LATIKA M BOURKE: Australia in EU’s sights for trade deal after Mercosur win and Donald Trump’s tariff threats

The President of the European Commission Ursula von der Leyen has singled out Australia as a priority country for a trade deal during her speech to the World Economic Forum in Davos.

Declaring that Europe was “open to the world” and was choosing “fair trade over tariffs,” the EU chief sought to draw a sharp contrast with the behaviour of the Trump Administration.

On the weekend, Europe signed a massive trade deal with the Mercosur countries Argentina, Brazil, Paraguay and Uruguay.

The deal was 25 years in the making but is strongly opposed by French President Emmanuel Macron, who is in a parlous domestic position and is afraid of upsetting his heavily subsidised farmers, who have launched protests about foreign meat being sold to Europeans.

France is joined by Ireland, Poland and Italy in also opposing the deal, primarily because they fear Australian farmers being able to sell more beef and lamb into Europe. This was the blockage that led to talks collapsing in 2023.

But President von der Leyen told the world’s elite, gathered at Davos, that the Mercosur breakthrough sent a “powerful message to the world.”

“We are choosing fair trade over tariffs, partnership over isolation, sustainability over exploitation,” she said.

“We are serious about de-risking our economies and diversifying our supply chains.

“That is why we will not stop with Latin America. We are working on a new free trade agreement with Australia.”

Olof Gill, the EU’s deputy chief spokesman, said that the deal with Mercosur was significant for Australia.

“Mercosur is a major breakthrough,” he told The Nightly.

“It shows that what was previously impossible is now possible. We look forward to taking this momentum forward to our talks with Australia.”

The EU boss will travel to India after Davos. The EU is also hoping to clinch a deal with India, which, like the EU, is a traditionally protectionist market.

Plans are being drawn up for the Commission boss to visit Australia after Prime Minister Anthony Albanese revealed late last year that President von der Leyen would visit in 2026.

Trade Minister Don Farrell said Australia was also keen to secure an agreement.

“Australia continues to be willing and able to finalise a Free Trade Agreement with the European Union,” he told The Nightly.

“We look forward to further negotiations to finalise that agreement at the convenience of the European negotiators.”

The EU wants to integrate cooperation on critical minerals and a security partnership into any upgrade of its trading relationship.

But one final hurdle remains. Members of the European Parliament are voting on Wednesday local time on whether or not to defer the Mercosur deal to the Court of Justice of the European Union to see if it is compatible with EU Policy.

While it is not a vote on approving the trade deal itself, it would delay its implementation and effectively constrain the Commission’s authority to strike new deals.

Roughly 4000 farmers from France, Italy, Belgium and Poland driving tractors protested outside the European Parliament in Strasbourg, France, ahead of the vote.

John O’Brennan, a professor of European politics at the National University of Ireland Maynooth, said the opposition of farming groups was putting Europe’s broader interests at risk.

“If the Parliament votes against, the deal will not go through,” he said.

“The Irish position was more about balancing coalition politics - the government relies for its majority on a group of independents in parliament who mainly represent rural constituencies (think National Party in Australia).

“But there was great hypocrisy in the Irish position. In the week Ireland voted against Mercosur, the Taoiseach was leading a huge trade delegation in China, extolling the virtues of free trade.”

“In a world of increasingly volatile trade relations, locking in new trade deals and reducing barriers to trade is more important than ever.

“This goes beyond trade: it is also about deepening strategic relationships with key partner regions.”

Europe’s quest to diversify its trading relationships was spurred by the dependencies on China exposed by the pandemic.

Originally, the EU’s shift to South America after the failure to get negotiations over the line with Australia in 2023 was bad news for Canberra.

But the EU has doubled down on its diversification strategy, despite the internal politics, as a result of the Trump Administration targeting Europe and other countries for trade duties.

On top of this, US President Donald Trump said he would impose new tariffs on the EU and UK unless they let him acquire Greenland.

The added duties would renege on deals the US struck with Europe and the UK last year.

Ms von der Leyen said that in politics, as in business, a “deal is a deal.”

“And when friends shake hands it must mean something.”

Asked to comment about his position on trade in light of the EU’s Mercosur deal, President Trump said about trade relationships in general: “We’ll see what happens, I think it’s going to go quite well.”

Asked how far he was willing to go to acquire Greenland, Mr Trump said: “You’ll find out.”

He was speaking to reporters at the White House to mark one year since his inauguration.

“We have a lot of meetings on Greenland and I think things are going to work out pretty well.”

But he declined French President Emmanuel Macron’s invitation to attend a G7 meeting in Paris, because he said Mr Macron would not be around for long. France’s next president will be chosen in elections scheduled for 2027.

Mr Macron issued his invitation to Mr Trump via text message which Mr Trump posted online to social media