International Trade

European farmers are protesting against the EU-Mercosur deal.

That is as signing has been postponed until January, due to disagreements in Europe.

The European-South American deal, planned for more than 25 years, would create the world’s largest free-trade zone.

So, why is there division?

Presenter: Folly Bah Thibault

Guests:

Pieter Cleppe – Editor-in-chief at BrusselsReport.eu
Ciaran Mullooly – Member of the European Parliament for the Independent Ireland group
Gustavo Ribeiro – Founder and editor-in-chief of the Brazilian Report online newspaper

EU delays Mercosur trade deal until January amid farmer protests and opposition from France and Italy.

The European Union has delayed a massive free-trade deal with South American countries amid protests by EU farmers and as last-minute opposition by France and Italy threatened to derail the agreement.

European Commission chief spokesperson Paula Pinho confirmed on Thursday that the signing of the trade pact between the EU and South American bloc Mercosur will be postponed until January, further delaying a deal that had taken some 25 years to negotiate.

Commission President Ursula von der Leyen was expected to travel to Brazil on Saturday to sign the deal, but needed the backing of a broad majority of EU members to do so.

The Associated Press news agency reported that an agreement to delay was reached between von der Leyen, European Council President Antonio Costa and Italian Prime Minister Giorgia Meloni – who spoke at an EU summit on Thursday – on the condition that Italy would vote in favour of the agreement in January.

French President Emmanuel Macron had also pushed back against the deal as he arrived for Thursday’s summit in Brussels, calling for further concessions and more discussions in January.

Macron said he has been in discussions with Italian, Polish, Belgian, Austrian and Irish colleagues, among others, about delaying the signing.

“Farmers already face an enormous amount of challenges,″ the French leader said.

The trade pact with Argentina, Brazil, Bolivia, Paraguay and Uruguay would be the EU’s largest in terms of tariff cuts.

But critics of the deal, notably France and Italy, fear an influx of cheap commodities that could hurt European farmers, while Germany, Spain and Nordic countries say it will boost exports hit by United States tariffs and reduce reliance on China by securing access to key minerals.

Brazil’s President Lula says Italy’s PM Meloni asked for ‘patience’

The EU-Mercosur agreement would create the world’s biggest free-trade area and help the 27-nation European bloc to export more vehicles, machinery, wines and spirits to Latin America at a time of global trade tensions.

Al Jazeera’s Dominic Kane, reporting from Berlin, said Germany, Spain and the Nordic countries were “all lobbying hard in favour of this deal”. But ranged against them were the French and Italian governments because of concerns in their powerful farming sectors.

“Their worry being that their products, such as poultry and beef, could be undercut by far cheaper imports from the Mercosur countries,” Kane said.

“So no signing in December. The suggestion being maybe there will be a signing in mid-January,” he added.

“But there must now be a question about what might happen between now and mid-January, given the powerful forces ranged against each other in this debate,” he added.

Mercosur nations were notified of the move, a European Commission spokeswoman said, and while initially reacting with a now-or-never ultimatum to its EU partners, Brazil opened the door on Thursday to delaying the deal’s signature to allow time to win over the holdouts.

Brazil’s President Luiz Inacio Lula da Silva said Italy’s Meloni had asked him for “patience” and had indicated that Italy would eventually be ready for the agreement.

The decision to delay also came hours after farmers in tractors blocked roads and set off fireworks in Brussels to protest the deal, prompting police to respond with tear gas and water cannon.

Protesting farmers – some travelling to the Belgian capital from as far away as Spain and Poland – brought potatoes and eggs to throw and waged a furious back-and-forth with police while demonstrators burned tyres and a faux wooden coffin bearing the word “agriculture”.

The European Parliament evacuated some staff due to damage caused by protesters.

Thousands protest as EU leaders clash over trade pact farmers fear will flood Europe with cheaper South American goods.

Hundreds of tractors have clogged the streets of Brussels as farmers converged on the Belgian capital to protest against the contentious trade agreement between the European Union and South American nations they say will destroy their livelihoods.

The demonstrations erupted on Thursday as EU leaders gathered for a summit where the fate of the Mercosur deal hung in the balance. More than 150 tractors blocked central Brussels, with an estimated 10,000 protesters expected in the European quarter, according to farm lobby Copa-Cogeca.

It made for a twin-tracked day of febrile tension outside and inside at the EU summit as leaders were perhaps more focused on a vote to determine whether they are able to use nearly $200bn in frozen Russian assets to support Ukraine over the next two years.

Outside the gilded halls on the streets, farmers hurled potatoes and eggs at police, set off fireworks and firecrackers, and brought traffic to a standstill.

Authorities responded with tear gas and water cannon, setting up roadblocks and closing tunnels around the city. One tractor displayed a sign reading: “Why import sugar from the other side of the world when we produce the best right here?”

“We’re here to say no to Mercosur,” Belgian dairy farmer Maxime Mabille said, accusing European Commission chief Ursula von der Leyen of trying to “force the deal through” like “Europe has become a dictatorship”.

Protesters fear an influx of cheaper agricultural products from Brazil and neighbouring countries would undercut European producers. Their concerns centre on beef, sugar, rice, honey and soya beans from South American competitors facing less stringent regulations, particularly on pesticides banned in the EU.

“We’ve been protesting since 2024 in France, in Belgium and elsewhere,” said Florian Poncelet of Belgian farm union FJA. “We’d like to be finally listened to.”

France and Italy now lead opposition to the deal, with President Emmanuel Macron declaring that “we are not ready” and the agreement “cannot be signed” in its current form.

France has coordinated with Poland, Belgium, Austria and Ireland to force a postponement, giving critics sufficient votes within the European Council to potentially block the pact.

However, Germany and Spain are pushing hard for approval. German Chancellor Friedrich Merz warned that decisions “must be made now” if the EU wants to “remain credible in global trade policy”, while Spanish Prime Minister Pedro Sanchez argued the deal would give Europe “geo-economic and geopolitical weight” against adversaries.

The agreement, 25 years in the making, would create the world’s largest free-trade area covering 780 million people and a quarter of global gross domestic product (GDP).

Supporters say it offers a counterweight to China and would boost European exports of vehicles, machinery and wines amid rising US tariffs.

