As trade officials desperately try to move the long-delayed EU-Mercosur agreement forward this week, we must stop and consider that this deal is likely to go far beyond the balance of trade, and increase economic, social and political divisions within both continents, writes Helmut Scholz.
Helmut Scholz is a German MEP for the Confederal Group of the European United Left – Nordic Green Left (GUE/NGL) and Coordinator on the European Parliament’s International Trade committee.
If the European Commission could achieve the political compromises required to push the agreement through in the near future, European companies could gain a larger share of global export markets following Trump’s withdrawal from international free trade agreements.
But the Commission’s neoliberal trade agenda is upsetting a lot of people in Europe. Aside from the millions of citizens who protested over TTIP and CETA, tensions over trade can also be seen in the voting trends of recent elections. Last year, Marine Le Pen’s far-right Front National made dramatic gains in France, gathering most support in areas of high unemployment. Her anti-EU protectionist trade policies resonated with disenfranchised regional voters worried about jobs being lost to overseas competitors.
If the EU’s import quotas for beef are increased, European farmers may be left in desperation. Beef from Argentina and Brazil is cheaper thanks to more intensive production methods, antibiotic use, lower wages and lower animal welfare standards. With the additional problem of the largest importer of Irish beef – the UK – leaving the EU, European farmers will struggle to sell their beef and many may be forced to stop producing. The EU signing yet another trade deal is not a popular move with rural communities in France and Ireland who are likely to face more unemployment.
Rural communities are well aware that neoliberal trade agreements sacrifice their needs for the benefit of transnational companies. In this case, the companies will save €4 billion on export taxes to Mercosur countries, among other benefits. When the problems this causes for rural communities are ignored by mainstream political leaders, these communities are left with no other alternative than to take revenge at the ballot box.
Meanwhile, in Latin America the consequences are also likely to be divisive. Increasing beef exports to the EU will create wealth for a few, but the deal is likely to cause massive job losses in the manufacturing sectors of Mercosur countries. According to a university study, 186,000 industrial jobs could be lost in Argentina alone.
If Mercosur agrees to increase imports of manufactured goods from Europe, they will be signing a slow and painful death sentence to their own manufacturing industries over many decades to come. This will further entrench these countries’ dependent trade relationships in which they will continue exporting large volumes of low value-added exports such as commodities and raw materials, and remain unable to develop industries producing high value-added goods. Without this industrial development, it is usually very difficult for countries to lift vast sections of their population out of poverty.
Concerns over jobs and manufacturing from Mercosur have been a major reason why this agreement has been stalled for decades. In fact, negotiations over the manufacturing sector are only on the table again as a result of some new governments representing the interests of large landowners taking power in Mercosur countries last year. But, let us not forget that the governments of Brazil and Paraguay made their way into power through coups d’état. Unpopular decisions by governments with an undemocratic history are not likely to lead to any kind of stability.
Add to that the fact that EU has convinced Mercosur leaders to increase royalties collected from patents on essential medicines and increase financial deregulation under the agreement. The deal would also reduce the import taxes collected by Mercosur governments and therefore their ability to fund basic services, resulting in less access to medicines and services for the poorest. So, we can reasonably foresee more economic and social division between rich and poor, left and right.
In addition, the consequences of this deal will be irreversibly damaging for the environment and animals on the Mercosur side. Increasing production of beef is likely to mean more destruction of the Amazon rainforest and loss of biodiversity. It will also entail more intensive use of antibiotics and chemicals in the farming sector. The EU already imports large volumes of Latin American soy beans carrying residue of cancer-causing glyphosate and other toxins up to 200 times the levels legally acceptable in the EU. Such problems are only likely to increase under this deal, as the zero tariff applied to soy would be fixed in the new agreement thanks to the ‘ratchet clause’.
In Brazil, a growing number of agricultural workers on the big industrial soy plantations are also not paid, receiving only food and shelter for work under slave-like conditions. While this is illegal, it continues without being addressed. The EU-Mercosur agreement does not contain strong labour rights clauses that could exert the pressure required to prevent such severe human rights abuses.
The agreement will have potentially have harsh consequences for manufacturing and farm workers, as well as peasant and indigenous communities in Latin America. Even the Commission’s impact assessment study identified many of these problems.
There are alternatives to all this, however. Trade agreements can be used to diversify economies making them more resilient to crises, increase jobs and quality of life, strengthen social and environmental regulation, develop public services and protect privacy and cultural diversity.
Forcing the deal aims to cement the neoliberal trade agenda into the EU-Mercosur relationship. This is likely to preclude alternative approaches to the trade relationship that could actually better serve the fundamental needs of the working populations of Europe and Latin America, for the foreseeable future.
Both in Europe and Latin America, more of the same policies will produce more of the same results. This does not bode well for increasing economic division between rich and poor, social division between urban and rural, and political division between left and right.