Ten days ago, the EU and Mercosur (Argentina, Brazil, Paraguay and Uruguay) signed a free trade agreement that will cover a market of 780 million consumers. However, diverging opinions on both sides of the Atlantic remain.
After 20 years of heavy negotiations and bargaining, the EU-Mercosur free trade agreement will allow European companies to save €4 billion in customs duties each year.
For European Commission President Jean-Claude Juncker, this is the most significant trade agreement in the EU’s history. His potential successor, Ursula von der Leyen, called it “exemplary”.
Despite the joy expressed by South American presidents and several European leaders, many sectors of activity on both sides of the Atlantic are not happy with this free trade agreement.
South Americans in favour of the EU-Mercosur deal
Brazilian coffee makers are in support of the concluded free trade agreement. The world’s largest producers and suppliers of coffee beans welcomed the agreement with the EU, the second largest consumer after the United States.
In 2018, the South American giant exported 35.2 million coffee bags weighing 60 kg each, an increase of 13.9% compared to 2017. With the agreement, this positive trend is expected to continue, according to the Brazilian Coffee Exporters Council (Cecafé).
Brazil’s economy ministry also welcomed the agreement, thanks to which the Brazilian economy will grow by $87.5 billion in 15 years, according to the Economy Ministry. The GDP could reach $125 billion due to the reduction of trade barriers and increased productivity.
The ministry also predicts that during the same period, investments in Brazil will increase by $113 billion and Brazilian exports to the EU will generate $100 billion in revenue until 2035.
Uruguayan entrepreneurs also support the EU-Mercosur deal, not only for the stability and investment facilities it could generate but also because Uruguay will become an international business hub, according to Antonio Cárambula, the executive director of Uruguay XXI, an agency that promotes foreign investment and exports.
Also, Uruguay’s annual exports to the EU will reach $100 million, according to Uruguay’s Foreign Minister Rodolfo Nin Novoa.
South Americans opposing the EU-Mercosur deal
José Alberto Zuccardi, president of the Argentine Wine Union, criticised his government, led by Mauricio Macri, for not sufficiently consulting the wine industry and for not having conducted a technical analysis of the trade agreement’s impact on wine value chains.
This business leader noted the asymmetry between the European and Argentinian wine industry, highlighting that the EU pours €900 million into the sector each year to promote its wines. Europe’s approach to its wine industry, combined with the reduction in customs duties, could harm Argentine producers.
In a joint statement, trade unions in Brazil, Argentina, Paraguay and Uruguay called for greater ‘transparency’ from both Mercosur states and the EU to access impact studies.
Brazil’s main trade union, the Unified Workers’ Central (CUT), fears that the agreement was signed at a time when the four Mercosur countries were facing high unemployment rates, leading to deindustrialisation, job losses and job insecurity.
Europeans supporting the EU-Mercosur deal
After stressing that it will open a market to 266 million consumers wanting access to European goods and services, the employers’ organisation BusinessEurope welcomed the free trade agreement, emphasising that the deal would protect European interests.
European Chambers of Commerce also called on states to conclude the agreement, considering it as an “opportunity to be seized” because the region would benefit from duty-free products from crucial sectors, such as the automotive, heavy industry, chemicals and pharmaceutical industries.
The Spanish Exporters and Investors Club expects the treaty to be a real “boost” for the trade of Spanish products in Mercosur countries.
According to the club, sales of goods to Mercosur member states in 2018 reached €3.9 billion, which corresponds to 1.40% of total Spanish exports. Spain is now the EU’s fourth-largest supplier to the region, behind Germany, France and Italy.
Europeans opposing the EU-Mercosur deals
The agreement with Mercosur may be an “economic risk and health hazard”, according to the Association of Spanish Beef Producers (Asoprovac) and professional organisations of the same sector in France, Ireland, Italy and Poland.
They estimate that “more than 100,000 tonnes of South American beef” will be exported to the EU each year. These organisations regret that these goods will be produced “with substances banned in Europe and under conditions that are poorly or not at all regulated from an environmental point of view.”
The EU farmers association Copa-Cogeca said the impact of the trade deal would be “devastating on the European farming family model“.
The French government is not yet ready to ratify the agreement with Mercosur, warned the government spokeswoman Sibeth Ndiaye, who believes these South American countries need to give “assurances”, especially when it comes to environmental protection.
France insisted that it would not support the agreement if Brazil were to continue with its deforestation practices in the Amazon forest. To ratify the agreement, Macron’s government is also demanding that Brazil does not withdraw from the Paris climate agreement.
The French agricultural sector is also pressuring the government, especially concerning sugar imports.