Arc2020 | 28 May 2019
Part 2 EU-Mercosur trade deal | A road to nowhere for farmers?
by Hans Wetzels
Behind closed doors the European Commission is negotiating about a massive trade deal with the South American block Mercosur. Talks continue despite increasing concerns for farmers and the environment. Are farming interests and consumer standards being sacrificed for the benefit of the motor industry? Part two of a two-part article with Hans Wetzels.
It’s February 2018 when the European Commission receives a small group of Volkswagen executives at its headquarter in Brussels. High levelled diplomats belonging to the cabinet of Trade Commissioner Cecilia Malmström invited the group for a personal conversation about the ‘geostrategically important’ trade agreement the European Commission is negotiating on with the South-American trading bloc Mercosur. Carmakers like Volkswagen or Daimler stand to gain a lot from unlimited access to a growing middle class market in Brazil and Argentina and the Commission wants to cooperate closely with important European industries. That’s according to a batch of documents about high-level meetings around the trade-deal Arc2020 has obtained through a freedom of information-request (FOI).
At that point the European Union has been negotiating for years a highly anticipated trade agreement with the four Mercosur countries (Mercado Común del Sur – Argentina, Paraguay, Uruguay and Brazil). Eliminating barriers and tariffs could exponentially increase international trade between South America and Europe, a spokesperson for the European Commission explains: “In terms of the specific sectors that could benefit from a deal with Mercosur, we expect that exporters of cars and car parts, machinery, chemicals, pharmaceuticals and textiles have a lot to gain because of the high tariffs that exist currently.”
But as is the case everywhere in international trade, an EU-Mercosur agreement would have to benefit both signatories. In return for opening their markets for European cars and machinery, the South American demand is for EU market access for soya, ethanol and beef. Since negotiations first got underway, the amount of meat the EU was willing to allow in has been the single biggest obstacle to closing the agreement.
Argentina produces massive amounts of cheap beef that would directly threaten the EU livestock sector. Brazilian plantations are of a size unthinkable in Europe: in Brazil, largely genetically modified crops are sprayed with huge amounts of chemicals. “Opening up the European agricultural market, exposing EU farmers to huge risks and very unfavourable trade conditions, just because Volkswagen wants to sell more cars in Brazil is simply not acceptable to the European livestock sector,” Secretary-General Pekka Pesonen of EU-farmers organisation Copa-Cogeca comments.
Copa-Cogeca has repeatedly urged EU Chief Negotiator Sandra Gallina to exclude beef from the agreement. Instead the Commission has slowly but gradually raised meat quota from 70,000 to 100,000 tons a year, documents obtained by Greenpeace show.
Since Donald Trump came into office as US President, the European Commission has been trying hard to prove itself as a more viable trading alternative. European trade deals have been closed with Canada, Mexico and Vietnam; negotiations are on the way with India, Australia and Mercosur.
During the chaotic G20-summit in Hamburg in 2017, the Commission presented a free-trade agreement with Japan (called JEFTA). That deal might directly benefit European farmers exporting grains, fruit, dairy, blue cheese or beef to a major market of mostly affluent Japanese consumers.
But in this case, the European car industry deemed an agreement unacceptable: Volkswagen and Daimler fear billions of euros in losses, should Japanese automobile powerhouses such as Toyota and Mitsubishi gain access to the EU market. According to calculations by the European Automobile Manufacturers Association (ACEA) rising imports from Japan could lose the EU up to seventy thousand jobs in manufacturing. To compensate for those projected losses the car industry has upped the ante in demanding better market access in the four Mercosur countries, according to internal documents obtained from the European Commission through a freedom of information request. “Just like any other economic sector we try to look after our own specific economic interests,” ACEA-spokesperson Cara McLaughlin comments. “It’s up to the EU negotiators to strike a good balance between all sectors involved in a deal with either Mercosur or Japan.”
Farmers suffer for other’s gain?
On another sunny day in 2018, four top executives from Copa-Cogeca report to the headquarters of the European Commission in Brussels. They demand a good result from the trade negotiations with Japan to compensate for the damaging effects an EU Mercosur agreement might have on European agriculture. According to the Copa-Cogeca officials, “protecting the interests of the car industry” can never “undermine an ambitious package for European agricultural exports” in JEFTA, as recorded in the minutes of the meeting. The outcome of the JEFTA negotiations will even determine whether EU farmers can “accept an EU-Mercosur deal or not.”
During a meeting in Brussels early 2019, Chief Negotiator Gallina stresses once again that the European Commission will pay attention to farmers’ fears of being pushed of their own markets “via tariff-rate quotas that will be carefully calibrated to balance the EU sensitivities with reasonable expectations of our Mercosur partners for a meaningful access to the EU market.”
Despite those constant reassurances it looks like EU farmers are being sacrificed so that German car makers can gain access to the lucrative South American market. Pekka Pesonen stresses on behalf of Copa-Cogeca: “In the end exporting more to Japan will in no way compensate for the damage done by closing a trade deal with Mercosur. Naturally, we have kept constant contact with the relevant Commission services on our concerns with a possible Mercosur trade agreement. We also share in the European parliament [concerns] about the environment. But for us this elaborate game of chess is mainly about farm jobs. We refuse to let EU farmers suffer only so that other economic sectors can gain.”