EU-Mercosur agreement could cause international trade uncertainty

Were the EU to withdraw from the agreement with the Mercosur states, experts consider China to be one of the beneficiary countries in the global trade scenario. EPA/BALLESTEROS

This article is part of our special report EU agriculture and Mercosur: what is the state of play?.

The EU’s trend of negotiating preferential or free trade agreements with different regions and countries of the world has experienced successes and failures. EURACTIV’s partner Efeagro reports.

While the EU has sometimes succeeded in the race for international trade, like in the case of the EU-Canada free trade agreement (CETA), it has also failed – notably when it came to negotiating the Transatlantic Trade and Investment Partnership (TTIP) with the US, which died a slow death following the election of President Donald Trump.

Now, besides the future of EU-UK trade relations after Brexit, progress on free trade is hoped for with Mercosur countries.

The EU-Mercosur deal was always expected to be complex, with a path full of obstacles. Not only is the agreement’s content being questioned, but the environmental policy of Brazilian President Jair Bolsonaro has also become a problem.

However, were the EU to withdraw from the agreement with the Mercosur states, experts believe China would benefit.

Considering these elements, the European Commission keeps taking steps with the aim of making the agreement a reality, at the earliest, by the end of 2021.

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Key figures

The agreement – a document of more than 7,000 pages – is based on two decades of negotiations. The agreement would form the largest free-trade zone ever created by the EU, involving 780 million people.

It would liberalise 99% of EU agricultural trade, while the Mercosur countries would open their market to 88% of EU agricultural goods and 91% of total exports.

The EU posted a surplus in global trade with the Mercosur of €5.341 billion in 2019.

For the agricultural sector, however, the agreement benefits the Mercosur states, as the EU recorded a trade deficit of €13.9 billion in 2019 for its trade of agri-food products.

Delicate issues 

The agricultural associations of the Mercosur states – who are to benefit from reduced tariffs on fruit and vegetable shipments and no taxes on soy products – welcome the agreement.

However, although the EU sees the deal as an opportunity to highlight the quality of European products and protect 350 European designations of origins, representatives of European agriculture, who are worried about their beef, poultry, rice and sugar, remain critical.

European farmers are calling for reciprocity in the trade of foodstuffs, particularly given the difference in animal and plant production standards.

The agreement dedicates an entire chapter to sanitary and phytosanitary measures. For example, each block of countries will make available to the other a list of pests, regulated products and phytosanitary import requirements.

The Spanish Business Association for the Protection of Plants (Aepla) applauds the establishment of strict standards but admits there is “great concern about the possible entry of new pests in the EU.”

With regard to animal welfare and the environment, the deal expects to adhere to the European agenda and to the standards of the World Organisation for Animal Health (OIE).

However, although the EU has many laws to regulate such matters, countries like Brazil – a major beef producer – have not developed basic standards in this regard, according to the Spanish Association of Beef Producers (Asoprovac).

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And what about Spain?

Spain has a trade deficit of around €2.8 billion, according to the country’s ministry of agriculture, fisheries and food.

For the Spanish agri-food sector, the agreement offers advantages and tariff reductions in sectors such as wine, spirits and soft drinks, chocolate, dairy products, some fruits and vegetables, and olive oil.

Some Spanish producer associations, like agri-food cooperatives Asaja and COAG, are suspicious of the deal and demand reciprocity to ensure food imports – particularly of beef and orange juice – follow the same production model as the one in the EU.

Yet, the Spanish food industry acknowledges that the Mercosur represents a large market with a clear demand for European packaged products.

[Edited by Daniel Eck, Natasha Foote, Zoran Radosavljevic]

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