By: Mary Louise Malig, Global Forest Coalition

After 20 years of negotiations, the EU-Mercosur Free Trade Agreement (FTA) is entering a crucial moment where it can come to a tragic end. To paraphrase a well-known saying, Mercosur is offering its kingdom for a plate of lentils, or in this case, its sovereignty for a plate of beef.

Free trade agreements are not only about commodity trade, if you look at the different groups of negotiations of the EU-Mercosur FTA, you can see that only some deal with market access but others deal with services, intellectual property, government procurement[1], sanitary and phytosanitary measures[2], sustainable development, small- and medium-sized enterprises and other issues that have to do with the right or political space that a country has to regulate the access and prices to medicines, who provides key services, which sectors receive support to develop, who can compete in purchases of the public sectors, what are the requirements for foreign investments, and so on.

Therefore, an agreement has to be seen not only in terms of how much your exports or imports are going to increase from the other regional group but what spaces are you going to have to decide over your own economy, your public sector and your environment after you close a deal. Plus, and this is a very important plus, whatever you give to the EU you will be asked to give also to other countries like US, Japan, China, Russia and others because they will want at least the same treatment you gave to the EU when they negotiate or renegotiate their trade agreements.

Let’s start this story with the end. Let’s begin by what Mercosur wants to get more from this FTA. A news coverage of the recent rounds of negotiations said: “At its heart, any agreement will depend on beef and ethanol — but mainly the beef. If Europe agrees to buy enough prime Latin American beef at low tariff levels, Mercosur will drop tariffs on leading EU exports such as cars and machinery.”[3] What Mercosur wants is to export prime meat to the EU. This with ethanol is one of its biggest ambitions. When one hears this one could think that the entire economy of Mercosur depends (relies) on meat exports and that this is crucial for the future of Mercosur and its people. Let’s look at some data and begin with the bigger picture.

A brief introduction and catch up on the EU-Mercosur Agreement negotiations

Why is a deal that was being negotiated on and off for almost twenty years suddenly making a frenzied race to an agreement this 2018? Why the sudden revival, dedication and more importantly, what are both sides aiming to get out of this deal?

First, who is Mercosur: Mercosur is a South American trade bloc established by the Treaty of Asunción in 1991 and Protocol of Ouro Preto in 1994. Its full members are Argentina, Brazil, Paraguay and Uruguay. Venezuela is a full member but has been suspended since December 1, 2016. Associate countries are Bolivia, Chile, Peru, Colombia, and Ecuador.

The current negotiations are between the European Union – a 28 bloc nation, and the founding nations of Mercosur: Argentina, Brazil, Paraguay and Uruguay.

The early negotiations did not really have any common ground that the two blocs could reach. The EU considered Mercosur as too developed and did not qualify to use Special and Differential Treatment, usually afforded to developing and least developed countries in trade negotiations. Quotas in agricultural products were a point of contention and on the other side of the offer, the EU was supposedly dissatisfied with the offers on the automotive sector. This stalemate continued on in the period from 2004 to 2009. A brief show of life in 2010 only to be paused again in 2012.

On the side of the EU, Irish and French farmers had been raising alarm bells on how a flood of imports of beef from Mercosur would negatively impact the small farmers in these countries. In September of 2017, “The ICSA (Irish Cattle and Sheep Farmers’ Association’s) is extremely concerned at this. If such an offer (85,000 tonnes of beef for Mercosur to the EU) is tabled it would have a very severe impact on European beef markets and would hit Irish beef exports particularly hard,” the chairman said.[4]

And just this February 21, 2018, French farmers held tractor protests, to raise their demands to Macron amidst fears of this fear trade deal boosting Mercosur beef imports.[5]

An uneven relation

The EU is a bloc of 28 nations and Mercosur is a grouping of Argentina, Brazil, Paraguay and Uruguay.

Source: Eurostat Comext

According to this graph from the European commission statistics the trade on goods between EU and Mercosur was in favor of Mercosur until 2011, , but since then has shifted in the EU’s favor.

Exports from the EU to Mercosur accounted €43,1 billion in 2016 while exports from Mercosur to the EU were €41,8 billion in the same year. For Mercosur the EU represents 21,8% of its exports, while for the EU, Mercosur represents only 2,7% of its exports. In other words, there is an uneven economic power relation between these two blocks where already the weakest one has a trade deficit in relation to the bigger one.

Looking specifically at the trade in services, the picture is different. In 2014 the EU exported services worth €21.5 billion to Mercosur, whereas in the same year Mercosur exported roughly half of this value, €11.7 billion, to the EU.[6] The deficit in this other area that will be covered in the agreement is even worse.

