Exploring Mercosur‐EU interregionalism: A multifaceted analysis of its past, present and future functions and dynamics

Abstract

This article provides an analysis of the relationship between the Southern Common Market (Mercosur) and the European Union (EU) focusing on its purposes and functions, by exploring the literature on interregionalism through the perspectives of three distinct schools of thought: neorealism, neoliberal institutionalism and constructivism. Considering the functions theoretically fed by these theories behind interregional relations‐balancing, institution‐building and collective identity‐building‐, the paper attempts at providing a comprehensive understanding of the factors influencing the past and current purposes and functions of Mercosur‐EU relations and holds the potential to anticipate future trends. Our central argument underscores the enduring relevance of the setting of rules and norms and the focus on material gains in shaping the core of the relationship, particularly regarding the trade agreement, while the ideational function of sharing collective identity and values has experienced certain erosion. Nevertheless, increasingly crucial will be the geopolitical purpose, concerning balancing and counterbalancing external actors, given the current era of geopolitical upheaval where binary narratives fall short. We are not concerned with forecasting the future of the relationship as a whole; instead, we aim to analyse which functions will hold greater significance.

INTRODUCTION

The relations between the Southern Common Market (Mercado Común del Sur, Mercosur in Spanish) and the European Union (EU) present an example of interregionalism in the wider sense, ‘the establishment of close institutional links between two regional blocs’ (Hänggi et al., 2006, p. 3). One side of the relationship involves a regional organization composed of states that are integrated, yet they also act as independent entities with their own national agendas in domains that the EU has not yet incorporated. The other side of the relationship entails a group of middle-income countries in transition to development with the objective of creating a customs union1

Mercosur is considered an imperfect customs union primarily due to the presence of tariff exceptions, nontariff barriers, and a lack of full economic integration among its member countries.

and a common market.

Mercosur-EU interregionalism has been developing since the early 1990s, with the aim of creating a bi-regional strategic partnership based on three main pillars: liberalization of trade, political dialogue and cooperation. This relationship faces challenges such as the asymmetry of power and development between the two regions, the divergences in their trade policies and political preferences, the recurrent political instability and social unrest in Mercosur countries, and the influence of external actors. Despite these difficulties, Mercosur and the EU have achieved some significant results, like the establishment of joint dialogues and cooperation programmes, and the conclusion of the negotiations of the trade chapter of the Association Agreement on 28 June 2019.2

The political dialogue and cooperation part was completed 1 year later, on 18 June 2020, but has not been published.

The conclusion of the trade negotiations marked a significant milestone. It coincided briefly with a moment of convergence between the EU and Mercosur, especially on the part of Mercosur, where both parties recognized the potential benefits of embracing a liberal economic order. In the present international context, there is a discernible increase in the significance of states and a questioning of the supposedly naïve nature of the liberal economy, both in terms of its distributive effects and its articulation with political power. There is also a recognition of the nexus between economic leadership and geopolitical power, fostering competitive schemes and an understanding that economic integration is not neutral (Zelicovich, 2023). Paraphrasing Zelicovich, we presuppose that interregionalism is not neutral either but rather characterized by power struggles, strategic competition, clashes of economic interests and ideological differences.

In this article, in line with the prevailing approach in theory-driven studies of interregional relations, which typically employ a mix of theoretical frameworks, we argue that the functions and dynamics of the Mercosur-EU relationship are influenced by a combination of factors derived from neoliberal institutionalism, neorealism and constructivism. As Rüland (2014, p. 18) convincingly asserts, ‘[i]nterregionalism studies (…) confirm a general trend in international relations research towards multivariate theories. The price for this procedure is certainly a lack of parsimony and a strong dose of eclecticism’. However, many scholars find this price acceptable, especially since Hemmer and Katzenstein (2002) have praised eclectic theorizing as a virtue in the absence of a universally applicable, culturally sensitive theory of international relations.

Our central argument underscores the enduring relevance of the setting of rules and norms and the focus on material gains in shaping the core of the relationship, particularly regarding the trade agreement, while the ideational function of sharing collective identity and values has experienced certain erosion. Nevertheless, increasingly crucial will be the strategic purpose, concerning balancing and counterbalancing external actors, given the current era of global upheaval. We are not concerned with forecasting the future of the relationship as a whole; instead, we aim to analyse which functions of the relationship will hold greater significance.

The paper has been organised in the following way. After the introduction, it goes on to present the methods and theoretical approach. In the second section, we position the evidence of the Mercosur-EU interregional history against the function of balancing or counterbalancing inspired by neorealism. The third section evaluates the institutional-building role drawn upon the neoliberal institutionalist perspective. The fourth section presents the characteristics and implications of identity-building based on a constructivist approach. In the final section, we outline potential future trajectories for the functions and dynamics of Mercosur-EU relations before concluding.

