As anger spreads across the countryside, Emmanuel Macron keeps repeating that France will not sign Mercosur, the trade agreement currently under discussion between the EU and South American countries. The fact remains that the French president does not really have sufficient support within the European Council to derail this free trade treaty. Above all, far from being a predicted catastrophe for Europe, it could be generally positive for the economy of the Old Continent. For L’Express, the economist and researcher at the European Council on International Relations (ECFR) in London, Agathe Demarais, dissects the preconceived ideas and dispels the fantasies surrounding this agreement.
L’Express: The free trade agreement between the EU and the Mercosur countries arouses strong opposition in France. Is this concern really justified?
Agathe Demarais : We can always point out the inadequacies – real, especially on the environmental aspect – of this type of agreement. But let’s ask ourselves a question: why are almost all of our European neighbors from Germany, through Italy, Spain and the Netherlands, ready to sign it? Why is this subject not the subject of any controversy in other European countries? In any agreement, there are always winners and losers, but the net result for the European economy will be positive, as demonstrated by almost all the impact studies that have been carried out.
This is also the case in many agricultural sectors such as the pork sector, the dairy sector or that of wines and spirits. Certainly, cattle breeding and the poultry industry will suffer. But here again, it can be useful to gain a little perspective. Tariff quotas – that is to say the volumes of meat which will enter Europe at zero or reduced duties – represent only 1.6% of the EU’s total annual beef consumption and 1.2% of that of poultry. This represents around two burgers and two chicken fillets per year per European. In addition, the EU already imports poultry and beef from Mercosur countries: it is therefore not a question of fighting to avoid opening the door to lower quality products, which are already on the shelves . It is absolutely necessary to put things in context.
By 2032, the impact of planned free trade agreements with Mercosur countries, Australia and New Zealand are expected to reduce European beef and chicken production by less than 1%. If farmers are going through a deep crisis, it is not linked to free trade, but, from an economic point of view, to the high level of energy and fertilizer prices, and to variations in exchange rates. The agreement with Mercosur is a scapegoat. Rejecting it will not solve the problems of French farmers.
So what are the arguments to oppose to those who denounce this agreement?
They are of two types. Let’s start from the economic field. What is one of the main challenges facing all our economies over the coming decades? Succeed in the energy and climate transition. However, Mercosur countries hold vast reserves of raw materials crucial for the green energy transition. This is excellent news for Brussels, given the European Union’s aim to reduce its dependence on China for these raw materials.
Brazil, for example, has around 20% of the world’s reserves of graphite, nickel, manganese and rare earths. All crucial elements for clean technology equipment. The country also holds 94% of the world’s reserves of niobium, a metal used in the aerospace sector and on the EU’s list of critical raw materials. Argentina has the world’s third largest reserves of lithium, also an essential element in electric vehicle batteries.
The second economic argument is linked to the European desire to reduce our economic dependence on China. On the one hand, we need to find new outlets at a time when the Chinese market, which is very important in many industrial sectors, is both closing and slowing down. Italians are very concerned about this dependency. However, today European products are subject to customs duties upon entry into Mercosur of 18% in chemicals and 14 to 20% in industrial machinery and equipment. This agreement opens up new perspectives for European industry, at a time when the trade war between the United States and China will push Chinese groups to redirect their trade towards Europe. On the other hand, European companies are very present in China. The agreement with Mercosur could encourage them to open production lines in Latin America rather than on Chinese soil.
Does geopolitics also come into play in this trade agreement?
It’s obvious. If Europe does not sign this agreement, China will take its place in Latin America. And there, on the environmental aspect, it is clear that China will not impose any conditions whereas we, Europeans, could have used the agreement with Mercosur to build a more in-depth exchange on the environmental level.
China is already the leading recipient of Mercosur exports. And Beijing will spend nearly $250 billion in foreign direct investment in the area this year. Finally, let’s look at reality. Europe is frowned upon in a large part of developing economies because it is accused of giving lessons on a multitude of subjects, both social and environmental. As such, this agreement is watched very closely by other countries, particularly India. If Europe does not sign, the development of our relations with developing countries will not get off to a good start, even though the re-election of Donald Trump makes such a strategy imperative.
Does France have the power in Brussels to derail this agreement?
It will be very difficult. France plays a bit of the role of the unhappy neighbor in a meeting of co-owners but most of our 26 European co-owners seem reluctant to follow our positions. There is therefore a risk that our gesticulations will not serve much purpose, except to erode our credibility vis-à-vis our European partners, even though the union seems important in preparing for the second mandate. of Trump.
How do you explain France’s distrust of free trade?
This seems difficult to explain even though most economic studies show that trade liberalization at the global level has made it possible to reduce poverty. Perhaps we should see a feeling of “exceptionalism” in France – even more so in the food sector! Apart from a few oddities, the media coverage of these trade negotiations and their impacts also appears biased, especially when seen from abroad. Given what is said and written, it seems understandable that a large part of the French population is against the agreement when it is a non-issue elsewhere in Europe. It seems to me that we must look coldly at the impacts of this agreement: Europe, as a whole, has a lot to gain from it.
.