Tariff Cuts and Increased Quotas for Agricultural Products
The Mercosur will eliminate tariffs on 91% of EU exports, including automobiles, from the current 35% over a period of 15 years. The EU will progressively eliminate tariffs on 92% of Mercosur exports within a span of up to 10 years.
Mercosur will also eliminate tariffs on EU agricultural products, such as 27% on wines and 35% on spirits. For the most sensitive agricultural products, the EU will offer larger quotas, including 99,000 metric tons more of beef and Mercosur will grant the EU a duty-free quota of 30,000 metric tons for cheeses.
There are quotas from the EU for poultry, pork, sugar, ethanol, rice, honey, corn, and sweet corn, as well as from Mercosur for powdered milk and infant formula. These additional imports represent 1.6% of the EU’s beef consumption and 1.4% of poultry consumption. Proponents point to existing imports as evidence that Mercosur meets EU standards.
The agreement recognizes 350 geographical indications to prevent the imitation of certain traditional EU food products, such as “Parmigiano Reggiano,” reserving it for specific Italian cheeses.
What Supporters Say
The Commission and some of its supporters, like Germany and Spain, claim the agreement offers a way to reduce dependence on China, especially for essential minerals like lithium, crucial for batteries.
The agreement guarantees the absence of export taxes on most of these materials. Supporters also argue that it provides relief from tariffs imposed by then-US President Donald Trump.
The Commission states that the free trade agreement is the largest in terms of tariff reductions, eliminating over 4 billion euros (approximately 4.7 billion USD) annually in tariffs on EU exports, and a necessary part of the EU’s push to diversify its trade relations.
It adds that, given Mercosur’s modest collection of trade agreements, the EU would have an initial advantage and that EU companies could bid for public contracts in Mercosur under the same conditions as local suppliers, something Mercosur has not offered in previous trade agreements.
There are also potential safeguard measures to address possible market disruptions.
What Critics Say
European farmers protest because the agreement would allow for cheap imports of products from South America, especially beef, which do not meet EU’s environmental and food safety standards. The European Commission asserts that EU standards will not be relaxed.
The agreement includes environmental commitments, such as avoiding deforestation from 2030. However, environmental groups claim it lacks enforceable measures.
Friends of the Earth has labeled the agreement “climate-destroying” and claims it would lead to increased deforestation, as Mercosur countries sell more agricultural and raw materials, often from forested areas including the Amazon.
France, the largest EU beef producer, had said it would only sign the free trade agreement if it “protected French and EU agricultural interests.” Currently, France rejects the agreement.
Italy, Hungary, and Poland also expressed opposition. Together, these four countries could have blocked the agreement, but Italy eventually changed its stance.
How Has the EU Tried to Win Over Skeptics?
When the Commission presented the agreement for approval in September, it established a mechanism allowing suspension of Mercosur’s preferential access to sensitive agricultural products, like beef.
The trigger for the Commission to evaluate the need for such safeguards would be an increase in import volumes or a drop in prices in one or more EU countries by a certain amount.
The EU had previously agreed on an 8% threshold, but ambassadors reduced it to 5% following Italy’s request.
The EU executive said it would study the potential alignment of production standards between national and imported products, particularly in pesticides and animal welfare.
Its goal is to strengthen control over food and agricultural products entering the EU by increasing audits and inspections in third countries.
The upcoming EU budget will offer a €6.3 billion crisis fund for EU farmers, which could cover the “unlikely scenario” of the agreement harming EU agricultural markets. Additionally, €45 billion will be advanced as aid to farmers.
Finally, the Commission has announced a reduction in import duties for certain fertilizers, whose costs have risen by up to 60%.
Key Questions and Answers
- What is the EU-Mercosur trade agreement? It’s a historic free trade agreement between the European Union and the Mercosur trading bloc, which includes Argentina, Brazil, Paraguay, and Uruguay.
- Why is it controversial? The agreement has sparked debate due to concerns over environmental impact, potential relaxation of EU agricultural standards, and the influence on existing EU farming sectors.
- What tariff reductions does the agreement include? The Mercosur will eliminate tariffs on 91% of EU exports, including automobiles, over 15 years. The EU will progressively eliminate tariffs on 92% of Mercosur exports within a span of up to 10 years.
- How will the agreement affect EU farmers? Critics argue that cheap imports of agricultural products, especially beef, from Mercosur will not meet EU’s environmental and food safety standards.
- What environmental commitments are included? The agreement includes a commitment to avoid deforestation from 2030, though environmental groups claim it lacks enforceable measures.
- How has the EU addressed skeptics’ concerns? The Commission established a mechanism for suspending Mercosur’s preferential access to sensitive agricultural products and plans to study the alignment of production standards between national and imported products.