METHODS AND THEORETICAL APPROACH

In methodological terms, the paper follows the logic of a qualitative case study. The study is longitudinal, seeking to understand the functions of interregionalism along the evolution of Mercosur-EU relations. The techniques of data collection and analysis were qualitative, relying on the review of official documents, statements and speeches, as well as on secondary bibliographic sources.

From an academic standpoint, Mercosur-EU interregionalism is rather over than under-researched. Over the years, a large number of Latin American and European scholars have analysed the progress of the Association Agreement negotiations, especially the trade pillar, the level of economic interdependence and changing interregional patterns. A vast literature has periodically taken stock of the progress and setbacks of this complex relationship.

Scholars theorizing on interregional dialogue have increasingly opted for a combination of theoretical approaches (e.g., Aggarwal, 2004; Bersick, 2003; Schirm, 2006; Söderbaum & Van Langenhove, 2005). This article provides an analysis of the relationship between the Mercosur and the EU focusing on its purposes and functions, by exploring the literature on interregionalism through the perspectives of three major schools of thought: neorealism, neoliberal institutionalism and constructivism.3

These three perspectives are viewed not as isolated compartments, but rather as interconnected vessels, suggesting the fluidity and mutual influence among them.

Thus, by considering the functions theoretically fed by these theories, the paper attempts at providing a comprehensive appreciation of the factors influencing the past and current purposes of Mercosur-EU relations4

Even though we acknowledge the relevance of domestic factors in shaping the relationship, this research only marginally incorporates these factors, emphasizing the interplay of external dynamics to understand Mercosur-EU interregionalism more comprehensively.

and holds the potential to anticipate future trends.

Rüland (2014) contends that the theories employed in studies on interregionalism are indeed capable of explaining the functions of interregional forums. In fact, he finds a somewhat rigid interpretation the statement made by some analysts referred to the incompatibility among the three major International Relations (IR) theoretical strands—realism, liberal institutionalism and constructivism—since it overlooks the fact that these theories are often less exclusive than initially assumed.5

For a concise overview and examples of theory eclecticism in interregionalism studies, see Rüland (2014).

In fact, as a result of an eclectic combination of arguments derived from neorealism, neoliberal institutionalism and constructivism,6

Because of space constraints, we will not provide a comprehensive introduction to the IR paradigms mentioned. However, our lines of inquiry are derived from these paradigms.

five major functions of interregionalism are distinguished in the literature: balancing, institution-building, rationalizing, agenda-setting and collective identity-building (Rüland, 1999). These five tasks are hardly mutually exclusive; they are often inextricably intertwined. While the functions of balancing, institution- and identity-building belong to the basic roles of all regional organizations, rationalizing and agenda-setting can be regarded as ‘more specific functions’ of interregional institutions (Wagner, 2006, pp. 285–286). Therefore, as a yardstick for our paper we focus on the first three of these functions.

Neorealism operates within a systemic theoretical framework. It focuses on the distribution of power in the international system and emphasizes the dynamics of rivalries and the pursuit of balance in an anarchic context (e.g., Gilpin, 2000; Mearsheimer, 1990; Waltz, 1979). Similar to many studies that adopt a systemic perspective, commonly referred to as an ‘outward-in perspective,’ the neorealist focus on interregional dialogue often overlooks its domestic dimension. In this context, interregionalism is frequently perceived as a mechanism for balancing external forces.

Interregionalism may include two balancing functions. Power balancing aims to counterbalance great powers or threats for national security and autonomy, often involving a military dimension. Institutional balancing, on the other hand, focuses on coalition-building and employing institutions within cooperative frameworks, aiming to exert influence in a low-threat environment. While power balancing between regions is rare (Maull & Okfen, 2006), institutional balancing addresses unevenness through interregional institution-building or activating existing forums. It denotes the strategic use of interregional forums to respond to shifts in global or regional power distribution.

Neoliberal institutionalists (e.g., Keohane, 1993; Keohane & Martin, 1995) view international institution-building as a key to mitigate the anarchical character of international relations. Interregional institution-building, in particular, relates to the creation of a new level of policymaking in a multilayered international system and the formation of subsidiary institutions (Rüland, 2006). This approach highlights how regions cooperate to establish (regulative) norms and mechanisms for managing their shared interdependencies.

Accordingly, neoliberal institutionalism emphasizes the importance of formal institutions in shaping interregional relations and Free Trade Agreements (FTAs) are a prime example of such institutions. These agreements provide a set of rules and norms that govern mutual trade, offering gains to actors, assuming that they are rational utility-maximisers and primarily focus on material gains.

