Ticking clock: Mercosur and the E.U. race towards a trade deal

After decades of talks Mercosur, a four-nation bloc that is South America’s nearest equivalent to the European Union, is nearing a free trade agreement (FTA) with the E.U. Amid protectionist clouds gathering on both sides of the Atlantic, the clock is ticking to reach a deal, with agriculture assuming its perennial place as the main bone of contention.


There have been 28 intermittent rounds of negotiations since trade talks began in 2000, one year after the E.U. and Mercosur – Brazil, Paraguay, Uruguay and Argentina – signed a co-operation agreement. The next round of negotiations is scheduled for 2-6 October in the Brazilian capital of Brasilia, and a deal could be announced at the World Trade Organization’s ministerial conference in the Argentinian capital of Buenos Aires in December, although some technical details will not be resolved until 2018 at the earliest.

The E.U. is Mercosur’s largest trading partner

If clinched, this would be the latest in a brief series of major trade deals established by the E.U., with the E.U.-Canada Comprehensive Economic and Trade Agreement (Ceta) coming into force this month, and a much more tentative deal reached with Japan for a trade agreement yet to be negotiated but set to begin in 2019. The E.U. is Mercosur’s largest trading partner. According to E.U. data, in 2016 E.U. exports to Mercosur countries totalled EUR43.2 billion and Mercosur exports to the E.U. were EUR41.6 billion. In addition to the trade of physical goods, the agreement will cover services and government procurement but is unlikely to include rules around data protection or investment protection.

Mercosur goals

Brazil is leading Mercosur’s negotiations. E.U. tariffs and quotas on beef, sugar, and ethanol are particular points of contention that the Latin American countries hope to address during the next round of negotiations. Mercosur also hopes to gain Mode 4 access to the E.U., which allows for the easier movement of professionals between participating countries.

 

Mercosur’s primary goal is to gain access to E.U. markets for meat exports, particularly beef and poultry. Brazil is the world’s second largest producer of beef, accounting for 15 per cent of global production, and is the third largest producer of poultry in the world. Argentina, Uruguay and Paraguay are also major beef exporters.

The discussion around beef exports is complicated by a March 2017 scandal involving Brazilian food inspectors. Investigations uncovered that Brazilian food inspectors accepted bribes in exchange for overlooking illegal practices such as selling rotting meat and altering the expiration dates on meat products. The revelations led the U.S. Department of Agriculture to ban the import of fresh Brazilian beef over safety concerns.

Brazil is the world’s second largest producer of beef, accounting for 15 per cent of global production

Despite this, the E.U. has shown willingness to include beef in the trade deal as long as its sanitary and phytosanitary standards are met. E.U. cattle farmers disagree, however, and have called for beef to be excluded from the deal over concerns that Brazilian beef will drive down prices. During negotiations in 2016, the E.U. proposed a 78,000 tonnes import quota on beef from Mercosur countries. Several E.U. member states, under pressure from farmers, opposed the offer, and the actual additional beef quota agreed upon by both sides is likely to be significantly lower.

If E.U. farmers deem the proposed deal unsatisfactory, protests similar to those in Brussels in 2015 are likely. In September 2015, thousands of dairy farmers from several European countries including Belgium, Germany, France and the U.K. protested in the Belgian and E.U. capital over what they perceived as the E.U.’s failure to intervene in falling milk prices.

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