The abandonment of this proposed free trade agreement negotiated between Brazil, Uruguay, Paraguay, Argentina and the 27 states of the European Union is at the heart of the demands of French agricultural producers. Mathilde Dupré, co-director of the Veblen Institute for Economic Reforms, summarizes the issues of this treaty which has been under discussion since the 1990s.
3 mins
• What does the agreement contain?
This draft agreement includes two parts: the first is political, the second commercial and says “ free trade “. It has sometimes been summarized as a partnership ” meat versus car “. This is simplistic, but it sums up the double challenge for the signatory countries. Those of Mercosur which mainly export food and agricultural productsand the Europeans who intend to sell milk, wine, spirits or even automobiles, chemicals and pharmaceutical products.
This agreement aims to facilitate access to these goods for both parties without customs taxes, in particular. Customs duties, for example, on cars and on European industrial equipment exported to Mercosur – respectively 35% and 14% to 20% – would be eliminated.
• Where are the negotiations?
There have been several suspensions and restarts of the negotiation process, which began in the 1990s, before culminating in its current form in 2019. The main point of tension comes from the environmental and health impacts of South American agricultural policies, particularly concerning deforestation, and therefore the resulting effects on the climate and biodiversity. Europeans were in particular firmly opposed to the approach of Brazilian President Jair Bolsonaro (2019-2023). The election of Luiz Inácio Lula da Silva, in January 2023, made it possible to relaunch discussions, but the content of the text has not changed.
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• Why is the project controversial?
The deal is facing criticism on both sides of the Atlantic. In Mercosur countries, many workers’ unions fear that it will have consequences on their activity due to an increase in European imports. Furthermore, organizations defending indigenous peoples also fear that the increase in agricultural production will come at the cost of human rights violations.
Within the European Union, the France is the main opponent of the text. Paris is particularly concerned about unfair competition from agricultural production from South America to its farmers. Germany, on the contrary, sees new opportunities for its automobile and chemical industries. Spain and Portugal also support this agreement because of the strong historical and cultural proximity with the Mercosur countries.
• What are the points of divergence in the regulation of standards?
There are numerous regulatory differences between Mercosur countries and those of the EU. This is particularly the case in the agricultural sector. Some pesticides are banned in the European Union, but are authorized in Brazil or Argentina. The same is true regarding breeding practices for which these countries use antibiotics as growth activators.
Environmental rules are also very different and can create distortions of competition. For France, it is a red line. Paris wants to negotiate mirror clauses. It’s about achieving common production standards or finding common ground to balance these disagreements.
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• How would the agreement be economic, but also political?
From a European point of view, the defenders of this agreement also highlight the positive effects that it could induce. In particular, because the treaty will to a certain extent oblige Mercosur countries to adopt more demanding social and environmental standards for exporting to Europe. Importing less polluting European vehicles will also reduce greenhouse gas emissions in these countries. This text also has diplomatic significance for the member states of each community by facilitating political exchanges, or even ultimately the adoption of bilateral agreements.