The legacies of past interactions, the dynamics of current engagements, and the resulting need for greater regional cohesion can foster collective identity-building. The constructivist perspective stresses the role of (constitutive) norms, ideas and identities in shaping interactions (e.g., Checkel, 1998; Wendt, 1999). Contrary to the other two theoretical paradigms, constructivism rejects the concept of material constraints such as power and wealth as primary (or exclusive) determinants.

Constructivism introduces ideational and normative elements into the analysis, emphasizing the role of ideas, norms and identity in shaping regional cooperation. It focuses on ideational and inter-subjective factors rather than purely rationalist ones and judges in terms of normative outcomes rather than purely material ones (Acharya, 2016). By analysing interregionalism through the lens of constructivism, we gain insights into the social and ideational factors that underpin regional cooperation.

NEOREALISM

From the onset of the connection between Mercosur and the EU, strategic factors played a significant role. To address this question a distinction between power balancing and institutional balancing is appropriate, as mentioned earlier. In the context of the supremacy exerted by the United States over Latin America and the Caribbean (LAC), the concept of institutional balancing gains particular significance. US historical dominance in the region has often created power imbalances and asymmetrical relationships that have left a bitter legacy that compromises efforts to achieve community in the hemisphere (Tulchin, 2016).

In the 1990s, the EU perceived the initiative for the Free Trade Area of the Americas (FTAA) as a significant strategic and economic move by the United States to consolidate its influence in the region. The prospect of an expanded FTAA raised concerns among European policymakers.7

The 1998 Summit of the Americas, which launched FTAA negotiations, speeded up European Commission's request for a negotiating mandate after the EU and Mercosur underwent a pre-negotiation phase between November 1996 and May 1998 (Klom, 2003, cited in Nolte & Correa, 2021).

It is fair to state that EU–Mercosur relations have been a European response to US plans for a FTAA, a declining share in LAC trade and aggressive merger and acquisition strategies by US firms in the region (Rüland, 2006).

Indeed, the EU's 1994 Enhanced Policy document must be read in this context, signalling as it did a reorientation of the relationship with Mercosur towards greater economic engagement, highlighting the ‘economic potential of Mercosur integration’ (European Commission, 1994, p. 8) along with the concern that a failure to respond to hemispheric initiatives would have adverse consequences for ‘the Union's market share’ (European Commission, 1994, pp. 11–12).

While the EU and the United States both prioritized multilateralism, human rights and democracy as liberal powers, their approaches differed significantly. Rather than fully aligning with the United States, the EU responded by seeking to counterbalance its influence in LAC. Mercosur itself shared a similar motivation to strike a balance, driven by a desire to reduce its reliance on US markets and an apprehension regarding the effects of the Union's eastern enlargement (Bulmer-Thomas, 2017).

By expanding trade relations with Mercosur, Europe offered an alternative economic avenue, reducing its reliance on the United States as a primary trading partner.8

The first agreements of the EU were with countries that had previously signed an FTA with the United States: Mexico (1997), Chile (2002), Caricom (2008), Central America (2012), Colombia and Peru (2012). Only later came the agreements with Ecuador (2013) and Cuba (2016). The EU has already concluded agreements (though not all are in effect) with every country in LAC except Bolivia and Venezuela, establishing itself as the nonregional partner with the most extensive network of agreements in the region, surpassing even the United States.

 Thus, through institution-balancing, Mercosur-EU interregionalism served as a counterweight to US influence, offering a platform to enhance their regional integration, especially Mercosur's, strengthen their economic cooperation, and promote their collective interests.

But the post-9/11 world played against the Euro-Mercosur rapprochement since the international agenda shifted towards counterterrorism and security issues. At the regional level, the EU continued to be immersed in its eastward expansion, while Mercosur countries adopted a regionalist orientation known as post-liberal or posthegemonic, focusing more on the political and social agenda. LAC regionalism became an attempt to ‘move beyond American-led patterns of integration’ (Riggirozzi & Tussie, 2012, p. 1), adapting itself to the contemporary pressures of globalization and a multipolar world less subject to the United States.

In this scenario, the EU and Mercosur formally suspended trade negotiations in August 2004 after 15 negotiation rounds. Between 2004 and 2010, there was a phase of ‘mutual disinterest’ between both regions (Sanahuja & Rodríguez, 2019, p. 6) though political and economic dialogue continued. In the years following the demise of the FTAA project, the EU faced less competitive pressure as the FTAA's failure reduced the urgency for securing alternative trade agreements in the region. Simultaneously, China's economic presence in LAC was still in its early stages. However, the global commodities boom, driven by China's soaring demand, bolstered the economies of Mercosur countries, reducing their dependence on the EU and making their governments more self-reliant in economic matters (Nolte & Correa, 2021).

