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The European Union (EU) and Mercosur free trade agreement, and the two parties reached an agreement in 2019. The talks between the free trade agreements started in 1999. The talks between the two trading blocs remained stalled over disagreements and continued opposition by the meat and beef producers of the EU. The talks restarted in 2016 when the EU and Mercosur reached an agreement. The trading blocks were expected to reach an agreement on December 7, 2023, with Mercosur member countries like Argentina, Paraguay, Brazil, and Uruguay failing to close free trade negotiations. The EU-Mercosur deal can benefit various sectors.
Illustration by Team Geostrata
The primary industries related to agri-food products remain one of the principal beneficiaries of implementing a possible trade deal between the EU and Mercosur. In the case of the EU, more than 850,000 employment opportunities are created owing to exports to Brazil.
In addition, the companies from the member countries of Mercosur employ more than 30,000 people, with more than 60,000 companies exporting their goods and services to Mercosur. The article intends to offer suggestions by focusing on the existing disagreements over the use of pesticides, dairy and cattle production and packaged products.
UNIFORMITY IN TERMS OF MAXIMUM RESIDUE LIMITS (MRL) IN PESTICIDE USAGE
The EU-Mercosur deal needs to take into consideration the use of pesticides in their member countries. In this case, the EU and Mercosur need to consider the use of pesticides that affect the health of their population as their use affects the health of their population. A huge gap exists in terms of the maximum residue limits (MRL) of pesticides whose residues are permitted to be used in food and water.
In the majority of cases, the EU exports certain pesticides that are banned by its member countries. The commercially available pesticide products consist of more than one active ingredient along with additives. In the majority of cases, the production of pesticides containing toxic substances poses a detrimental effect on biodiversity.
In a report published by Greenpeace UK in 2020, five leading agrochemical companies produced more than one-third of pesticides that are hazardous for humans and the environment.
The pesticides that are not approved in the EU for agricultural use are exported from member countries of the EU to Mercosur countries. The case of Germany can be cited as an example, where it exports insecticide cyfluthrin to Argentina and Brazil. Therefore, the EU and Mercosur need to bring uniformity by agreeing on the maximum threshold of maximum residue limits (MRL) in terms of the usage of pesticides. In addition, a policy on the use of pesticides will reduce the risks for the population and ensure safety for both the EU and Mercosur.
MUTUAL REDUCTION OF TARIFFS ON CATTLE, MEAT AND DAIRY EXPORT
In the case of cattle exports from countries like Argentina, Brazil, Paraguay, and Uruguay are likely to increase. Therefore, the market share of Mercosur is likely to increase in the EU market by 26% in 2030. The EU fears that the increased exports of cattle from Mercosur countries threaten the value of cattle on its border. In reality, the import of beef and cattle represents only 3% of the total imports of the EU from the Mercosur.
The study conducted by the Austrian Ministry of Economy has pointed out that the approved quota of beef from Mercosur is limited only to 99,000 tons compared to the production of beef in Europe, which is 7.32 million tons.
The existing focus is on tariffs on cattle imports from Mercosur up to ten years after the implementation of the trade deal. In the case of Europe, the milk production from cattle is expected to reduce to 162 million tonnes by 2031. A possible free trade deal between the EU and Mercosur will not only aid in making the world’s largest free trade area but will also help boost trade and productivity of the agricultural sector in third countries.
The trade deal has the possibility of increasing the incentives to produce products like meat. With an updated trade agreement, countries like Chile and Mexico can significantly increase the trade of animal products, encouraging the production of agricultural products and meat in areas where the production costs remain lower.
Therefore, the two trade blocs need to ensure the implementation of regulations that guarantee the reduction of tariffs by ten years from the inception of the trade deal in order to benefit the EU’s dairy and milk production industry.
The exports of milk powders and butter to Uruguay and Argentina will likely increase and will bring the excluded dairy and cattle production industry into the international market.
Such an arrangement will likely benefit both the EU and member countries of Mercosur, like Brazil, Paraguay, and Uruguay, holding the potential to become the top supplier of live cattle in the world market.
CONSIDERATION OF ISSUES ON SENSITIVE PACKAGED PRODUCTS AMONG THE MEMBER COUNTRIES
The EU-Mercosur trade deal holds prospects of becoming a market with an appetite for packaged products. In the case of Mercosur, the demand for European packaged products remains high. However, sensitivities around certain food products remain high for specific countries in the bloc.
The line of argument can be justified with the case of Spain, where the country is set to lose concerning trade relations in products such as beef and concentrated juices. Similarly, Spanish food will likely benefit from olive oil and table olives.
Therefore, the trade deal needs to consider the issues about sensitive food products among the individual member countries in the EU by identifying the positive and negative impacts of certain products and industries.
CONCLUSION
In conclusion, the existing difficulties over the use of pesticides, dairy, cattle and packaged products have interrupted the success of the trade agreement. Therefore, the EU and Mercosur must address the existing challenges, as the potential free trade deal will not be economically viable and beneficial.
In brief, the success of the trade deal can no longer be provided with justification by the individual member countries in EU and Mercosur, which considers minimising short-term risks in the packaged food products, cattle and dairy production along with the use of pesticides at the expense of long-term economic benefits.
BY ANIRBAN DUTTA
TEAM GEOSTRATA
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