Despite provisional safeguards negotiated on Wednesday to cap sensitive imports, opposition has intensified. Von der Leyen remains determined to travel to Brazil this weekend to sign the deal, but needs backing from at least two-thirds of EU nations.

Brazil’s President Luiz Inacio Lula da Silva issued an ultimatum on Wednesday, warning that Saturday represents a “now or never” moment, adding that “Brazil won’t make any more agreements while I’m president” if the deal fails.

US President Donald Trump has said the US owns rights to Venezuelan oil and land. The claims follow the US seizure of Venezuelan oil and the declaration of a naval blockade. But is any of this true? Soraya Lennie explains.

In October, a small electronics manufacturer in the western Indian state of Gujarat shipped its first batch of chip modules to a client in California.

Kaynes Semicon, together with Japanese and Malaysian technology partners, assembled the chips in a new factory funded with incentives under Indian Prime Minister Narendra Modi’s $10bn semiconductor push announced in 2021.

Modi has been trying to position India as an additional manufacturing hub for global companies that may be looking to expand their production beyond China, with limited success.

One sign of that is India’s first commercial foundry for mature chips that is currently under construction, also in Gujarat. The $11bn project is supported by technology transfer from a Taiwanese chipmaker and has onboarded the United States chip giant Intel as a potential customer.

With companies the world over hungering for chips, India’s entry into that business could boost its role in global supply chains. But experts caution that India still has a long way to go in attracting more foreign investment and catching up in cutting-edge technology.

Unprecedented momentum

Semiconductor chips are designed, fabricated in foundries, and then assembled and packaged for commercial use. The US leads in chip design, Taiwan in fabrication, and China, increasingly, in packaging.

The upcoming foundry in Gujarat is a collaboration between India’s Tata Group, one of the largest conglomerates in the country, and Taiwan’s Powerchip Semiconductor Manufacturing Corporation (PSMC), which is assisting with the plant’s construction and technology transfer.

On December 8, Tata Electronics also signed an agreement with Intel to explore the manufacturing and packaging of its products in Tata’s upcoming facilities, including the foundry. The partnership will address the growing domestic demand.

Last year, Tata was approved for a 50 percent subsidy from the Modi government for the foundry, along with additional state-level incentives, and could come online as early as December 2026.

Even if delayed, the project marks a pivotal moment for India, which has seen multiple attempts to build a commercial fab stall in the past.

The foundry will focus on fabricating chips ranging from 28 nanometres (nm) to 110nm, typically referred to as mature chips because they are comparatively easier to produce than smaller 7nm or 3nm chips.

Mature chips are used in most consumer and power electronics, while the smaller chips are in high demand for AI data centres and high-performance computing. Globally, the technology for mature chips is more widely available and distributed. Taiwan leads production of these chips, with China fast catching up, though Taiwan’s TSMC dominates production for cutting-edge nodes below 7nm.

“India has long been strong in chip design, but the challenge has been converting that strength into semiconductor manufacturing,” said Stephen Ezell, vice president for global innovation policy at the Washington, DC-based Information Technology and Innovation Foundation (ITIF).

“In the past two to three years, there’s been more progress on that front than in the previous decade – driven by stronger political will at both the central and state levels, and a more coordinated push from the private sector to commit to these investments,” Ezell told Al Jazeera.

Easy entry point

More than half of the Modi government’s $10bn in semiconductor incentives is earmarked for the Tata-PSMC venture, with the remainder supporting nine other projects focused mainly on the assembly, testing and packaging (ATP) stage of the supply chain.

These are India’s first such projects – one by Idaho-based Micron Technology, also in Gujarat, and another by the Tata Group in the northeastern Assam state. Both will use in-house technologies and have drawn investments of $2.7bn and $3.3bn, respectively.

The remaining projects are smaller, with cumulative investments of about $2bn, and are backed by technology partners such as Taiwan’s Foxconn, Japan’s Renesas Electronics, and Thailand’s Stars Microelectronics.

“ATP units offer a lower path of resistance compared to a large foundry, requiring smaller investments – typically between $50m and $1bn. They also carry less risk, and the necessary technology know-how is widely available globally,” Ashok Chandak, president of the India Electronics and Semiconductor Association (IESA), told Al Jazeera.

Still, most of the projects are behind schedule.

Micron’s facility, approved for incentives in June 2023, was initially expected to begin production by late 2024. However, the company noted in its fiscal 2025 report that the Gujarat facility will “address demand in the latter half of this decade”.

Approved in February 2024, the Tata facility was initially slated to be operational by mid-2025, but the timeline has now been pushed to April 2026.

When asked for reasons behind the delays, both Micron and Tata declined to comment.

One exception is a smaller ATP unit by Kaynes Semicon, which in October exported a consignment of sample chip modules to an anchor client in California – a first for India.

Another project by CG Semi, part of India’s Murugappa Group, is in trial runs, with commercial production expected in the coming months.

The semiconductor projects under the Tata Group and the Murugappa Group have drawn public scrutiny after Indian online news outlet Scroll.in reported that both companies made massive political donations after they were picked for the projects.

As per Scroll.in, the Tata Group donated 7.5 billion rupees ($91m) and 1.25 billion rupees ($15m), respectively, to Modi’s Bharatiya Janata Party (BJP) just weeks after securing government subsidies in February 2024 and ahead of national elections. Neither group had made such large donations to the party before. Such donations are not prohibited by law. Both the Tata Group and the Murugappa Group declined to comment to Al Jazeera regarding the reports.

Meeting domestic demand a key priority

The upcoming projects in India – both the foundry and the ATP units – will primarily focus on legacy, or mature, chips sized between 28nm and 110nm. While these chips are not at the cutting-edge of semiconductor technology, they account for the bulk of global demand, with applications across cars, industrial equipment and consumer electronics.

China dominates the ATP segment globally with a 30 percent share and accounted for 42 percent of semiconductor equipment spending in 2024, according to DBS Group Research.

India has long positioned itself as a “China Plus One” destination amid global supply chain diversification, with some progress evident in Apple’s expansion of its manufacturing base in the country. The company assembles all its latest iPhone models in India, in partnership with Foxconn and Tata Electronics, and has emerged as a key supplier to the US market this year following tariff-related uncertainties over Chinese shipments.