As the interregional relations between the EU and Mercosur entered the final phase of stalemate around 2010, the increasing presence of China in LAC could not be ignored as a potential incentive to resume trade negotiations (Makuc et al., 2015). Nevertheless, the central factor that reignited interest in revitalizing trade negotiations between the two blocs was the unfolding dynamics of the globalization crisis. With this notion we refer to a process characterized by the rise of movements expressing discontent with the main elements of globalization and the liberal international order, the assumption of power by governments in central countries led by actors openly questioning this order, a decreased elasticity of trade growth in relation to GDP growth, the advancement of protectionism, the inclusion of nontrade concerns in negotiation processes and the erosion of multilateral forums (Alvarez & Zelicovich, 2020).

As the global economic landscape continued to evolve, the two regions sought to explore mutually beneficial avenues to finalize negotiations. On 28 June 2019, Mercosur and the EU concluded the negotiations on the trade pillar after 20 years. The conclusion of the negotiations, announced at the G-20 summit in Osaka, surprised everyone. When everything suggested that both blocks were drifting apart,9

With the EU's 2016 Global and Security Strategy, adopted at the behest of the then EU High Representative for Foreign Affairs and Security Policy, Federica Mogherini, the Union made clear the marginal place it assigned to LAC in its hierarchy of foreign policy priorities (Sanahuja, 2023).

they managed to reach the agreement (Alvarez & Zelicovich, 2020). For the EU, the agreement with Mercosur served as a strong message to the Donald Trump administration, which was reluctant to advance multilateralism nor engage with and cooperate productively with LAC. On the other hand, Mercosur seemed interested in reclaiming international space by aligning with the world's leading trading bloc, in a sort of bandwagoning strategy.

From a strategic perspective, the completion of bi-regional trade negotiations was remarkable, as neither the United States nor China have secured a comparable arrangement with Mercosur. But when after the Osaka Summit the impact was diluted and the globalization crisis entered a brief period of greater tranquillity due to a temporary decrease in tensions between both superpowers, the influence of strategic variables as a driver of the agreement temporarily diminished. In fact, the underlying tensions of the material variable resurfaced, generating rumours linked to a nonratification of the agreement, both due to agricultural and environmental sensitivities on the European side and to a lesser extent, of workers and industrialists, in Mercosur.

As stated by Alvarez and Zelicovich (2020), the agreement as a strategic tool fulfilled its objectives with its mere announcement, but for its ratification it became again a prisoner of the politicization inherent in the material variable. Indeed, the ratification have become a long-lasting process—such as the negotiations per se—, shaped by France's protectionist position, disguised within environmental discourse, the genuine apprehensions of environmentally conscious administrations, persistent neo-extractivist interests and the formidable influence wielded by protectionist lobbies. Furthermore, the shifting positions of governments within the South American block also play a significant role.

These dynamics unfolded against the backdrop of escalating geopolitical tensions and endeavours to rescue the increasingly fragile liberal world order (Alvarez, 2021). For a moment, the conflict in Ukraine appeared as a potential catalyst for generating converging interests, particularly in the areas of food safety and energy-related considerations. Europe, in its pursuit of safeguarding its energy, raw materials and food supply, flirted with the possibility of turning to the Mercosur countries. Yet, the urgency has waned, and the EU found ways to circumvent its pressing needs without involving Mercosur.

In brief, the process of balancing has yielded mixed outcomes. In the 1990s, the EU faced the challenge of balancing the influence of a fellow liberal power, the United States. However, over time, the EU had to confront the need to counteract the impact of an autocratic nation, China. On the one hand, it is valid to contend that institutional balancing proved successful, as Mercosur's engagement with the EU has primarily revolved around continued efforts for signing an FTA and sustaining political dialogue over the years.

Nowadays, Mercosur countries share the need to build a strategy of ‘hedging’ or ‘fence sitting,’ trying to keep all their options open for maximum flexibility (Spektor, 2023) to avoid being crushed by the confrontation between the superpowers. Even with more alternatives, Europe may still need to avoid a subservient role in current power struggles. As the EU High Representative Josep Borrell asserted, ‘the EU-Mercosur agreement has a deep geopolitical significance: help both regions to avoid being placed in a position of subordination in the United States–China confrontation’ (EEAS, 2020).

On the other, it is also the case that Mercosur has actively engaged with China and the United States without formal FTAs, as we will note in the next section, and that China has become its main trading partner, displacing both the United States and Europe. This emphasizes the fact that despite progress in political cooperation and the conclusion of trade negotiations, EU's significance for the Southern bloc has waned in relative terms. Under these conditions, for Mercosur, the growing influence of China in the region represents a priceless opportunity that could prove to be a game-changer. This favourable position could empower Mercosur to capitalize on several benefits vis-à-vis Europe. Nevertheless, as we will elaborate, Mercosur may find itself following a similar pattern of ‘North-South’ relationship with China.

