened for the written version.