Its push in the ATP segment, however, is driven largely by the need to meet the growing domestic demand for chips, anticipated to surge from $50bn today to $100bn by 2030.

“Globally, too, the market will expand from around $650bn to $1 trillion. So, we’re not looking at shifting manufacturing from China to elsewhere. We’re looking at capturing the incremental demand emerging both in India and abroad,” Chandak said.

India’s import of chips – both integrated circuits and microassemblies – has jumped in recent years, rising 36 percent in 2024 to nearly $24bn from the previous year. An integrated circuit (IC) is a chip serving logic, memory or processing functions, whereas a microassembly is a broader package of multiple chips performing combined functions.

The momentum has continued this year, with imports up 20 percent year-on-year, accounting for about 3 percent of India’s total import bill, according to official trade data. China remains the leading supplier with a 30 percent share, followed by Hong Kong (19 percent), South Korea (11 percent), Taiwan (10 percent), and Singapore (10 percent).

“Even if it’s a 28 nm chip, from a trade balance perspective, India would rather produce and package it domestically than import it,” Ezell of ITIF said, adding that domestic capability would enhance the competitiveness of chip-dependent industries.

Better incentives needed

The Modi government’s support for the chip sector, while unprecedented for India, is still dwarfed by the $48bn committed by China and the $53bn provisioned under the US’s CHIPS Act.

To achieve scale in the ATP segment for meaningful import substitution – and to advance towards producing chips smaller than 28nm – India will need continued government support, and there is a second round of incentives already in the works.

“The reality is, if India wants to compete at the leading edge of semiconductors, it will need to attract a foreign partner – American or Asian – since only a handful of companies globally operate at that level. It’s highly unlikely that a domestic firm will be competitive at 7nm or 3nm anytime soon,” Ezell said.

According to him, India needs to continue focusing on improving its overall business environment – from ensuring reliable power and infrastructure to streamlining regulations, customs and tariff policies.

India’s engineers make up about a fifth of the global chip design workforce, but rising competition from China and Malaysia to attract multinational design firms could erode that edge.

In its latest incentive round, the Indian government limited benefits to domestic firms to promote local intellectual property – a move that, according to Alpa Sood, legal director at the India operations of California-based Marvell Technology, risks driving multinational design work elsewhere.

“India already has a thriving chip design ecosystem strengthened by early-stage incentives from the government. What we need, to further accelerate and build stronger R&D muscle – is incentives that mirror competing countries like China [220 percent tax incentives] and Malaysia [200 percent tax incentives]. This will ensure we don’t lose the advantage we’ve built over the years,” Sood told Al Jazeera.

Marvell’s India operations are its largest outside the US.

The Trump effect

India’s upcoming chip facilities, while aimed at meeting domestic demand, will also export to clients in the US, Japan, and Taiwan. Though US President Donald Trump has threatened 100 percent tariffs on semiconductors made outside the US, none have yet been imposed.

A bigger concern for India-US engagement – so far limited to education and training – is Washington’s 50 percent tariff on India over its Russian crude imports. Semiconductors remain exempt, but the broader trade climate has turned uncertain.

“Over half the global semiconductor market is controlled by US-headquartered firms, making engagement with them crucial,” Chandak said. “Any alignment with these firms, either through joint ventures or technology partnerships – is a preferred option.”

The global chip race is accelerating, and India’s policies will need to keep pace to become a serious player amid growing geo-economic fragmentation.

“These new 1.7nm fabs are so advanced they even factor in the moon’s gravitational pull – it’s literally a moonshot,” Ezell said. “Semiconductor manufacturing is the most complex engineering task humanity undertakes – and the policymaking behind it must be just as precise.”

Brazilian president says it is now or never after Italy joins France in saying it is not ready to sign trade deal.

Brazilian President Luiz Inacio Lula da Silva has warned he may abandon a long-awaited trade deal between members of the South American bloc Mercosur and the European Union after key countries sought a delay.

The Brazilian leader issued the threat on Wednesday after Italy joined fellow heavyweight France in saying it was not ready to commit to the pact to create the world’s biggest free-trade area.

The EU had expected its 27 member states to approve the deal in time for European Commission President Ursula von der Leyen to fly to Brazil to sign an agreement with the host, along with Mercosur partners Argentina, Paraguay and Uruguay, on Saturday.

“I’ve already warned them: If we don’t do it now, Brazil won’t make any more agreements while I’m president,” Lula told a cabinet meeting.

“We have given in on everything that diplomacy could reasonably concede.”

‘Premature’ to sign: Meloni

The deal, more than two decades in the making, has been keenly backed by economic powerhouse Germany, along with Spain and the Nordic countries, amid rising Chinese competition and recent United States tariffs, which have increased the incentive to diversify trade.

It would allow the EU to export more vehicles, machinery, spirits and wine to Latin America, and more beef, sugar, rice, honey and soya beans to flow in the opposite direction.

France, eager to protect its agriculture industry, had already called for a delay on a vote to approve the deal, and gained the support necessary to potentially block the agreement when Italian Prime Minister Giorgia Meloni said on Wednesday that Rome was also not ready.

“It would be premature to sign the deal in the coming days,” she told parliament, saying that some of the safeguards Italy is seeking on behalf of farmers were yet to be finalised.

She said Italy did not seek to block the deal altogether, and was “very confident” that her government’s concerns would have been addressed to allow it to be signed early next year,

French President Emmanuel Macron told a cabinet meeting on Wednesday that his government would “firmly oppose” any attempts to force through the deal.

Hungary and Poland are also lukewarm on the agreement.

By contrast, German Chancellor Friedrich Merz said Wednesday he would push “intensively” for the bloc to approve the deal by the year’s end, in what he described as a test of the EU’s “ability to act”.

EU reaches agreement on agricultural safeguards

In an effort to allay some of the concerns, the EU struck a provisional deal on Wednesday to set tighter controls on imports of farm products, amid a background of farmer protests against the deal.

It determined the trigger for launching an investigation into such imports if import volumes rose by more than 8 percent per year or prices fell by that amount in one or more EU members.

EU leaders will discuss the matter at a Brussels summit on Thursday, a commission spokesman said.

Paris says EU member states cannot vote on the trade agreement in its current state.