NEOLIBERAL INSTITUTIONALISM

The 1990s witnessed significant political and economic transformations in LAC, as democracy was restored to the region, peace negotiations took place in Central America, and the Cold War logic diminished in importance. Acquiescently embracing the Washington Consensus, LAC countries implemented policies of deregulation and privatization that facilitated European economic involvement.

The LAC liberal regional order—in the form of open regionalism—was tied to the transnationalization of trade and production, and the liberalization of markets, leading to the neoliberal reorientation of import substitution-centred schemes born in the 1960s and of the original method for Mercosur, thought to be gradual, sectorial and autonomy oriented. On the other side of the Atlantic, the EU experienced a noteworthy phase of integration with the establishment of the Single Market.

From the beginning, the European bloc viewed Mercosur as a promising partner to export its integration experience and strengthen its economic model, a potential mirror of its own successful integration experience (Sanahuja, 2006). Thus, the EU played a crucial role in supporting the development of Mercosur by providing valuable technical expertise and knowledge transfer in various fields, including trade policies, regulatory harmonization and institution building.10

Such as the formal recognition of the international legal personality of the bloc consolidated through the Ouro Preto Protocol, as well as the creation of the Permanent Review Tribunal, the regional parliament, or the Economic and Social Forum.

The EU formalized its commitment through the signing of an Interregional Framework Cooperation Agreement,11

The ‘Interregional Framework Cooperation Agreement between the European Community and its Member States, of the one part, and the Southern Common Market and its Party States, of the other part—Joint Declaration on political dialogue between the European Union and Mercosur’ was signed in Madrid on 15 December 1995 and entered into force on 1 July 1999.

serving as a stepping stone towards deeper engagement and the pursuit of a comprehensive interregional association.

But Europe's presence and influence in the region started to decline steadily since then. When the European Commission finally received a negotiating mandate in 1999, trade between the EU and Mercosur had reached its peak, while the Mercosur integration process was facing stagnation after the ‘double crisis’ of 1998 and 2001 in Brazil and Argentina (Sanahuja & Rodríguez, 2019, p. 4). The 2000s witnessed a new phase in Mercosur-EU relations, influenced by booming commodities prices, as we have mentioned earlier, largely driven by China's emergence as a major buyer of LAC exports such as soybeans, oil, gas and minerals.

It was the time when several left-leaning governments came to power in the region. The ‘pink tide’ represented a notable shift in the political landscape of South America, leading to visibly neo-developmental policies that were not aligned with the EU and that were critical of the WTO-plus model of trade agreements (Sanahuja & Rodríguez, 2019). In terms of regional governance, these administrations moved away from centrally economic initiatives, to be part of a new phase encouraged by a context of greater autonomy and regional activism. Accordingly, Mercosur embraced a more holistic and inclusive approach to integration and diversified its agenda.

While Mercosur took a political and social turn, economic integration and the negotiation of the FTA with the EU did not advance (Nolte & Correa, 2021). The reassuming of trade negotiations in 2010 was a significant development after a period of stagnation. The global economic challenges in the aftermath of the 2008 financial crisis highlighted the importance of strengthening economic partnerships and diversifying trade relations.

But from 2011 on, the effects of the global economic crisis began to reverberate in LAC, leading to a sharp decline in commodity prices and exacerbating structural problems. The dynamics between the EU and LAC reflected the rapidly changing global landscape, characterized by uncertainties and shifting power trends. The initial prospects of a balanced association between equals (Gardini & Ayuso, 2014) gradually gave way to a more challenging reality. The EU's internal crisis and LAC's economic struggles created an environment where a closer partnership became more difficult to achieve (Ayuso & Gratius, 2016).

In Europe, regionalism was facing significant challenges: the aftermath of the Eurozone crisis, a refugee influx, terrorist attacks, secessionist movements, the rise of nationalist-populist parties and the Brexit process. All these crises have consumed substantial political energy and were intertwined with discussions about the EU's future (Nolte & Weiffen, 2021). As Nolte and Ribeiro Hoffmann (forthcoming) argue, ‘[t]owards the end of the decade, the EU's internal problems limited its room for manoeuvre and reduced the attractiveness of the European model in LAC’.

Nonetheless, surprisingly, the EU and Mercosur managed to reach an agreement on the trade pillar in June 2019. Agreements such as the Mercosur-EU deal increase in value as they become not only instruments to preserve higher levels of certainty in times of rising risks of systemic instability but also components for contesting the (re)constitution of global governance in world trade (Alvarez & Zelicovich, 2020). In this sense, the accord offered a unique opportunity to advance a comprehensive regulatory framework that incorporates sustainability and addresses transition challenges.

