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EU-Mercosur deal: Is the agreement a threat to European agriculture?

Economy Jul 03, 2019 12:31PM ET
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Twenty years after negotiations began, the European Union and the South American trade bloc Mercosur reached a free-trade agreement on Friday. Deemed "historic" by European Commission president Jean Claude Juncker, both sides currently trade over €88 billion in goods and €34 billion in services each year.

Not everyone is on boardHowever, the treaty has not satisfied all member states. While French President Emmanuel Macron said it was a "good agreement" that met key French demands, other factions in France did not agree.

France is the EU's largest farming power. French farmers' groups and environmentalists have regularly raised concerns about the risk of a surge in South American agricultural exports to Europe. In addition, critics argue there are lower standards for produce in the Mercosur countries and insist that they would oppose the deal unless they see proper traceability and good livestock practices in the beef sector.

"We won't have an accord at any price. The story isn't finished," agriculture minister Didier Guillaume told lawmakers on Tuesday.

"We are going to wait and see what exactly is in this text but, I would like to tell you that the whole government and I will be vigilant. I will not be the minister who sacrifices French agriculture at the altar of an international agreement."

Foreign Minister Jean-Yves Le Drian echoed his colleague, saying that while the draft trade deal provided opportunities for European exporters, it remained to be seen whether it met France's demands.

"The red lines we have drawn for the agreement are firm," he told parliament, adding it "remained to be seen" whether Paris would support it, when it examined the details of the agreement.

France's main farmers' union, the FNSEA, said on Tuesday that it had requested a meeting with Macron and was also planning protests over the accord.

Unió de Llauradors, a Spanish agrarian organization based in Valencia, has also criticized the "obscurantism" with which the treaty has been negotiated.

What is Mercosur?Mercosur is a trade bloc of South American countries with Argentina, Brazil, Paraguay and Uruguay as full members. Venezuela, too, is a full member but has been suspended since 2016. Officially known as the Southern Common Market, the bloc was established by the Treaty of Asunción in 1991 and Protocol of Ouro Preto in 1994.

The European Union is already Mercosur's biggest trade and investment partner and its second largest for goods trade. With this trade pact, the EU is now also the first major partner, potentially giving EU firms a head start.

Although finer points are still to be discussed and understood, the EU stands to benefit greatly from tariff reductions on goods such as cars and wine. The bloc has its eye on increasing access for its companies making industrial products.

Meanwhile, Mercosur aims to increase exports of farm products. Phased over years, it will get a new 99,000-tonne quota of beef at a 7.5% tariff.

Which agricultural products will be affected?European orange juice, mainly produced in Spain and accounting for 14% to 20% of the annual production of oranges, would compete with Brazil, the largest producer, and exporter of orange juice in the world.

As for lemons, Argentina is the world's leading producer. In previous years, lemon imports from Argentina have led to an oversupply in the European market, and the scenario is likely to continue.

Recent rice imports from Myanmar and Cambodia have already weakened the European rice sector. Now, Uruguay could be an additional threat. In fact, rice from Mercosur countries is round grain, the same kind that is produced in the Spanish Levant. This would likely put Spanish farmers at a disadvantage given that the Mercosur rice would probably come at lower prices.

French cattle ranchers have already said that they would be unable to compete with large, South American livestock farms, mainly in Argentina, Uruguay, and Brazil.

With 20% of its current wine tariffs eliminated, Argentina is likely to be a big player in wine production, with estimates saying current exports will be multiplied by twelve. This would put it in competition with France, Spain and Italy — the largest producers of wine in Europe.

What about European pesticide legislation?Mercosur uses about 240 active substances prohibited by the EU in its crops. Brazil and the United States use the most pesticides in the world.

According to Carles Peris, president of Unió de Llauradors, an organisation of farmers and ranchers in the Valencian countryside, the agreement is not the best idea given the "unsustainable" production methods in Latin American countries, violating strict regulations imposed by the EU on its own producers.

The Unió de Llauradors recently compiled and submitted a dossier on high-risk pesticides used by the Mercosur countries, urging them to be banned.

Critics have drawn comparisons to an agreement with South African countries, which allowed for the introduction of oranges in European markets that contain up to three materials classified as "extremely dangerous" by the World Health Organization (WHO).

Is there a danger of new pests?One fear that some are voicing is that the imports could cause the introduction of new pests and diseases into Europe.

The citrus sector especially is pushing to introduce the obligatory "cold treatment" on Mercosur imports, since lemons and oranges can contain pests that do not exist in Europe.

What about working conditions?

According to Carlos Baixauli, an agronomist, or expert in the science of soil management and crop production, European producers must pass a series of controls when they sell to supermarkets, showing that workers were receiving a salary in accordance with national legislation and their working conditions are adequate. But he said these regulations would be absent on Mercosur imports.

"The big exporters will continue to work, the danger is that the small subsistence agriculture, which is widespread on our continent, will end up disappearing," Baixauli explained.

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EU-Mercosur deal: Is the agreement a threat to European agriculture?

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