European Union countries provisionally approved this Friday the free trade agreement between the EU and Mercosur (Southern Common Market) – it is the biggest trade agreement ever signed by Brussels in terms of tax reductions. This will change our lives – but it is creating controversy in some countries, namely France
First of all: what is Mercosur?
Mercosur is a South American regional intergovernmental organization founded in 1991 and whose member states are Argentina, Bolivia, Brazil, Paraguay, Uruguay and Venezuela (currently suspended), with Chile, Colombia, Ecuador, Guyana, Panama, Peru and Suriname being associated states.
What does the Mercosur-EU agreement consist of?
The agreement will eliminate 35% customs tariffs on 91% of imports from the European continent by Mercosur countries, including automobiles, over a period of 15 years. In the opposite direction, Brussels will cease customs duties on 92% of imports from Mercosur over a period of 10 years, explains .
Mercosur will also remove tariffs on European agricultural products, such as the 27% on wines and 35% on spirits.
For agricultural products that generate greater controversy, the EU will increase Mercosur’s import quotas, such as beef – whose export limit will increase to 99 thousand tons. In the opposite direction, Mercosur will grant Brussels a tax-free quota of up to 30 thousand tons of cheese.
There will also be new EU quotas for poultry, pork, sugar, ethanol, rice, honey, corn and sweet corn and, from Mercosur, for powdered milk and infant formula.
Compared to the current market, additional EU imports will represent 1.6% of European beef consumption and 1.4% of poultry consumption. Among EU member states, supporters of the agreement argue that existing imports are proof that Mercosur meets European quality standards.
In addition to changes to import quotas, the agreement provides for 350 geographical indications to be recognized to prevent the usurpation of certain EU food products. One of the examples chosen by Reuters is the term “Parmigiano Reggiano”, which continues to be reserved for cheeses specifically produced in Italy.
What do supporters of the agreement say?
Brussels and the main supporters of the EU-Mercosur agreement, such as Germany and Spain, argue that the commercial understanding will allow the creation of an alternative to dependence on China, especially with regard to the import of rare earths – such as lithium, a metal that is a key element in the production of batteries. The EU-Mercosur agreement will guarantee tax exemption on the export/import of most of these minerals.
In addition to emancipating the European market from China, the European promoters of the agreement estimate that the measures will provide member states with relief from the impact of customs tariffs imposed by US President Donald Trump.
The European Commission highlights that, if fulfilled, this will be the biggest free trade agreement it has ever signed in terms of tax reductions. Brussels will eliminate more than 4 billion euros in taxes on current EU exports.
For supporters of the agreement, it is necessary and essential for the European effort to diversify its trade relations.
The text of the agreement also adds that, compared to previous Mercosur trade agreements, the EU would have an initial advantage, given that European companies will be able to compete for public contracts in Mercosur on the same terms as local suppliers, something that had never been offered by Mercosur previously.
There are also potential safeguard measures to deal with possible market disruptions.
What about critical voices?
In terms of countries that are against the agreement, France is the first name that comes up. French agriculture is the main producer of beef in the EU, but it went so far as to say that it would sign the free trade agreement if it “safeguarded French agricultural interests”. However, Paris has repositioned itself and now rejects the agreement.
Italy, Hungary and Poland are also opposed. Together, the four countries could have blocked the agreement, but Italy’s position ended up changing over the last few months.
In the first vote, held this Friday, the proposal passed with France, Poland, Austria, Ireland and Hungary voting against and Belgium abstaining. At least 15 Member States, representing more than 65% of the European population, expressed their support, a necessary condition for approval.
One of the main focuses of criticism against EU-Mercosur is European farmers, who are protesting against what they say is an agreement that will lead to cheap imports of South American products. One of the main sources of concern for producers is beef, which they say does not meet EU environmental and safety standards. This is despite the fact that Brussels has already reiterated that European quality standards will not be relaxed in order to facilitate the entry of cheaper goods with reduced quality.
Although the EU-Mercosur includes the prevention of deforestation until 2030, environmentalists are also against the commercial understanding because they believe that the document lacks measures that can be applied.
The association classified the agreement as something “devastating for the climate” and guarantees that it will inevitably contribute to deforestation. For environmentalists, given the increase in demand, Mercosur countries will sell more agricultural products and intensify the exploitation of raw materials, often coming from forest areas such as the Amazon.
How did Brussels try to win over critics?
When the European Commission presented the agreement for approval in September, it established a mechanism through which Mercosur’s preferential access to sensitive agricultural products, such as beef, could be suspended.
The barometer for Brussels to assess the need for such safeguards would be an increase in the volume of imports or a fall in prices of a certain product in one or more EU countries. Brussels had previously set a limit of 8% for imports of each product from Mercosur, a value that was eventually reduced to 5% at Italy’s request.
The European Commission will study the possibility of harmonizing production standards between European and imported products, mainly with regard to pesticides and animal welfare. The purpose is to reinforce control over the import of food, products of animal and vegetable origin entering the EU, increasing the number of audits and checks in third countries.
The next European budget will include a €6.3 billion crisis fund for European farmers. This fund aims to cover the “unlikely event”, says Brussels, that the agreement harms European agricultural markets. The EU will also anticipate around 45 billion euros in support for farmers.
To try to generate consensus, the European Commission’s latest measure was to announce that it will reduce import duties on certain fertilizers, whose costs have increased by up to 60% in recent times.
