After 20 years of complex negotiations, Mercosur and the EU finally agreed on a trade deal last week. We round up reactions from key stakeholders.
After 20 years of complex negotiations, Mercosur and the EU finally agreed on a trade deal last week. We round up reactions from key stakeholders.
A trade deal between the Mercosur countries – Brazil, Argentina, Uruguay and Paraguay – and the European Union has been under negotiation for 20 years.
Last week (28 June), the parties announced they had reached a political agreement for a trade deal that is “ambitious, balanced and comprehensive”.
President of the European Commission Jean-Claude Juncker said: “I measure my words carefully when I say that this is a historical moment. In the midst of international trade tensions, we are sending today a strong signal with our Mercosur partners that we stand for rules-based trade.
"Through this trade pact, Mercosur countries have decided to open up their markets to the EU. This is obviously great news for companies, workers and the economy on both sides of the Atlantic, saving over €4 billion worth of duties per year."
© GettyImages/Thierry Monasse
The EU-Mercosur free trade agreement creates the biggest free trade zone in the world, establishing a common marketplace of 730 million people.
In 2018, Mercosur's exports to the EU were €42.6 billion while the EU's exports to the four Mercosur countries totaled €45 billion in 2018.
Mercosur exports mostly agri-food products to Europe. In 2018, these included food products, beverages, and tobacco (20.5%), vegetable products such as soy and coffee (16.3%), and meats and other animal products (6.1%), according to EU figures.
Europe, meanwhile, will benefit from tariff-free exports of industrial products and cars, which had tariffs of up to 20% for machinery and 35% for cars.
© GettyImages/anucha sirivisansuwan
The Brazilian Ministry of Agriculture, Livestock and Farming welcomed the agreement, saying: “Agricultural products of great interest in Brazil, such as orange juice, fruit and soluble coffee, will have their tariffs eliminated. Brazilian exporters will gain access to quotas, for meat, sugar and ethanol, among others.”
Industry group, the Brazilian Confederation of Agriculture and Livestock (CNA), has not yet commented, saying it will wait for the final details to be announced.
Brazil’s Ministry of Economy estimates the deal will boost the country’s GDP by US$87.5 billion over 15 years.
Taking to social media to comment on the deal from Osaka, Japan, where he was attending the G20 summit, president Jair Bolsonaro said: “Together, Mercosur and the EU represent 1/4 of the world economy and now Brazilian producers will have access to this huge market. […] Great day!”
However, the gains for some Mercosur agri-food players were not as big as they had hoped.
During the decades-long negotiation process, Brazil, Argentina, Paraguay and Uruguay pushed for an annual tariff-free beef quota of 350,000 tonnes. The proposed deal offers them a quota of 99,000 tonnes of beef annually, with a tariff of 7.5%.
Nonetheless, markets reacted positively towards South American meat packers. Shares in JBS, the world’s largest meat producer, rose 6% while the biggest chicken exporter globally, BRF, saw its share value increase 8%. Marfrig shares rose by 3%, Reuters reported.
© GettyImages/Fevziie Ryman
Environmentalists greeted the announcement with dismay, slamming the proposed deal as a profit-driven exchange of ‘cows for cars’.
According to Greenpeace, cattle is the biggest driver of deforestation in the Amazon, with 63% of deforested areas occupied by animal pastures. Almost eight thousand square kilometers of the Brazilian Amazon was destroyed in 2018.
Perrine Fournier, trade and forests campaigner at non-profit Fern, said: “[This agreement] will open EU markets to more beef imports from countries where ranching is the main cause of deforestation, while favoring the export of EU cars, especially highly fuel-intensive Sport Utility Vehicles (SUVs).”
She criticized the European Commission for claiming to champion rules-based trade while signing a deal with Bolsonaro’s “government of climate deniers who launched an assault on the Amazon and indigenous peoples”.
The final days of the negotiation were marked by tension over environmental issues. At the G20 summit, the president of France, Emmanuel Macron, said he did not want to conduct trade deals with parties who do not respect the 2015 Paris Agreement on climate change.
However, he later accepted the agreement, saying it was "good at this stage".
Image: A cattle ranch in the Brazilian Amazon. © GettyImages/edsongrandisoli
Worried about cheaper products flooding the EU market and pricing them out of business, some European agri-food producers, and in particular the beef sectors in Ireland and France, expressed disappointment with the deal.
In a joint statement, the EU farming trade groups, Copa and Cogeca, said: “[We] deeply regret the substantial concessions made in the agricultural chapter with Mercosur. Considering the huge difference in production standards, the imports of Mercosur’s agricultural goods will de facto establish double standards and unfair competition for some key European production sectors, putting their viability at stake.”
The president of the Irish Farmers Association Joe Healy said it was a “bad deal for Ireland and for Irish farmers, the environment and for EU standards and consumers”.
“The ‘turning a blind eye’ approach to double standards and environmental degradation in Brazil is indefensible,” he added.
© GettyImages/Pe3check
The deal establishes legal protection for certain food and drink products that will safeguard them from imitations.
The EU countries recognize Mercosur products such as cachaça from Brazil and Mendoza wine from Argentina.
Meanwhile, Mercosur recognizes the geographical indications of products such as Prosciutto di Parma from Italy, Comté cheese from France and Germany’s Münchener beer.
Image: A vineyard in Mendoza, Argentina. © GettyImages/pawopa3336
Uruguay stands to benefit from the agreed quotas on meat (99,000 tons made up of 55% fresh and 45% frozen), rice (60.000 tons) and honey (45,000 tons).
According to the Uruguayan Ministry of Foreign Affairs, the country’s meat sector could make between $40 and $70 million per year, depending on country distribution of quotas.
Within eight years, the proposed deal offers to remove tariffs on wine in five-liter containers for both EU and Mercosur parties.
The ministry sought to alleviate fears on the country’s domestic wine sector.
“[…] Uruguayan exporters will have access to European market under equal conditions as exporters from other wine-producing countries that already have commercial agreements. On the other hand, from a defensive point of view, and in the face of fears about the impact on European wines in our market, the times [of the entry into force] will be long enough to allow the sector to adapt,” it said.
© GettyImages/Derek Brumby
The Argentinian minister of production and labor Dante Sica called the agreement "a fundamental step in our policy of smart entry onto the international stage”.
“Before, Argentina was closed to the world; in 2015 we were the third economy behind Nigeria and Sudan […] With this agreement, we will reach 30% of the world’s GDP, which means that our SMEs will be able to reach a market of 500 million people”.
The country’s secretary of international relations Horacio Reyse shared a video of the moment the deal was confirmed on social media.
He tweeted: “This is a milestone […] with the potential to transform the national productive matrix, increase GDP, generate employment and attract investment.”
Although an agreement has been reached, the deal is not yet finalized. Both parties will now perform a legal revision of the text to come up with a final version.
It will then be submitted to the governments of all member states involved for approval, and put to a vote in the EU parliament.
© GettyImages/artJazz
