EU farmers sow seeds of doubt as Brussels moves to seal Mercosur pact

EU farmers sow seeds of doubt as Brussels moves to seal Mercosur pact

Critics say trade deal with South America could harm EU farmers

Jean-Claude Juncker has vowed that the EU “will do everything we can” to wrap up this year what he describes as Brussels’ biggest trade deal — an accord with South America’s Mercosur bloc that he says is worth four times as much as the EU’s agreement with Japan.

But as officials from the two sides race to meet the deadline, the European Commission president’s ambitions are running into difficulties because of objections from farmers, championed by France and other EU governments.

Mr Juncker and other European proponents of the deal with Brazil, Argentina, Uruguay and Paraguay say it would demonstrate that Europe is not only “open for business” but also ready to anchor an international trading order battered by the election of US President Donald Trump.

For Brussels, the potential benefits are clear: a big new market for European vehicles and industrial goods, access to public procurement contracts and better protection of intellectual property rights.
The EU estimates that a deal could abolish €4bn in annual customs duties on EU exports, including €500m for French exports alone.

[A deal] would devastate the EU beef sector, growth and jobs in rural areas and undermine EU food safety standards Copa-Cogeca, lobby group representing EU farmers Mr Juncker’s claims about the deal’s size refer to the scale of such potential tariff reductions rather than the overall economic impact of opening up markets — which is likely to be less than an agreement this year with Japan. Nevertheless, the commission says exports of European goods stand to double because of the Mercosur deal, while exports of services could rise by two-thirds.

Such considerations and the election of Mauricio Macri, Argentina’s most pro-trade president for many years, have given urgency to a deal that has been under discussion since 1999.

“It is a very important moment,” a Mercosur trade official said ahead of the round of talks next week. Negotiations needed to “get traction” on market access in sensitive sectors in November if a deal is to be reached in December, the official warned.

“The time is now,” Cecilia Malmström, EU trade commissioner, told the FT, speaking of a rare political “window of opportunity”. She added: “We are talking about a huge market that has traditionally been closed . . . there is a lot to gain.”

The concern among some European farmers, however, is that the gain could come at their expense, given the exporting prowess of the agricultural industries of Brazil and Argentina, by far the two biggest economies in Mercosur.

More generally Mr Macron — one of the few centrist European politicians who has recently had a convincing success at the polls — has called on the EU not to act with undue “haste” on a trade agenda that does not enjoy notable public support.

Paris has expressed concern that the deal could undermine social, health and environmental norms — as well as hitting France’s beef industry.

Ireland has voiced similar fears for its beef sector, while several central and eastern European countries are also worried about the impact of a deal on ethanol production from crops. Poland, Slovakia, Czech Republic, Austria, Hungary, Romania and Bulgaria all produce ethanol to various extents.

The EU has offered Mercosur a quota that Brussels estimates is equivalent to some 8 per cent of the EU market, although the ethanol lobby says it amounts to more. In any case, the offer is too generous for some member states; 11 countries including France, Poland and Ireland have called for the EU to set out firm limits on how much it opens markets for ”the most sensitive agricultural products” in future trade deals.

Emmanuel Desplechin, secretary-general of the European renewable ethanol association, complains that his industry is caught in a pincer movement between EU regulations that could reduce the size of its markets and a succession of trade deals that has led to increased foreign competition. “We are a bargaining chip, it is clear,” he said, mournfully.

The Mercosur talks retain plenty of allies among EU states. Germany, Italy, Spain, the Netherlands, Portugal, the Czech Republic, Sweden and Denmark all back Brussels’ ambition for a year-end deal. At an EU summit in October, Mark Rutte, Dutch prime minister, challenged Mr Macron’s call for a rethink.

Cows on an Argentine farm. EU farmers are concened that a Mercosur trade deal could hit Europe's beef industry © Reuters

But given the sensitivities on both beef and ethanol, the coming weeks will be a political test of how far the EU is prepared to go to secure an agreement.

On beef, the EU and South American sides still have much left to do. The Mercosur countries have made clear that the EU will need to significantly increase its quota offer of 70,000 tonnes a year if it wants to secure a deal.

The offer amounts to less than one per cent of annual EU consumption and was “lower than what we expected . . . even as an initial offer,” the Mercosur official said, noting it amounted to less than one hamburger per European consumer per year. “It has to move up.”

But Europe’s well-organised producer lobbies have opposed any offer on beef at all. Copa-Cogeca, a lobby group representing EU farmers, said in September that it rejected either beef or ethanol’s inclusion in the EU’s offer: “It would devastate the EU beef sector, growth and jobs in rural areas and undermine EU food safety standards” it said. “It is unacceptable that the commission is sacrificing the EU agriculture sector and allowing double standards on the single market.”

Ms Malmström said there was “still work to do,” as she sought to emphasise the export opportunities of the Mercosur deal while acknowledging the concerns European producers have raised. “We cannot conclude it until we feel that we can solidly answer all of the questions that member states will put to us.”

Jim Brunsden and Alan Beattie es un sitio web oficial del Gobierno Argentino