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Article: EU-Mercosur trade deal has ‘limited impact’ on European agri-food sector – Commission report
14 July 2020
On 8 July, the European Commission published a preliminary
sustainability impact assessment of the draft trade agreement
between the EU and the Mercosur countries - Argentina, Brazil,
Paraguay and Uruguay.
The report, prepared by the London School of Economics, found
that the deal would have a limited impact on the economic stability
of EU agri-food sectors.
Its conclusions were based on economy-wide analysis on how far
tariff liberalisation could go in both blocs and how this would
affect factors like production, consumption, consumer prices and
income.
For the Mercosur bloc's agri-food market, the conservative
scenario eliminates tariffs in 80% of all agricultural imports and
100% in the ambitious scenario. For the EU, its conservative
scenario would see tariffs for rice, sugar, ruminant meat and other
meat sectors set at 15% and at 30% for the ambitious one, while
cereals and dairy would see cuts of 15% and 100%, respectively.
The report found that EU dairy could get a big boost and
increase exports somewhere between 91-121%. This would happen
alongside Mercosur countries increasing their own exports to the EU
from 18-165%, depending how well the South American countries meet
a range of criteria, like animal welfare and safety standards.
European beverages would also make large gains in the trade
deal, with exports expanding by 36-38%, mostly concentrated in wine
and spirits.
Meanwhile, EU beef imports from Mercosur could increase between
30-64%, causing EU output to drop between 0.7-1.2%. Pekka Pesonen,
secretary-general of Copa-Cogeca, the EU's biggest farm lobby, has
said that the agriculture
sector is going to pay for this agreement, particularly those
producers in sensitive sectors such as beef, poultry, sugar,
cereal, rice, honey and citrus fruits.
Overall, the trade agreement was found to have a positive impact
on the economies of both the EU and the Mercosur countries, raising
wages and contributing to a reduction in inequalities.
Environment and social rights
The report also examined environmental and social factors,
concluding that the EU-Mercosur deal might see a small expansion of
agricultural production in South America, mostly associated to beef
and sugar cane. The LSE researchers nevertheless found that the
size of this increase will not lead to significant growth of the
agriculture sector, which reduces the risk of the trade deal
contributing to deforestation in the Amazon.
The report says the limited increase in agricultural production,
and its low chance of leading to deforestation, means that the
trade deal is not expected to have an impact on indigenous rights
or raise further conflicts.
These findings contradict an earlier analysis funded by the
European Greens which concluded that the trade deal will deepen
Mercosur countries' dependency on the extraction of natural
resources for domestic growth. Indigenous leaders of the Amazon
have also said that the trade agreement threatens their communities and
risks further violations of human rights, like the killing of
activist Paulo Paulino Guajajara in November 2019.
LSE's report does acknowledge that their more positive analysis
is dependent on the trade deal's flanking policies set out in the
sustainable trade chapter. This part binds Mercosur countries,
notably Brazil, into implementing the Paris Agreement, which
includes a pledge to stop illegal deforestation in the Amazon by
2030 and legal commitments to protect forests.
Still, NGOs and green groups continue to campaign against the
EU-Mercosur deal, claiming Brazil will not respect the trade deal's
requirements, meaning it can lead to environmental degradation and
cheaper agri-food products entering the single market.
Trade reform
Trade Commissioner Phil Hogan recently said that "global trade
requires proper global rules" and only limited progress can be made
without a functioning intermediary body, namely the World Trade
Organization (WTO).
"We are vigorously pursuing WTO reform, because we believe that
with the right leadership, and the right reforms, this organisation
can be the beating heart of global economic recovery," he said,
adding that this will depend on keeping trade open, free and fair,
with predictable and enforceable rules.
Hogan was speaking at the launch of the Commission's trade review, which aims to
build a consensus around the future direction of EU trade policy
within the context of new global challenges, such as COVID-19 and
climate change.
Another area the Commission is looking for input is how its
trade policy can better support sustainable development around the
world. A public consultation will open on 15 September and the
results will feed into an overall communication that will be
published towards the end of the year, which will shape the future
orientation of EU trade policies.