Negotiators for the European Union and the South American Mercosur trading block reached agreement on a new free-trade deal back in June, writes Niall Hurson.
Mercosur is a South American trade bloc which was established by the Treaty of Asunción in 1991 and Protocol of Ouro Prêto in 1994. These agreements were made in order to establish a customs union in the region, creating a fluid movement of goods, people, and currency. Mercosur is made up of four full member countries which include Argentina, Brazil, Paraguay, and Uruguay. Venezuela is a full member but has been suspended since 2016 after doubts whether the country was complying with the union's rules, including human rights violations. Merscosur also has seven associate countries which include Bolivia, Chile, Colombia, Ecuador, Guyana, Peru and Suriname.
The deal was 20 years of negotiations in the making and it will consist of a free trade area open to 760 million people, bringing 2 continents together in cooperation. The European Union (EU) is the first major partner to agree a deal with Mercosur and all that is left is a final approval from the European Parliament before the pact will come into effect. The deal has been met with negativity with France expressing concern about a surge of beef imports into the EU. Environmental groups are warning the deal could worsen the deforestation of the Amazon Rainforest.
Previous to the free-trade deal, the EU was already Mercosur’s biggest trade and investment partner. A total of 20.1% of the bloc’s exports went to the EU in 2018. Europe’s biggest exports were machinery and transport equipment while foodstuffs, beverages, and tobacco were the biggest imports from the South American region. It has been estimated the EU will save over 4 billion euros as a result of tariff reductions between the two continents. Europe will now enjoy tariff reductions on goods such as cars and wine with an aim to increase access for companies involved in industrial products.
The Amazon rainforest covers most of the Amazon basin of South America and 60% is contained within Brazil. Many environmentalists fear that agricultural expansion incentivised by the free-trade deal could potentially contribute to further deforestation in the region. In August French president Emmanuel Macron threatened to block the Mercosur trade deal as a result of wildfires in the Amazon rainforest and a lack of action from Brazil’s government. An Taoiseach Leo Varadkar also said there is no way Ireland will vote for the deal if Brazil does not honour its environmental commitments. Varadkar said “There is no way we can tell Irish and European farmers to use fewer pesticides, less fertiliser, embrace biodiversity and plant more of their land and expect them to do it, if we do not make trade deals contingent on decent environmental, labour and product standards."
Mercosur aims to increase exports of farm products, the deal includes a 99,000-tonne quota of beef at a 7.5% tariff, phased in over five years along with tariff-free 180,000-tonne quotas each for sugar and poultry. The Irish Farmers Association (IFA) has widely condemned the deal with IFA president, Joe Healy saying the deal is a sell-out of EU values and reckless of the Commission to agree to thousands of tonnes of substandard beef from South American countries come into the European market.
A study carried out by the EU Commission Joint Research Centre said beef imports from Mercosur countries into Europe could drive beef prices down by 16%, costing the European beef sector as much as €5bn a year in revenue. The potential impact on Irish farmers according to the IFA could be a loss of between €500 and €750m. IFA livestock chairman Angus Woods said in jest earlier in the year that “this deal is to allow Europe to sell more cars, champagne and potentially electric chainsaws to cut down their rainforest with.”
Beef farmers in Ireland have received unrelenting bad prices for their animals for months on end with the Mercosur free-trade deal presenting an enormous threat to an industry that is already on its knees. Unregulated agricultural expansion in countries such as Brazil also poses a real risk of heightened deforestation.