When it comes to investments the EU has €378 billion in investment stocks in Mercosur in the year 2015 while Mercosur had €115 billion in investments in the EU in 2014[7], and many of these investments were from daughter European companies established in Mercosur, which raises the question of whether the profits stay in Mercosur countries or go back to the parent corporations in EU countries.

In synthesis, the trade and investment relation between EU and Mercosur, even with Mercosur not being such a small bloc, is still not big enough to be on even footing with the EU.

How important are bovine meat exports?

The four countries of Mercosur are one of the leading exports of bovine meat in the world. Their exports to the world have jumped since 2004. In 2017, they placed 2 million tons of fresh beef in the international market accounting for around 9 billion US dollars at an average price of US$/t 4,538.

 

Source: COMTRADE

From this 2 million tons of meat around 246,000 tons were exported from Mercosur to the EU, which represents 12% of the total exports of meat to the world. In terms of value this was around 937 million USD which represents only 0,5% of the total export of Mercosur products to the world and 2,3% of the total exports of Mercosur to the EU.

To put it in value. The total exports of Mercosur to the world are 221 billion USD and the exports of meat to the world are 9 billion USD. The exports of Mercosur to the EU are around 42 billion USD and the meat exports of Mercosur to EU are around 1 billion USD. This is how big and relevant currently meat exports from Mercosur to the world are and to the EU.

The main market for Mercosur bovine meat is China, Russia and others. EU is interesting because it’s a good destination for prime beef.

However, the specifics of the current trade negotiations indicate that the most likely maximum quota for Mercosur beef exports to the EU will be 100,000 tonnes. Considering the value and quantity of meat exports already being reached, this doesn’t seem like a significant win for anyone. Looking at this negotiation from the perspective of Mercosur’s meat corporations though, they are the only ones poised to make any kind of profit, albeit not significant enough to justify the range of offers Mercosur is giving to the EU in exchange.

Is it really just cars for beef? Or everything for a plate of beef?

Since the 2016 relaunch, the EU and Mercosur list of offers cover[8]:

• tariffs
• rules of origin
• technical barriers to trade
• sanitary and phytosanitary measures
• services
• government procurement
• intellectual property
• sustainable development
• small- and medium-sized enterprises

Trade unions, civil society and environmental groups in the various countries have voiced out their rejection of the deal citing that the cost to the economy, people, health, animals and forests will be a steep price to pay for the ability to sell premium beef.[9][10]

This list shows that the agreement is so much more than just cars and beef:

• As Mercosur agrees to open its economy to foreign service providers, this will severely impact local and national providers who will not be able to compete with the better financed transnational corporations who will be provided National Treatment – or equal footing as the locals. The Argentinian coalition following these negotiations have estimated that the job loss in Argentina would be an “estimated 186,000 industrial jobs… 11 out of each 100 jobs in the manufacturing industry. It will hit national enterprises as the increase of imports displace local production, especially in “sensitive” manufacturing activities, such as textile, footwear, toys, leather goods, furniture. In this last sector, 47.000 jobs will be lost while the auto parts sector will have decreased of 32.500 positions and the chemical sector would fall back to 19.000”[11]
• Intellectual property will be included in the deal. This includes a list of items from geographical indications[12] to wines, agricultural products, and certain policies that may lead to impacting negatively on generic medicines. Activists warn, “Regarding seeds, the leaked text indicates that “each Party shall protect plant variety rights, in accordance with the International Convention for the Protection of New Varieties of Plants adopted in Paris on December 2, 1961, last revised in Geneva on March 19, 1991 (UPOV 1991)”. This means that Monsanto Laws will be imposed in all our countries.”[13]
• In addition to cars, industrial goods, chemical products or construction materials, the EU will be able to come in and sell high value items at premium. And with the government procurement access, will be able to win contracts to build infrastructures, roads, airports and other key projects that would have otherwise directed profits and jobs to local industries.
• The sanitary and phytosanitary measures are seen as a failsafe that the EU has put in, in order to have ways to limit the entry of agricultural products from Mercosur countries.

What will happen to the forests and communities?