France has urged the European Union to postpone a vote on a trade deal with the South American bloc Mercosur, saying conditions are not yet in place for an agreement.

In a statement from Prime Minister Sebastien Lecornu’s office on Sunday, Paris said that EU member states cannot vote on the trade agreement in its current state.

“France asks that the deadlines be pushed back to continue work on getting the legitimate measures of protection for our European agriculture,” the statement added.

European Commission President Ursula von der Leyen is due to visit Brazil on Monday to finalise the landmark trade pact, which the 27-member union has been negotiating with the Mercosur trade bloc for more than 20 years. The agreement is being negotiated with four Mercosur members: Argentina, Brazil, Paraguay and Uruguay.

But the Commission first has to get the approval of the EU member states before signing any trade deal, and Paris has made its objection to the deal with the Mercosur countries clear.

“Given a Mercosur summit is announced for December 20, it is clear in this context that the conditions have not been met for any vote [by states] on authorising the signing of the agreement,” the statement from Paris said.

Earlier on Sunday, in an interview with the German financial daily Handelsblatt, French Minister of the Economy and Finance Roland Lescure also said that the treaty as it stands, “is simply not acceptable”.

He added that securing robust and effective safeguard clauses was one of the three key conditions France set before giving its blessing to the agreement.

He said the other key points were ensuring that the same production standards that EU farmers face are implemented and proper “import controls” are established.

Farmers in France and some other European countries say the deal will create unfair competition due to less stringent standards, which they fear could destabilise already fragile European food sectors.

“Until we have obtained assurances on these three points, France will not accept the agreement,” said Lescure.

European nations are expected to vote on the trade pact between Tuesday and Friday, according to EU sources.

The European Parliament will also vote on Tuesday on safeguards to reassure farmers, particularly those in France, who are fiercely opposed to the treaty.

The EU is Mercosur’s second-largest trading partner in goods, with exports of 57 billion euros ($67bn) in 2024, according to the European Commission.

The EU is also the biggest foreign investor in Mercosur, with a stock of 390 billion euros ($458bn) in 2023.

If a trade deal is approved later this month, the EU-Mercosur agreement could create a common market of 722 million people.

Incident in November latest reported instance of Trump administration’s increasingly aggressive maritime tactics.

United States forces raided a cargo ship travelling from China to Iran last month, according to the Wall Street Journal, in the latest reported instance of increasingly aggressive maritime tactics by the administration of US President Donald Trump.

Unnamed officials told the newspaper that US military personnel boarded the ship several hundred miles from Sri Lanka, according to the report on Friday. It was the first time in several years US forces had intercepted cargo travelling from China to Iran, according to the newspaper.

The operation took place in November, weeks before US forces seized an oil tanker off the coast of Venezuela earlier this week, citing sanctions violations. It was another action Washington has not taken in years.

US Indo-Pacific Command did not immediately confirm the report. An official told the newspaper that they seized material “potentially useful for Iran’s conventional weapons”. However, the official noted the seized items were dual-use, and could have both military and civilian applications.

Officials said the ship was allowed to proceed following the interdiction, which involved special operation forces.

Iran remains under heavy US sanctions. Neither Iran nor China immediately responded to the report, although Beijing, a key trading partner with Tehran, has regularly called the US sanctions illegal.

Earlier in the day, Chinese Foreign Ministry spokesperson Guo Jiakun condemned the seizure of the oil tanker off the coast of Venezuela, which was brought to a port in Texas on Friday.

The action came amid a wider military pressure campaign against Venezuela, which Caracas has charged is aimed at toppling the government of leader Nicolas Maduro.

Beijing “opposes unilateral illicit sanctions and long-arm jurisdiction that have no basis in international law or authorisation of the UN Security Council, and the abuse of sanctions”, Guo said.

White House spokesperson Karoline Leavitt told reporters on Thursday the Trump administration would not rule out future seizures of vessels near Venezuela.

Monterrey, Mexico – In April, Mexican President Claudia Sheinbaum announced the country’s aerospace industry could see sustained annual growth of as much as 15 percent over the next four years, and attributed the sector’s expansion to a robust local manufacturing workforce, increasing exports, and a strong presence of foreign companies.

But with the review of the United States-Mexico-Canada Agreement (USMCA) coming up – the free-trade treaty between the three countries that helped Mexico’s aerospace sector to grow and flourish – the industry’s future is no longer certain.

Stakeholders warn that ensuring investment stability and strengthening labour standards are essential to protecting the sector’s North American supply chain.

Mexico is striving to become one of the top 10 countries in aerospace production value, a goal outlined in Plan Mexico, the country’s strategic initiative to enhance global competitiveness in key sectors.

As the sixth-largest supplier of aerospace parts to the US, the industry has benefited significantly from the USMCA, which fostered regional supply chain integration, said Monica Lugo, director of institutional relations at the consulting firm PRODENSA.

However, the integration is no guarantee of business continuing to grow as the country is at an “unprecedented moment” with US President Donald Trump and his wide-ranging tariff policies.

Lugo, a former USMCA negotiator, said that recent tariffs on materials like steel and aluminium — critical to the aerospace sector— have eroded trust in the US as a reliable partner. She predicts that if current conditions continue, the sector risks losing capital, investments and jobs.

“Having this great uncertainty – one day it’s on, the next it’s off, who knows tomorrow – and based on no specific criteria, but rather on the president’s mood, creates chaos and severely damages the country and the economy,” she said.

On December 4, Trump suggested the US might let the USMCA expire next year, or negotiate a new deal. This follows comments by US Trade Representative Jamieson Greer to US news outlet Politico that the administration is considering separate deals with Canada and Mexico.

A booming aerospace sector

The Mexican aerospace market is valued at $11.2bn, and is expected to more than double to $22.7bn by 2029, Sheinbaum said, citing data from the Mexican Aerospace Industry Federation (FEMIA). Home to global companies like Bombardier, Safran, Airbus, and Honeywell, Mexico has established itself as a key player in the global aerospace market and is now the world’s twelfth-largest exporter of aerospace components.

Marco Antonio Del Prete, secretary of sustainable development in Queretaro, attributes this success in part to heavy investment in education and training. In 2005, the Queretaro government promised Canada’s Bombardier that it would invest in education and set up the Aeronautical University, which now offers programmes ranging from technical diplomas to master’s degrees in aerospace manufacturing and engineering.

