European farmers are opposing the agreement between the EU and Mercosur countries in its currently negotiated form. They fear that the European market will be flooded by cheap food from South America, as farmers there do not have to adhere to most sustainable development standards, which in turn raises the production costs in the community. According to Prof. Łukasz Ambroziak from IERiGŻ – PIB, although the trade agreement as a whole is beneficial for the EU in many aspects, the agricultural and food production sector might suffer.
The European Union – Mercosur agreement (Brazil, Argentina, Paraguay, and Uruguay), scheduled for signing at the G20 summit in Brazil on November 18th-19th, plans to establish an economic bloc that will include almost 750 million residents and generate about 20% of the global GDP. The work on the agreement has been ongoing for 20 years, and the trade component negotiations have mostly concluded with a political agreement in 2019. Current discussions are focusing on sustainable development issues.
“All analyses indicate a high risk that the balance of the free trade agreement between the European Union and Mercosur will be unfavorable for European agriculture,” states Łukasz Ambroziak, professor at the Institute of Agricultural and Food Economics – National Research Institute. “The European Commission expects that opening the South American market for industrial processing goods, automotive products, machinery and devices, various chemicals, pharmaceuticals will bring certain benefits. Similarly, liberalization in access to the service market in South American countries or to public procurement. Looking globally at this agreement, it should bring benefits, unfortunately, the agricultural and food sector may suffer.”
European farmers fear that the agreement with Mercosur will weaken their competitiveness and express their opposition on the streets of Brussels. Protests are also forecasted in Poland and France, primarily driven by the expected influx of cheap food from South America into the European market.
“Farmers in South American countries do not have to meet many production standards that EU farmers must, and these are mainly standards related to sustainable development. In plant production, these are active substances used in herbicides, pesticides, insecticides, or fertilizers. Thus, the use of many substances that cannot be used in the European Union, which affect yields, is allowed in South American agriculture,” warns the IERiGŻ expert. “In the animal production of South American countries, strict welfare standards do not have to be met, which means these countries can produce cheaper and offer their products noticeably cheaper on the European market. This mainly concerns such basic agricultural products as cereals, wheat, corn, but also animal production, including beef, poultry, eggs, or dairy products. The only exception are eggs, which can be imported at a preferential tariff rate if the egg production meets the animal welfare standards set out in the agreement.”
The Ministry of Agriculture and Rural Development expressed its negative position in early November on the issue of not taking into account the requirements of sustainable cultivation and breeding of plants and animals, which will be exported to the EU without customs duties. The ministry suggests that accepting the agreement in its currently planned form may create a threat of ousting Polish agricultural products from the markets of other EU countries by products imported from Mercosur countries, especially in the poultry meat sector, of which Poland is a huge exporter.
“A compensation fund could currently be a solution to problems associated with the introduction of the EU – Mercosur agreement, but it would be crucial to focus on regulations that would eliminate these imperfections,” says Łukasz Ambroziak. “The perfect solution would be to include in the free trade agreement provisions conditioning the possibility of taking advantage of preferences by the fact that food is produced in compliance with various standards related to sustainable development. This has been raised by the Polish side during the negotiations, but unfortunately, it wasn’t welcomed by the European Commission that negotiated the agreements. It might have been possible to include such a provision in the agreement, but it would be harder to verify it regularly during the agreement’s term.”
In his opinion, some of the fears raised by farmers could be exaggerated.
“Many farming communities claim that we will be flooded with food from South American countries, and this uncontrolled influx of food would occur immediately after the agreement comes into force. The free trade agreement between the Union and Mercosur provides for certain instruments that are supposed to counteract this inflow of food. The abolition of customs duties on imports to the European Union at the time of the agreement’s entry into force will only affect the least sensitive products. Duty-free access will cover less than 40% of agricultural and food products,” explains the IERiGŻ expert.
Numerous products, over 100 tariff lines, were excluded from liberalization, primarily some fermented dairy products, durum wheat, wheat other than for sowing, dairy fats, sugar cane other than for refining, sheepmeat, goat meat, and mozzarella.
“In the case of sensitive agricultural products, transition periods have been applied, which means that the liberalization of duties will take place gradually over several years and duties will be completely abolished after 5, 8, 11, or even in the case of some products, after 15 years,” reassures Prof. Łukasz Ambroziak. “Tariff quotas have been envisaged for the most sensitive products, which means that a certain volume of goods covered by this quota can be brought to the Union at a preferential or zero-rate of duty, but beyond this volume, imports will be at the MFN rate. Quotas have been established for the import of beef, poultry, milk powder, cheese, corn, eggs, ethanol, and cane sugar for refining. The volume of these quotas in the first year is usually small and increases over time. The target size of the quota will usually be applied six years after the agreement comes into effect.”
For example, in the import of beef in the first year, two quotas with a decreased duty of 7.5% for 16.5k tons have been forecasted, and this volume is expected to gradually increase to 99k tons in the sixth year. In the case of poultry meat in the first year, there will be two quotas with a total volume of 30k tons, which is expected to increase to 180k tons in the sixth year. In the import of fresh or chilled fruits and vegetables from Mercosur countries, the EU will retain the entry price system for most goods covered by it (e.g., tomatoes, cucumbers, apples, pears, plums, cherries, apricots, peaches and nectarines, grapes, and grape juice). This system, used in the EU customs tariff, protects against low-priced imports, as it provides for an increase in the customs rate as the price of imported products drops below a certain threshold.
