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Could the EU-Mercosur trade deal be revived?

The re-election of Luiz Inácio da Silva, or Lula, as president of Brazil has prompted speculation that the free-trade agreement between the EU and South American Mercosur bloc could be revived – but the European farming sector has concerns.

Lula’s third-round presidency victory has raised immediate questions on whether this will unlock the currently stalled trade agreement with the South American Mercosur bloc. The Mercosur bloc comprises Brazil, Argentina, Paraguay and Uruguay as its founding members.

The European Union (EU) has set its sights on the Latin American market for trade deals. With the EU looking to diversify its trade flow routes away from Russia primarily but also China, a trade deal with Latin America is a big ambition. Although the Mercosur deal, which would secure trade opportunities between the EU and South America, was signed in 2019, it has yet to be ratified and has effectively remained a non-starter.

Interest turns to whether revised policies on deforestation, climate change and trade will now be in better alignment with the EU and, therefore, may signify the time to resurrect once seemingly buried conversations on initiating the Mercosur deal.

“With the election of Lula in Brazil, the atmosphere around climate/sustainability and especially zero deforestation commitments are certainly changing, which will most likely increase the willingness in Europe to proceed with the Mercosur trade deal,” Ksenija Simovic, senior policy advisor at Copa-Cogeca, the association representing EU farmers and agri-cooperatives, told Ingredients Network.

Reviving Mercosur: Many problems still not resolved

Copa Cogeca states that, due to the war in Ukraine, there is the shared goal of applying urgency to the EU’s search for new trade opportunities and existing agreements. However, it says that a move to ratify the EU-Mercosur deal could lead to the Commission compromising Europe’s farming sustainability further.

The association highlights that the European Commission will claim that the directive on deforestation affecting imported products, passed by the European Parliament in September 2022, does enhance the agreement’s control and sustainability. However, “it would be far from resolving the many problematic points of this agreement when it comes to agriculture,” Christiane Lambert, president of Copa says.

EU fights back: Calls for equality and fairness

In the opinion piece, Lambert relays that core issues exist relating to the Mercosur agreement in the context of the agricultural landscape. Firstly, Lambert states the Mercosur deal is unbalanced in favour of large operators in South America as it removes the negotiating opportunities from European farmers, particularly in fragile agricultural sectors, such as beef, poultry, rice, orange juice, sugar and ethanol.

Secondly, European farmers are concerned about the cumulative and difficult-to-quantify effects of all agreements signed by the EU. A lack of sustainability in the long term is a worry. In poultry, for example, annual imports from Mercosur will equal the combined production total of Denmark, Finland, and Sweden.

Thirdly, Copa reports a double standard is being placed on EU farmers, setting out forbidden goods in the EU and those tolerated within imports. Highlighting sugar beet as an example, European imports of sugar and ethanol do not reflect their production standards. For example, the association states that Brazil uses 27 herbicides and insecticides that are currently banned in Europe.

© AdobeStock/Budimir Jevtic

Additionally, it states the implementation of the Green Deal will add a wider gap in standards between the EU and Mercosur farmers. Its introduction makes an already untenable agreement worse for European producers, it relays, as it was designed before the release of Farm-to-Fork and the war in Ukraine.

“It would therefore be both anachronistic and detrimental; thus, we firmly denounce it,” states Lambert in the opinion piece.

Overcoming sector-specific sensitivities

Production standards will need, therefore, to be examined and resolved from a solutions-driven perspective to ensure no market is at a competitive disadvantage.

“Copa Cogeca cannot support this deal as it stands now due to concerns on certain standards of production and due to the heavy impact it would have on some of the sensitive sectors,” adds Simovic.

“Any attempt by the Commission to force the passage of this agreement would be truly scandalous and set a dangerous precedent for EU farming,” adds Lambert.