“Since Bombardier’s arrival, an educational and training system was created that allows us to develop talent in a very efficient way, let’s say, fast track,” Del Prete told Al Jazeera.

Bombardier has served as an anchor, propelling Queretaro’s rise as a high-skilled manufacturing hub for parts and components.

While the Bombardier plant in Queretaro originally focused on wiring harnesses, it has evolved to specialise in complex aerostructures, including the rear fuselage for the Global 7500, Bombardier’s ultra-long-range business jet, and key components for the Challenger 3500, the mid-sized business jet.

Marco Antonio Carrillo, a research professor at the Autonomous University of Queretaro (UAQ), pointed out that the area’s wide educational offerings have cultivated a powerful workforce, which has gained significant attention from aeroplane makers, mainly from the US, Canada and France.

“This development [of Queretaro] has been, if you look at it in terms of time, truly explosive,” Carrillo said.

Mexico also aims to join France and the US as the third country capable of fully assembling an engine for Safran.

But the International Association of Machinists and Aerospace Workers (IAM) Union, which represents more than 600,000 workers in Canada and the US, is worried that progress could lead to more advanced manufacturing and assembly work to eventually shift to Mexico, given the local investment in aeronautical universities and training.

“Right now they’re [Mexican workers] doing more entry-level type things, but our concern is that later on, larger pieces of the aerospace operation will go to Mexico,” Peter Greenberg, the IAM’s international affairs director, told Al Jazeera.

High-skilled, low-cost workforce

Of the three countries in the USMCA agreement, Mexico’s biggest attraction has been its low-cost manufacturing.

Edgar Buendia and Mario Duran Bustamante, economics professors at the Rosario Castellanos National University, cite Mexico’s low labour costs and geographical proximity to the US as the country’s key advantages. This is partly why the US has intensified pressure on the Mexican government, including during the initial USMCA negotiations in 2017, to raise wages to level the playing field and reduce unfair competition.

“Most US companies have incentives to move their production here in Mexico, given the [low] wages and the geographic location. So, to prevent that from happening, the United States is pressuring Mexico to raise labour standards, ensure freedom of association, and improve working conditions,” Buendia told Al Jazeera, things that will benefit Mexican workers even as employer-dominated labour groups worry that they may lose their advantage.

The IAM originally opposed the USMCA’s predecessor, NAFTA. Greenberg said that while they acknowledge USMCA will continue, US and Canadian workers “would probably be perfectly happy” if the agreement ended as the NAFTA deal had led to plants being shuttered and workers being laid off as jobs moved from the US and Canada to low-cost Mexico.

“There is a need for stronger incentives to keep work in the United States and Canada. We want to see the wages in Mexico go up so that it doesn’t become automatically a place where companies go to because they know they will have lower wages and workers who do not have any bargaining power or strong units,” Greenberg added.

Under Sheinbaum’s Morena party, Mexico has raised the minimum wage from 88 pesos ($4.82) in 2018 to 278.8 pesos ($15.30) in 2025, with the rate in municipalities bordering the US reaching 419.88 pesos ($23). On December 4, Sheinbaum announced a 13 percent rise in the minimum wage — and 5 percent for the border zone— set to begin in January 2026.

Despite these increases and the competitiveness of wages in the aerospace sector, researchers agree that a significant wage gap persists between Mexican workers and their US and Canadian counterparts.

“The wage gap is definitely abysmal,” said Javier Salinas, a scholar at the UAQ Labor Center, specialising in labour relations in the aerospace industry. “The [aerospace] industry average is between 402 [Mexican pesos] and 606, with the highest daily wage being 815. [But] 815, converted to US dollars, is less than $40 for a single workday.”

By contrast, Salinas estimates that a worker in the US earns an average of about 5,500 pesos, or $300, per day.

‘Protection unions’

The USMCA required Mexico to end “protection unions”, a longstanding practice where companies sign agreements with corrupt union leaders — known as “sindicatos charros” — without the workers’ knowledge. This system has been used to prevent authentic union organising, as these sindicatos often serve the interests of the company and government authorities rather than the workers.

Salinas argues that despite the 2019 labour reform, it remains difficult for independent unions to emerge. Meanwhile, “protection unions” continue to keep wages low to maintain competitiveness.

“But imagine, a competitiveness based on precarious or impoverished working conditions. I don’t think that’s the way forward,” Salinas said.

Even with new labour courts and laws mandating collective bargaining, organising in Mexico remains dangerous. Workers attempting to create independent unions frequently face firing, threats, or being blacklisted by companies.

Humberto Huitron, a lawyer specialising in collective labour law and trade unionism, explains that Mexican workers, including in the aerospace sector, often lack effective representation. “There’s discrimination during hiring or recruitment. They don’t hire workers who are dismissed for union activism,” he said.

Beyond demanding that Mexico enforce its labour reform, the IAM is calling for the expansion and strengthening of the Rapid Response Mechanism (RRM), which allows the US to take action against factories if they fail to uphold freedom of association and collective bargaining rights.

While not in the aerospace sector, the US recently invoked the RRM against a wine producer in Queretaro. Previous such actions in the state had been limited to the automotive sector.

“No one knows exactly what is going on in all of the factories in Mexico,” Greenberg said.

According to FEMIA, there are 386 aerospace companies operating in 19 states. These include 370 specialised plants that generate 50,000 direct jobs and 190,000 indirect jobs.

Del Prete, however, assured Al Jazeera that, in Queretaro, unions are independent and “they have their own organisation.”

Salinas points out that in Queretaro, there has not been a strike in decades, adding, “Imagine the control of the workforce: 29, 30 years without a single strike in the private sector.”

Published on 11/12/2025 – 18:10 GMT+1
•Updated
18:14

The European Union’s member states and the European Parliament have struck an agreement to strengthen the screening of foreign investments in the bloc as tensions rise over investments from countries such as China.

The Parliament had been pushing for broad screening of foreign direct investments, but it is EU member states who hold the ultimate authority over investment reviews. The two have now agreed on a common text that strengthens the existing rules.

Under the deal, mandatory screenings will now cover military equipment, artificial intelligence, quantum technologies, semiconductors, raw materials, transport and digital infrastructure, and even election systems.