But the globalized world, already in crisis, faced further upheaval with the onset of the Covid-19 pandemic, exacerbating existing vulnerabilities in global governance. Later the conflict in Ukraine accentuated the trend towards the rising importance of considerations within trade and global supply chains that has already been ongoing for several years. The likely scenario of gradually regionalized supply chains and their governance poses the risk of the regulatory fragmentation of global trade which would be particularly perilous for LAC countries (ECLAC, 2023).

Of course, the globalization crisis underscores the importance of interregionalism—and FTAs in particular—as catalysts to address heightened risks and steer the course of global trade governance. For Mercosur, the EU can act as a facilitator, leveraging the ‘Brussels effect’ (Bradford, 2020) thus allowing Europe to shape regulations and standards beyond its borders,12

To further explore the influence of the EU's economic policy to promote shared rules, see for example, Meunier and Nicolaïdis (2006), Bach and Newman (2007).

and potentially providing guidance and structure to Mercosur's norms and policies. Indeed, the European Commission has put forth an additional legal instrument within the agreement, specifically addressing environmental concerns. This interpretative provision aims to address the criticisms voiced by European stakeholders and governments regarding the comparatively lenient environmental standards and regulations in South America.

Brazilian President Luiz Inácio Lula da Silva has harshly criticised the EU for making additional environmental demands.13

Access to public procurement is another complex issue, especially because of Brazil's prioritization of local business in its current growth model.

These developments have led to a (new) halt in the progress toward the ratification and implementation of the trade agreement. Later on, despite the subsequent decrease in criticism from Brazil and expectations to announce the deal's successful signature by late 2023, the endeavour encountered (again) European entrenched protectionist interests, resulting in a renewed standstill.

In summary, from a neoliberal institutionalist perspective, and under the influence of Europeans, EU-Mercosur interregionalism has functioned as an attempt to establish a delimited sphere for rule-based order and institution building, together with the pursuit of tangible material interests. This approach reflects the comprehensive nature of the partnership, which seeks not only to promote regulatory frameworks and shared norms but also to address concrete economic and strategic objectives. Nonetheless, this effort has unfolded amidst a backdrop rife with complexities and limitations, characterized by conflicting interests and divergent priorities, exemplified by the Association Agreement still awaiting signature and ratification.

CONSTRUCTIVISM

According to constructivist perspectives, regions such as the EU and Mercosur are not merely rational actors seeking to maximize their interests but they are also social constructs formed through processes of identity construction. In terms of identity, many agree that Europe and Mercosur share defining features. This is not surprising, if one takes into account the historical influence of Western European powers in the Southern Cone (Caetano, 2022). Indeed, the construction of normative structures and identities is considered a crucial component of interregional relations (Söderbaum & Van Langenhove, 2005).

In the case of EU-Mercosur bonds, while the pursuit of a common identity is essential for long-term collaboration, it is the alignment of fundamental values that has played a central role in maintaining their interconnected narrative, transcending mere strategic or material interests. As outlined in the Interregional Agreement, both parties share values that include respect for the principles of the United Nations, democracy, the rule of law, human rights, the importance of environment and sustainable development, the promotion of regional integration as a tool for economic and social development, and the commitment to maintaining a rules-based international trading system (EUR-Lex, n.d.).

As we have mentioned, Europeans and Latin Americans in general share a cultural and historical heritage that unites them beforehand (Gratius, 2010), and that is precisely what distinguishes these interregional ties from any other type. In words of the Spanish Minister of Foreign Affairs, José Manuel Albares, LAC is ‘by far the most Euro-compatible region on the planet’ (La Nación, 2022). But there is a relevant issue that is often overlooked: the promotion of common values is not the ultimate goal of EU-Mercosur interregionalism but rather an ongoing and underlying thread that maintains its continuity. The alignment of values and principles is an implicit assumption—repeated tirelessly in the joint narrative—, rather than a function of the interaction.

Ideational factors have been the fundamental basis of bi-regional relations beyond cyclical and transversal difficulties. The values, principles and ideas that shaped the decision to establish a strategic partnership explain the continuation of the negotiation process of the Association Agreement (despite interruptions). During the negotiations in 2017, the EU asserted that ‘[…] we think in the same direction and […] the countries of Mercosur and Latin America are the ones with whom the European Union shares its fundamental values the most’ (Rivas Molina, 2017, p. 1).