Even though in a macro context, the numbers are not massive, the principle itself to further increase the meat production by Mercosur governments strikes fear to the hearts of those who have already and continue to witness the large-scale destruction of forests, biodiversity, ecosystems, communities, health and animals from the unsustainable industrial livestock and feedstock farming across the countries of Mercosur and neighboring countries in South America. As many studies have already shown with case studies and on the ground accounts of the negative impacts of massive deforestation to make way for monoculture soy plantations and cattle, these also include widespread displacement and dispossession of land of communities, forest dependent peoples and Indigenous Peoples.[14]

Here it is made visually clear that a significant driver of forest and biodiversity loss, especially in South America, where much of the world’s deforestation takes place, is the production of meat, from clearing land for cattles or for growing animal feed crops. The 2016 State of the World’s Forests report refers to an analysis in seven South American countries which found that 71% of deforestation between 1990 and 2005 was driven by increased demand for land while in Brazil the figure was even higher, at 80%.

Source: FAO State of the World’s Forests 2016

Conclusions and Recommendations

The last sustainability impact assessment commissioned by the EU of the possible impacts of an EU-Mercosur deal was done in November of 2007 and the latest one that is still in its inception phase in September 2017, will probably be finished only after the deal is concluded. Some roundtables with stakeholders being organized in Brussels, Buenos Aires and Sao Paulo are also underway, but again, the impacts of these discussions or these impact assessments are unclear as negotiations seem to be steaming ahead. After the recently concluded round of talks in Asuncion, even if there were no high-level deals agreed, reports concluded that a deal was near. This is most likely due to the impending elections in key countries in Mercosur where they fear that a change in leadership may mean a pause and review of the negotiations. The current right-wing neoliberal leadership of Brasil and Argentina combined are in a mad dash to seal this EU-Mercosur deal before any possible political shifts occur in their governments. For Brasil, it is clear that their meat industry “winners” have a lot to gain while Argentina seems to see this more of an opportunity to solidify his message that foreign investors are once more welcome with open arms and that Argentina is for sale.

At closer inspection, the EU-Mercosur deal is much more than a trade deal, it is more of a bargain for so much more of Mercosur’s sovereignty from its intellectual property rights, its services, its government procurement and so much more, in exchange for selling premium beef. This intensification even more of livestock and feedstock production may lead to even more massive deforestation and loss of ecosystems, territories of Indigenous Peoples and communities, the harming of more animals and the health of the people.

The EU-Mercosur deal must be stopped, the deafening chorus of peoples’ voices must be amplified, and actions must be taken to pressure decision-makers and governments from signing on to this disastrous deal.

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[1] Government Procurement or can also be commonly called public procurement is the purchase of goods, public works or services by a public authority, such as the government. As it involves government funds, the vetting of deals and contracts for such constructions is highly regulated. However, with the EU-Mercosur deal, it is possible that this nationally regulated act may be deregulated or opened to favor transnational corporations.

[2] Sanitary and phytosanitary measures (SPS) is a regulation to protect humans, animals, and plants from diseases, pests, or contaminants, by instituting agreed international scientific standards in trade agreements (sanitary –relating to animals; phytosanitary – relating to plants)

[3] https://www.politico.eu/article/mercosur-eu-deal-faces-race-against-the-clock/

[4] http://en.mercopress.com/2017/09/19/irish-and-french-farmers-warn-about-mercosur-eu-beef-negotiations

[5] https://af.reuters.com/article/africaTech/idAFL8N1QB4P6

[6] http://ec.europa.eu/trade/policy/countries-and-regions/regions/mercosur/

[7] http://ec.europa.eu/trade/policy/countries-and-regions/regions/mercosur/

[8] European Commission Directorate-General for Trade http://ec.europa.eu/trade/policy/countries-and-regions/regions/mercosur/

[9] https://mejorsintlcorg.files.wordpress.com/2018/02/declaration-no-to-fta-with-eu-feb-2018-english.pdf

[10] https://www.bilaterals.org/?12-reasons-why-we-say-no-to-the

[11] https://mejorsintlcorg.files.wordpress.com/2018/02/declaration-no-to-fta-with-eu-feb-2018-english.pdf

[12] The World Trade Organization defines geographical indicators as: “indications which identify a good as originating in the territory of a Member, or a region or locality in that territory, where a given quality, reputation or other characteristic of the good is essentially attributable to its geographical origin.” This is significant in trade in commodities as the WTO intellectual property rights agreement has strict regulations and punitive measures to protect the value of the geographical indicator of the products.

[13] https://www.bilaterals.org/?12-reasons-why-we-say-no-to-the

[14] Case studies from Brasil, Bolivia, India, Paraguay and Russia can be seen in our report “What’s at Steak”

http://globalforestcoalition.org/whats-steak-real-cost-meat/

Original post: http://globalforestcoalition.org/eu-mercosur-trade-deal/