“By requiring all member states to implement a screening mechanism and by strengthening cooperation among them, the regulation closes potential loopholes for high-risk investments in the internal market,” said MEP Bernd Lange, chair of Parliament’s trade committee.

He added that Parliament’s negotiators “successfully advocated for a broader minimum scope of the national screening mechanisms, ensuring that investments in particularly critical sectors must be screened by all member states”.

Shielding Europe’s economic security

The revamped framework stems from a European Commission initiative to harden the EU’s economic defences.

“In recent months, it has become clear that the geopolitical context has changed significantly,” an EU diplomat said on Thursday. “Trade can no longer always be seen as a neutral transaction between independent economic operators.”

He noted that several recent cases “demonstrated that economic instruments have been weaponized against Europe for geopolitical purposes.”

In September, the Netherlands placed the Dutch-based, Chinese-owned chipmaker Nexperia under state supervision out of concern that critical know-how from its European facilities could be siphoned back to China.

Beijing responded by restricting chip exports to Europe, thus threatening the EU’s automotive industry, which relies heavily on those components. Although a US-China deal eventually restored exports, tensions between Beijing and The Hague remain high.

The EU has had a cooperation mechanism on foreign direct investment screening in place since October 2020, but initial resistance was strong.

“At the beginning, some economic actors across Europe were reluctant to (implement) such a screening,” a parliamentary source told Euronews. “Investment issues are essential to them and they sometimes don’t see the risks.”

Under the EU’s rules, the Commission can request information and issue opinions, but it cannot force a member state to screen and block an investment.

On top of that, a 2023 regulation introduced a new screening regime for non-EU subsidies granted to companies operating in the bloc – another move that places China firmly in the spotlight.

China’s trade surplus – the difference between the value of goods it imports and exports – has hit $1 trillion for the first time, a significant yardstick in the country’s role as “factory of the world”, making everything from socks and curtains to electric cars.

For the first 11 months of this year, China’s exports rose to $3.4 trillion while its imports declined slightly to $2.3 trillion. That brought the country’s trade surplus to about $1 trillion, China’s General Administration of Customs said on Monday.

Shipments overseas from China have boomed despite US President Donald Trump’s global trade war, largely consisting of sweeping “reciprocal” tariffs on most countries, which were launched earlier this year in a bid to reduce US trade deficits.

But China, which was initially hit with US tariffs of 145 percent before they were lowered to allow for trade talks, has emerged largely unscathed from the standoff by stepping up shipments to markets outside the US.

Following Trump’s 2024 election win, China began diversifying its export market away from the US in exchange for closer ties with Southeast Asia and the European Union. It also established new production hubs, outside of China, for low-tariff access.

Why does China have such a large trade surplus?

China’s exports returned to growth last month following an unexpected dip in October, rising to 5.9 percent more than one year earlier and far outpacing a 1.9 percent rise in imports, according to China’s General Administration of Customs.

China’s goods surplus for the first 11 months of 2025 was up 21.7 percent from the same period last year. Most of the surge was driven by strong growth in high-tech goods, which outpaced the increase in overall exports by 5.4 percent.

Auto exports, especially for electric vehicles, rallied as Chinese firms muscled in on Japanese and German market share. Total car shipments jumped by more than one million to approximately 6.5 million units this year, according to data from China-based consultancy Automobility.

And although China still trails US leaders like Nvidia in advanced chips, it is becoming dominant in the production of semiconductors (used in everything from electric cars to medical devices). Semiconductor exports rose by 24.7 percent over the period.

China’s technological advances have also boosted shipbuilding, where exports rose 26.8 percent compared with the same period in 2024.

So, given the hostile global trade backdrop, how has China achieved this?

Rerouting and diversifying

Though Washington has lowered tariffs on Chinese imports in recent months, they remain high. Average import duties on Chinese goods currently stand at 37 percent. For this reason, Chinese shipments to the US have dropped by 29 percent year-on-year to November.

Some Chinese companies have shifted their production facilities to Southeast Asia, Mexico and Africa, enabling them to bypass Trump’s tariffs on goods arriving directly from China. Despite this, overall trade between the two countries remains down.

In the first eight months of this year, for instance, the US imported roughly $23bn in goods from Indonesia, an increase of nearly one-third on the same period in 2024. It is widely understood that the rise is down to Chinese goods being redirected via Indonesia.

“The role of trade rerouting in offsetting the drag from US tariffs still appears to be increasing,” Zichun Huang, an economist at Capital Economics, wrote in a note to clients on Monday. Huang added that “exports to Vietnam, the top [Chinese] rerouting hub, continued to grow rapidly.”

As trade with the US has slackened, China has doubled down on developing ties with other major trading partners. That includes a 15 percent surge in Chinese shipments to the EU, compared with the year before, and an 8.2 percent rise in exports to countries in Southeast Asia.

Weaker currency

Another reason for China’s trading success is that its currency has been cheap, compared with others, in recent years. A lower renminbi makes exports relatively inexpensive to produce, and imports relatively expensive to consume.

China maintains a “managed float” of the renminbi – meaning the central bank intervenes in foreign exchange markets to maintain its value against other currencies – with the aim of keeping the price stable.

For years, many economists have argued that China’s currency is undervalued. In their view, that gives exporters a competitive edge by boosting the appeal of cheap Chinese products at the expense of other countries, leading to large imbalances in trade.

Indeed, taking into account global inflationary dynamics, the real effective exchange rate – a measure of the competitiveness of Chinese goods – is actually at its weakest level since 2012.

How has China got here?

China’s eye-watering $1 trillion trade surplus – never before recorded in economic history – is the culmination of decades of industrial policies that have enabled China to emerge from a low-income agrarian society in the 1970s to become the world’s second-largest economy today.

China established itself as a dependable producer of low-cost manufactured goods, like T-shirts and shoes, in the 1980s. Since then, it has climbed the industrial ladder to higher-value goods, such as electric vehicles and solar panels.

By far its largest sector in terms of exports is electronics. China exported a total of more than $1 trillion-worth of electronic goods around the world in 2024. This follows the pattern of other industrialised countries by starting with simple, labour-intensive goods and then moving into more complex sectors. However, China has done so with unusual scale and speed to cement its dominance across numerous global supply chains.