These ideational issues underlie the bi-regional narrative since the 1990s and are also part of the pillar of political dialogue, which distinguishes EU agreements with third countries from, for example, US agreements. However, the once-strong emphasis on common values, which acted as a steadfast anchor, now seems to be undergoing some re-evaluation. The preference of Chinese and Russian vaccines during the pandemic as seen in countries like Argentina, the stance on the conflict between Russia and Ukraine,14

The divergent perspectives and stances on Ukraine were evident during the III Summit between the EU and the Community of Latin American and Caribbean States (CELAC). This represented a notable constraint in their political dialogue and shared position concerning the global stage. The summit, which took place after an 8-year gap, experienced a notable failure due to the irreconcilable differences on this particular issue (Nolte & Alvarez, 2023). While the EU expected to secure a strong demonstration of support from LAC countries, the gathering underscored the complexity of the task at hand.

the strong presence of China in trade and investments in the region, as well as the historical revisionism by some LAC leaders are warning signs for Europeans. Also, differences in approaches to addressing human rights and democracy in Venezuela,15

The situation in Venezuela has brought to the forefront deep divisions on how to address issues of respect for democratic norms. While the EU has taken a firm stance including the imposition of sanctions on the Venezuelan regime, some LAC countries have chosen a more cautious approach, advocating for noninterference in internal affairs.

along with the weakening commitment to multilateralism, exemplify contrasting governmental positions between Europe and LAC.

In brief, the most anticipated Association Agreement would yield something intangible, which is trust and a sense of shared participation in a common space between these two regions. But the alignment of values and principles is often assumed rather than actively pursued. It is important to recognize that the constructivist aspects may no longer have the same influence they once did. With this in mind, it must be assumed that the post-Cold War ‘liberal consensus’ regarding democracy no longer exists, neither on a global scale nor in the bi-regional relationship (Sanahuja, 2023).

LOOKING AHEAD: PROJECTIONS THROUGH A MULTIFACETED PRISM

From a neorealist perspective, the future dynamics of EU-Mercosur interregionalism will increasingly be modelled by institutional balancing among states. This includes external actors whose interests and actions can shape the context within which these bi-regional relations unfold. The presence of other global powers, such as China, or even the United States, a traditional ally that could become a competitor if governed by antiglobalist forces, the conflict in Ukraine, the war between Israel and Hamas and other geostrategic tensions, and the restructuring of trade flows would persistently influence the bargaining power and strategic calculations of both regions.

The main contender of the EU now is no longer, as in the 1990s, a liberal power, the USA, but China, an illiberal and revisionist power that questions the liberal international order. But Mercosur lacks interest in counterbalancing China. In fact, the increasing presence of China in the region presents Mercosur with a valuable opportunity, akin to having “an ace up its sleeve”. This advantageous position could enable Mercosur to leverage some benefits vis-à-vis Europe.

Meanwhile, the responsibility of counterbalancing, particularly in relation to China (and eventually the USA if governed by antiglobalist forces again), falls on the EU. This seems to be the case since the emergence of new countries as global economic—and increasingly political—players reinforces the challenges to the existing regional and global order, especially in its philosophical and normative content. As Ayuso (2023) asserts, it would be necessary to promote alliances between various actors in a multilevel governance structure in which regionalism and interregionalism deserves a place in the reconfiguration of the global order.

Viewed from a neoliberal institutionalist standpoint, the future of institution and rule-order building in EU-Mercosur interregionalism hinges on several key factors. First, it depends on the continued commitment of both the EU and Mercosur to deepen their cooperation efforts. This involves the ratification and enforcement of the bi-regional agreement since enhanced institutionalization can foster cooperation on common challenges (particularly on matters highly valued by the EU, such as climate change, digital transformation and the green transition)16

The EU has traditionally prioritized its own agenda, e.g., social cohesion and regional integration in the 1990s.

and incentivize Mercosur's adherence to established norms and regulations (another crucial concern for the EU).

Recently, the EU has unveiled its intention to transition with LAC countries from being ‘natural partners’ to becoming ‘partners of choice’ (EEAS, 2023). The change in terminology reflects the EU's commitment to actively choose partnerships that align with its values and priorities. However, the shift in language by the EU evokes varied reflections. On the one hand, it might serve as a cover for Europe's urgent needs for critical raw materials. In fact, given Europe's historical paternalistic perspective, it presents a challenge for the EU to view LAC not merely as a supplier of natural resources but as an equitable partner. On the other, the EU search for trustworthy partners is demanding due to significant issues in LAC countries, including corruption, poverty and the presence of criminal organizations, which also affect Mercosur nations.17

In the search of reliable partners, it should be noted that some LAC countries—even the region's strongest democracies—have experienced stagnation in reducing corruption and a decrease in the rule of law leading to erosion of trust, impunity and violence (Dammert et al., 2024).

Nevertheless, it is crucial to highlight that to forge alliances with other powers, such as China, does not necessarily guarantee a different treatment for Mercosur countries. In this sense, the form of international insertion resulting from ties with China is not substantially different from the classic centre-periphery relationship. Furthermore, it became increasingly apparent that both China and the EU exert neo-extractivist pressures in their pursuit of dominance and access to valuable natural resources.

