MercoPress. South Atlantic News Agency

EU/Mercosur trade deal: How detrimental for Mercosur and how beneficial for EU farmers?

EC President Ursula von del Leyen with Mercosur leaders, Argentina’s Javier Milei; Uruguay’s Luis Lacalle Pou; Lula da Silva, Brazil and Paraguay’s Santiago Peña. 

A few days after European Commission President Ursula von del Leyen signed a long-pending trade agreement with four South American nations, French farmers were back on the streets dumping manure. This time they parked the tractors near the tunnel in Calais that goes through the English Channel, according to a report from German political and business analyst Uwe Hessler.

France's minister for trade, Sophie Primas, said the deal with Mercosur, Argentina, Brazil, Paraguay and Uruguay, “only commits the Commission, not the member states,” indicating that France will oppose ratification of the agreement

At the heart of the farmers' protest is an increase in beef imports, as well as poultry and sugar. But experts believe the volumes of these imports are modest, marginal, and not an existential threat.

Moreover, as agricultural products produced in the EU find millions of new consumers in Mercosur nations, the agricultural sector overall stands to benefit from the agreement.

A so-called Fact-sheet published by the EU Commission says that under the new agreement, EU will import 99,000 tons of beef at lower duties of 7.5%. That is just 1.6% of total beef production in the EU and is less than half of the current imports from Mercosur, which stand at 196,000 tons. For poultry and sugar, the imports amount to 1.4% and 1.2%, respectively, and for rice even lower.

Bruno Capuzzi, a Brazilian trade economist currently in a fellowship at the European University Institute, said the increase in beef imports represents only one and a half burgers for each consumer in the union.

Other experts also say the 99,000 tons will not necessarily lead to additional demand and mostly replace a part of the existing imports from Mercosur but at cheaper rates. On average, beef exporters from Mercosur pay 40% duties on current exports.

“It is expected that, rather than creating an equivalent increase in imports, one of the effects of the new quota will be to replace some of the imports that are already taking place,” said Christopher Hegadorn, adjunct professor of global food politics at Sciences Po, Paris.

In a report in February, the EU admitted that there will be some impact on producers of beef, poultry and sugar, and sectoral adjustments will be required. Experts also revealed that in the negotiations over the year, EU succeeded in installing various safeguards to soften the impact.

Firstly, the increased but set quota of 99,000 tons of beef is not coming in duty-free, and secondly, the EU's high health standards are expected to guard against oversupply.

“Only 20% of the slaughterhouses in Brazil are authorized to export to the EU as it requires individual certification,” expert Capuzzi pointed out.

As she signed the agreement, von der Leyen said high health and food standards in the union “remain untouchable.” Thirdly, the deal is expected to be phased in over five years to give the beef producers in the EU time to adapt.

“It is assumed there will be financial resources to help affected farmers adjust to any dislocations,” Hegadorn pointed out. “But that will likely come up at the [European] Council as the agreement comes for ratification.”

Moreover, 99,000 tons would be divided among four Mercosur nations, handing each a relatively thin slice of trade in a commodity they have ample amounts to supply.

The experts believe that the deal's overall benefits far outweigh the adjustments, and even the agricultural sector stands to gain.

The EU Commission has protected more than 350 products under “a geographical indication,” and trademarked them for European farmers. This ensures there can be no imitation of specific hams, cheeses, wines and other products produced in European regions and seen as delicacies in various Mercosur nations with growing middle classes.

A recent study on the impact of 10 free trade agreements (FTAs), including the deal with Mercosur, concluded that the EU agri-food sector, “especially the dairy, pork, processed food and beverages sectors,” stands to benefit.

If the trade agreements are concluded, the study said, the value of EU agri-food exports would be between €3.1 billion (US$ 3.26 billion) and €4.4 billion higher in 2032 than they would have been without these 10 trade agreements. And the value of EU imports would also grow and is expected to be between €3.1 billion to €4.1 billion higher in 2032.

While the report also acknowledged the vulnerability of beef, poultry, rice and sugar, it said beef exports from the EU would increase, amounting to “net exports of more than 350,000 tons.”

“The EU will remain the biggest exporter of agricultural exports in the world even after the Mercosur trade agreement is ratified,” said Capuzi. “And still a net exporter of beef.”

The EU has argued that far from being detrimental to EU farmers, the development of new markets through preferential trade relations will instead consolidate the EU's position as the world's top exporter of agri-food products.

As US President-elect Donald Trump returns to the White House mid next month — and dangles the threat of tariffs on European goods — some say FTAs are necessary to expand the bloc's consumer base elsewhere. The impact on beef, poultry, and sugar, they believe, would be marginal and can be softened by state support.

“The overall EU-Mercosur deal is far beyond beef and agriculture, extending to all industrial sectors, and services — from A to Z, meats to medicines, vehicles to chemicals,” Hegadorn said.

“Those who are looking at the EU bloc's interest as a whole are sanguine about its expected positive impacts, both in terms of domestic economic benefits and expanding consumer choice, but also for geopolitical reasons including offering a counterbalance to China and the US”