It also dominates trade in rare-earth metals, which are crucial for the manufacture of a wide range of goods from smartphones to fighter jets.

Twelve of the 17 rare earth metals on the periodic table can be found in China, and it mines between 60 percent and 70 percent of the world’s rare-earth resources. It also carries out 90 percent of the processing of these metals for commercial use.

For historical context, China’s trade surplus in factory goods is larger as a share of its economy than the US ran in the years after World War II, when most other manufacturing nations were emerging from the ruins of war.

How are other countries responding to China’s expanding dominance?

Many are looking for ways to redress the balance.

French President Emmanuel Macron, who visited China last week, warned the EU may take “strong measures”, including imposing higher tariffs, should Beijing fail to address the imbalance.

The EU already imposes additional tariffs on Chinese-made electric vehicles (EVs), which range from 17 percent to 35.3 percent, for example, on top of its existing 10 percent import duty.
Germany’s foreign minister, Johann Wadephul, arrived in China for a two-day trip on Monday this week, becoming the latest senior European official to visit for talks amid the country’s rapidly expanding goods trade with Europe.

Before his trip, Wadephul said he planned to raise the issue of tariffs with his Chinese counterparts, particularly those involving rare earths, in addition to concerns about industrial “overcapacities”, which he said are distorting global prices for industrial goods.

Will China’s exports continue to grow?

Despite efforts by the US and other wealthy countries to diversify away from China, few economists expect the country’s broad-based trade momentum to slow anytime soon.

Economists at Morgan Stanley predict China’s share of global goods exports will reach 16.5 percent by the end of the decade, up from 15 percent now, reflecting China’s ability to adapt quickly to shifting global demand.

More immediately, China’s strong trade performance means the annual growth target – set by Beijing to guide economic policy and to align regional governments – of about 5 percent is likely to be met.

Surat, India – In 2018, Alpesh Bhai enrolled his three-year-old daughter in an English-language private school in Surat. This was something he never imagined possible while growing up in his village in the Indian state of Gujarat, where his family survived on small fields of fennel, castor and cumin, with their earnings barely enough to cover basic needs.

He had studied in a public school, where, he recalled, “teachers were a rarity, and English almost didn’t exist”.

“Maybe if I knew English, I would have been some government worker. Who knows?”, he said, referring to the dream of a majority of Indians, as government jobs come with tenure and benefits.

His finances improved once he joined the diamond cutting industry in Surat, a city perched along India’s Arabian Sea coast, where nearly 80 percent of the world’s diamonds are cut and polished. Monthly earnings of 35,000 rupees ($390) for the first time brought Alpesh a sense of stability, and with it, the means to give his children the education he never had.

“I was determined that at least my children would get the kind of private education I was deprived of,” he said.

But that dream did not last. The first disruption to business came with Russia’s full-scale invasion of Ukraine in 2022. The sanctions on Russia hurt supply chains, as India sourced at least a third of its raw diamonds from Russia, leading to layoffs.

Alpesh’s earnings fell to 18,000 rupees ($200) a month, then to 20,000 rupees ($222). Soon, the 25,000 rupees ($280) annual school fee became unmanageable. By the time his older daughter reached grade three, just as his younger child started school, the pressure became impossible.

Earlier this year, he pulled both children out of private school and enrolled them in a nearby public one. A few months later, when new United States tariffs deepened the crisis as demand slumped further, his polishing unit laid off 60 percent of its workers, Alpesh among them.

“Seems like I’ve come back to where I started,” he said.

Surat, India’s diamond hub, employs more than 600,000 workers, and hosts 15 large polishing units with annual sales exceeding $100m. For decades, Surat’s diamond‑polishing industry has offered migrant workers from rural Gujarat, many with little or no education, higher incomes, in some cases up to 100,000 rupees ($1,112) a month, and a path out of agrarian hardship.

But recent shocks have exposed the fragility of that ladder, with close to 400,000 workers having faced layoffs, pay cuts, or reduced hours.

Even before Russia’s war on Ukraine began in February 2022, Surat’s diamond industry faced multiple challenges: disrupted supplies from African mines, weakening demand in key Western markets, and inconsistent exports to China, the second-largest customer. With the onset of the war, India’s exports of cut and polished diamonds in the financial year ending on March 31, 2024, fell by 27.6 percent, with sharp declines in its top markets – the US, China, and the United Arab Emirates.

The 50 percent tariffs imposed by US President Donald Trump have worsened the downturn.

Alpesh now works loading and unloading textile consignments for about 12,000 rupees ($133) a month, barely enough to cover food and rent.

“If I had kept them in the private school, I don’t know how I would have survived,” Alpesh said. “People here have killed themselves over debts and school fees. When you don’t have enough to eat, how will you think of teaching your children well?”

His daughters are still adjusting. “They sometimes tell me, ‘Pupa, the studies aren’t as good now’. I tell them we’ll put them back in the private school soon, but I don’t know when that will happen.”

‘An exodus’

Some workers have returned to their villages, as many migrant families in Surat can no longer afford rent or find alternative work.

Shyam Patel, 35, was among them. When exports slowed and US tariffs hit in August, the polishing unit where he worked shut down. With no other work available, he returned to his village in the Banaskantha district the following month.

“What other option was there?” he said. “In the city, there’s rent to pay even when there’s no work.”

He now works as a daily-wage labourer in cotton fields in his village. His son, who was in the final year of high school, dropped out after four months of the new academic session.

“We’ll put him back in school next year,” Shyam said. “The government school said they can’t take new students in the middle of the term. Till then, he helps me in the fields.”

Across the city, the disruption is evident in government data. More than 600 students left school mid-session last year as their parents lost work or returned to their villages, mostly in Saurashtra and north Gujarat.

“Most migrants come to Surat to settle – the city has entire [neighbourhoods] and housing clusters built for diamond workers,” said Bhavesh Tank, vice president of the Diamond Workers Union Gujarat. “An exodus in the middle of the year is unprecedented, and the drop in school enrolment suggests many are not coming back soon.”

The union estimates that about 50,000 workers have left Surat over the past 12 to 14 months.

The Vishwa Hindu Parishad (VHP), a Hindu nationalist group allied with Prime Minister Narendra Modi’s governing Bharatiya Janata Party (BJP), has been closely observing the diamond industry crisis in Surat.