Neoliberal institutionalist perspectives provide additional insights into the functions of the Mercosur-EU relationship. As both regions seek to address global challenges and foster cooperation through formalized mechanisms, the potential for forging a strong alliance to promote common rules becomes alluring. Therefore, we could expect continued efforts from the EU (specially the European Commission18

In fact, the European Commission is actively securing increased EU funding for Mercosur countries to ensure their support and expedite the signing of the agreement.

) to finalize and implement the trade agreement. Nevertheless, the promotion of norms by the EU are met with scepticism and resistance from some Mercosur nations, as they seek to assert their own agency, autonomy and national interests. Furthermore, both parties still need to find common ground on traditionally contentious issues such as environmental protection and agriculture.

As we have already mentioned, interregional relations may perform symbolic functions. From a constructivist perspective, the function of building collective identities and common values, such as democracy, human rights and sustainable development could foster stronger cooperation. Conversely, diverging perceptions or identity contestations might lead to tensions. This immaterial element may be showing certain signs of erosion within the complex Mercosur-EU interregional framework.

While shared ideas and values have undoubtedly contributed to continuity in the past, they are now subject to scrutiny and criticism. Even the political dialogue pillar of the Association Agreement remains incomplete, with ideational commonalities existing only rhetorically. As the foundational common background of ideals and values has grown fragile, notwithstanding the endlessly optimistic narrative, the volatile ideational elements and the divergent and powerful material interests once again take centre stage and lead to renewed controversies.

Nevertheless, it is worth noting, as demonstrated by Romero et al. (2022), that beyond governmental positions, there continues to be an identification among LAC citizens with Western liberal values. There is also a preference for cooperation with Europe, along with a preference for the economic and political models of the Atlantic axis. The EU is still seen by a large majority as a useful model or a model to follow in LAC and playing a leading role in international politics in human rights defence, world peace promotion, the fight against poverty and inequality, and as the best partner to strengthen democracy. Recognizing and leveraging this alignment still presents an opportunity for the EU to strengthen its engagement with the region.

Thus far, interregionalism between Europe and Mercosur has been able to respond to hard foreign policy interests and balances of power, the diversification of relations or access to markets. It is to be seen if these interregional connections can still express a normative vision present in both regions, which sees regional groups as components (building blocks) of multilateral cooperation and global governance based on ideational and political affinities (Sanahuja, 2023).

CONCLUSIONS

We drew upon the IR-specialized literature to focus on some of the main functions performed by interregional fora, that is, balancing or counterbalancing, institution-building and construction of collective identities. We proposed that the functions performed by the Mercosur-EU relationship are shaped by a combination of elements drawn upon neorealism, neoliberal institutionalism and constructivism.

By taking into account the interplay of these perspectives, we achieve a more comprehensive understanding of the dynamics and utility of the relationship between Mercosur and the EU. In particular, our main argument underscores the enduring relevance of the setting of rules and norms and the focus on material gains in shaping the core of the relationship, particularly regarding the trade agreement, while the ideational function of sharing collective identities and values has experienced some erosion, primarily discernible in governmental positions. Nevertheless, the strategic role of the bi-regional relationship will become increasingly vital for balancing and counterbalancing, especially in this era of global upheaval where binary narratives fall short.

Over the past decades, the EU and Mercosur have struggled to adapt to the evolving landscape of global governance. This journey has led to moments of convergence, drawing the regions closer, yet also to instances of divergence, creating distance between them. Given the relatively low opportunity costs linked with interregional cooperation and a reluctance among governments to invest further in the governance expenses associated with more cohesive interregional institutions, EU-Mercosur interregionalism has to date mainly been used for balancing purposes. This is particularly evident since the Association Agreement remains unratified. Conversely, in the last few years, Mercosur has actively engaged with China and the United States without formal FTAs, thus operating outside of established formal rules governing trade relationships.

Integrating neorealism, neoliberal institutionalism and constructivism has been important for understanding the complexity of the past, present and potential purposes and functions of the bi-regional relation. However, it is hard to see how the existing circumstances could favour immediate enhancement. The weakening of ideational structures and the persistence of diverging economic interests may undermine the association's once-strong aspiration for a resilient partnership aimed at advancing shared regulations and principles. Nonetheless, despite these challenges, the association's growing significance in balancing external forces underscores its continued importance. In a world marked by complex global interdependencies, geopolitical tensions and economic instabilities, interregionalism demonstrates that is far from a naïve exercise, making analyses like the one presented in this article increasingly vital.

PEER REVIEW

The peer review history for this article is available at .

DATA AVAILABILITY STATEMENT

Data sharing not applicable to this article as no data sets were generated or analysed during the current study.

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