“The number of dropouts has reached a point where even government schools are struggling to take in new students, said Purvesh Togadia, a VHP representative in the city. “The poor quality of education is making the transition even more disheartening for families.”

The poor quality of education in public schools is well established. In 2024, only 23.4 percent of grade three students could read at a grade two level, compared with 35.5 percent in private schools. By grade 5, the gap persisted – 44.8 percent in government schools versus 59.3 percent in private ones.

Kishor Bhamre, director at Pratham, an organisation working on children’s rights across education and labour, said the setback is not just academic but psychological.

“Children moving from private to government schools lose the environment they grew up in – their friends, familiar teachers, and a sense of community. For many, it also means shifting from an urban to a rural setting, which makes the adjustment even harder and affects their learning,” he said.

Al Jazeera reached out to the Surat Municipal Corporation and the state’s education minister for comment, but did not receive a response.

Limited help

The Diamond Workers Union has repeatedly appealed to the state government to provide an economic relief package and revise salaries in line with inflation. The union has also urged authorities to address the equally pressing situation of the growing number of school dropouts among workers’ children.

The Gujarat government in May introduced a special assistance package for affected diamond workers – a rare move in the industry.

Under the scheme, the state government committed to paying for one year of school fees for diamond polishers’ children, up to 13,500 rupees ($150) annually. To qualify, workers must have been unemployed for the past year and have at least three years of experience in a diamond factory. The fees will be paid directly to the schools.

The government received nearly 90,000 requests from diamond workers across Gujarat, including about 74,000 from Surat alone.  After a slow start – it had provided assistance to only 170 children by July – officials reported disbursing 82.8 million rupees ($921,000) towards school fees for 6,368 children of jobless diamond workers in Surat by mid-September.

But about 26,000 applicants were rejected, reportedly due to “improper details mentioned” in the forms, leading to frustration and anger among workers. In the past few days, nearly 1,000 diamond polishers have filed applications with the local government, demanding to know who rejected their forms and on what grounds, and alleging opacity in the process.

The scheme’s rigid eligibility criteria have also excluded workers.

“The scheme only covers those who have completely lost their jobs, but it leaves out many who are facing partial cuts or reduced work,” said Tank. “They’re struggling just as much and need support equally.”

Tank added that education remains one of the most common concerns among workers reaching out to the union’s suicide prevention helpline, which was set up by the Diamond Workers Union after Surat had already recorded at least 71 suicides among diamond workers by November 2024. It has received more than 5,000 calls so far.

Divyaben Makwana, 40, lost her 22-year-old son, Kewalbhai, who had been working as a diamond polisher for three years. On June 14, he died by suicide.

Kewalbhai had been under immense mental stress after losing his job in the diamond market, his mother told Al Jazeera.

“He was earning around 20,000 rupees ($220) a month, and when even that collapsed,” he took his life, she said. “We took him to the hospital and did everything we could. I borrowed 500,000 rupees ($5,560) from relatives and friends, but we couldn’t save him. Now, I don’t have a son – only a loan.”

She lives in Surat with her husband, who has been unable to work due to prolonged illness, and their younger son, Karmdeep, 18. With no means to return to their village in Saurashtra, Divyaben has begun working as a domestic worker to make ends meet. Karmdeep dropped out after grade 11, and now attends a local coaching centre, where he is learning diamond faceting while looking for work.

“Education has become so expensive,” Divyaben said. “At least with coaching, he’ll learn a skill. By the time the market recovers, if he’s trained as a craftsman, maybe we’ll be able to repay some of our debts.”

She paused, her voice low. “I don’t know if education, whether taken on loan or given free, can really change our fate. Our only hope is still the diamond.”

If you or someone you know is at risk of suicide, these organisations may be able to help.

You can access the Diamond Workers Union helpline at +91-92395 00009.

Chinese exports climb as exporters reroute shipments to other markets amid slump in shipments to the US.

China’s annual trade surplus in goods has topped $1 trillion for the first time, with plunging exports to the United States amid a tariff war more than compensated for by shipments to other markets, new data shows.

Figures released by China’s General Administration of Customs on Monday showed the trade surplus for the first 11 months of the year hit $1.08 trillion in November, as exports climbed 5.9 percent year-on-year that month, reversing a 1.1 percent decline the month prior.

The leap came despite a continued slump in exports to the US, which fell 28.6 percent to $33.8bn last month, the data showed.

Beijing and Washington have been locked in a bitter trade war involving hefty tariffs during the second administration of US President Donald Trump, forcing Chinese exporters to pivot to other markets – although the leaders of the world’s two largest economies agreed to pause the hostilities during a meeting in South Korea in October.

“China’s trade surplus this year has already surpassed last year’s level, and we expect it to widen further next year,” Zichun Huang of Capital Economics wrote in a note.

Huang said the weakness in exports to the US was “more than offset by shipments to other markets”.

Exports were “likely to remain resilient”, Huang added, due to trade rerouting and rising price competitiveness for Chinese goods, as deflation pushed down its real effective exchange rate.

French warnings over surplus

Exports have proven critical to China’s economy as it grapples with a debt crisis in the property sector and sluggish domestic spending, impacting its growth.

But China’s towering trade surplus has rankled leading Western trading partners, with French President Emmanuel Macron the latest to threaten action if the imbalance is not addressed.

Macron, fresh from a state visit to China, in an interview with the French newspaper Les Echos on Sunday, warned that Europe could follow the US in imposing tariffs on Beijing if the surplus were not reduced in the coming months.

Exports to the European Union grew by an annual 14.8 percent last month, while shipments to Australia rose 35.8 percent. Meanwhile, the fast-growing Southeast Asian economies took in 8.2 percent more goods over the same period.

That boosted China’s trade surplus to $111.68bn in November, the highest since June, from $90.07bn recorded the previous month, and above a forecast of $100.2bn.

Zhiwei Zhang, president and chief economist at Pinpoint Asset Management, wrote in a note that November’s rebound of export growth had helped to “mitigate the weak domestic demand”, amid a slowdown in economic momentum being partly driven by weakness in the property sector.

In an indication of China’s weak domestic consumption, new customs data showed that imports rose 1.9 percent on-year in November, less than had been predicted.