Europe and South American Countries Sign Controversial Free Trade Agreement

The pro­to­col for a land­mark trade agree­ment was signed in Montevideo, Uruguay, by del­e­gates from the European Commission and four Mercosur coun­tries: Brazil, Argentina, Uruguay and Paraguay.

The new agree­ment estab­lishes the largest free trade area in the world, unit­ing 720 mil­lion con­sumers.

The agree­ment will also encom­pass all sig­nif­i­cant eco­nomic sec­tors, includ­ing agri­cul­ture.

Negotiators from both sides of the Atlantic began work­ing on the agree­ment in 1999.

According to the European Commission, remov­ing tar­iffs will cre­ate a range of new oppor­tu­ni­ties.

Every year, E.U. coun­tries export more than €80 bil­lion of goods and ser­vices to Mercosur. European coun­tries also account for more than €384 bil­lion in invest­ments within Mercosur economies.

In 2023, Mercosur exported €53.7 bil­lion worth of min­eral prod­ucts, food­stuffs, bev­er­ages, tobacco and veg­etable prod­ucts to the E.U.

These eco­nomic ties posi­tion Mercosur as the tenth-largest trad­ing part­ner of the European Union.

Brussels described the agree­ment as strate­gic, aim­ing to chal­lenge China’s posi­tion as Mercosur’s pri­mary trad­ing part­ner.

Olive oil is also included in the var­i­ous eco­nomic sec­tors the agree­ment cov­ers.

E.U. olive oil exports to Mercosur cur­rently face a 10 per­cent tar­iff, while Argentina applies a tar­iff of 31.5 per­cent.

The deal elim­i­nates these tar­iffs, poten­tially enhanc­ing the com­pet­i­tive­ness of E.U. olive oil in Mercosur mar­kets.

This has led to con­cern from pro­duc­ers across the Mercosur, many of whom worry that cheaper European olive oils will eat away at the mar­ket share of domes­tic pro­duc­ers.

“If an agree­ment were to be reached between the European Community and Mercosur, it would be a chal­lenge and some­thing that would not be very favor­able for our cat­e­gory,” said Miguel Zuccardi, head of olive oil pro­duc­tion at Mendoza, Argentina-based Familia Zuccardi.

On the other side of the Atlantic, Rafael Pico, deputy direc­tor of Asoliva, the Spanish national asso­ci­a­tion rep­re­sent­ing olive oil pro­duc­ers and exporters, warned about the time­line for remov­ing these tar­iffs.

“The Mercosur agree­ment for olive oil is not very advan­ta­geous for us,” he told Olive Oil Times. ​“The E.U. can import olive oils from Mercosur coun­tries duty-free from day one. However, export­ing from the E.U. to these coun­tries is sub­ject to a tar­iff that will be phased out over 15 years.”

In 2023, E.U. olive oil exports to Mercosur sur­passed €493 mil­lion. According to the European Commission, remov­ing tar­iffs could make E.U.-made prod­ucts more appeal­ing to Mercosur con­sumers.

Today, Brazil is one of the world’s largest olive oil importers, aver­ag­ing approx­i­mately 90,000 met­ric tons annu­ally over the past three sea­sons, accord­ing to International Olive Council (IOC) data.

Some large European olive oil pro­duc­ers voiced con­cern for the poten­tial com­pet­i­tive­ness of Argentinian olive oil exports.

Argentinian olive oil exports have aver­aged around 27,000 tons annu­ally over the past three years.

The agree­ment includes pro­vi­sions to pro­tect geo­graph­i­cal indi­ca­tions (GIs), ensur­ing that E.U.-certified qual­ity olive oils are rec­og­nized and safe­guarded against imi­ta­tions in Mercosur coun­tries.

From a broader agri­cul­tural per­spec­tive, European farm­ers are approach­ing the agree­ment with sig­nif­i­cant appre­hen­sion.

The new agree­ment extends to sev­eral crit­i­cal sec­tors, includ­ing beef, poul­try, sugar, rice, wine, spir­its, dairy prod­ucts, fruits and veg­eta­bles.

In some areas, the pro­to­col intro­duces export vol­ume lim­its to safe­guard E.U. agri­cul­ture. The aim is to bal­ance the antic­i­pated imports from Mercosur with the needs of European farm­ers and food pro­duc­ers.

Major agri­cul­tural orga­ni­za­tions in sev­eral European coun­tries argue that lim­it­ing export quo­tas to the E.U. in areas such as beef or sugar will still fall short of pro­tect­ing these sec­tors from the impact of large-scale imports of cheaper food from Mercosur.

Additionally, the rules gov­ern­ing the use of fer­til­iz­ers, pes­ti­cides and addi­tives dif­fer sig­nif­i­cantly between the two blocs.

This cre­ates dis­par­i­ties affect­ing pro­duc­tion costs, pro­duc­tiv­ity, food safety and label­ing prac­tices.

The dif­fer­ences in envi­ron­men­tal approaches and sus­tain­abil­ity prac­tices have com­pli­cated nego­ti­a­tions for years.

French President Emmanuel Macron crit­i­cized the pro­posed agree­ment, stat­ing it was signed by ​“coun­tries that do not respect the Paris Agreement on cli­mate change.”

Copa-Cogeca, rep­re­sent­ing mil­lions of farm­ers and agri-food coop­er­a­tives across Europe, announced a new mobi­liza­tion against the agree­ment.

While sev­eral protests have already occurred in Brussels, Madrid, and other European cities, the two orga­ni­za­tions called on all farm­ers to raise their voices on Monday, December 16^th.

“The evi­dence is over­whelm­ing: Mercosur coun­tries do not meet the pro­duc­tion stan­dards required of E.U. agri­cul­ture, whether in terms of plant pro­tec­tion prod­ucts, ani­mal wel­fare or sus­tain­abil­ity prac­tices,” Copa-Cogeca said.

“Mercosur nations also oper­ate under lower labor and safety stan­dards, enabling them to pro­duce at lower costs, which makes fair com­pe­ti­tion impos­si­ble for E.U. pro­duc­ers,” the orga­ni­za­tions remarked.

“This agree­ment will exac­er­bate the eco­nomic strain on many farms already grap­pling with high input prices and chal­leng­ing cli­matic con­di­tions,” warned Massimiliano Giansanti, pres­i­dent of Copa.

The Copa-Cogeca appeal will likely draw increas­ing atten­tion from var­i­ous sec­tors of the farm­ing com­mu­nity.

The national Italian farm­ing asso­ci­a­tion Coldiretti labeled the agree­ment as ​“unac­cept­able.”

“The deci­sion was made to severely penal­ize the agri­cul­tural sec­tor with incon­sis­tent reg­u­la­tions and unfair com­pe­ti­tion, fuel­ing a race to the bot­tom in pro­duc­tion costs, with non-rec­i­p­ro­cal rules that dis­ad­van­tage Italian and European agri­cul­tural busi­nesses,” Coldiretti said.

European Commission President Ursula von der Leyen responded to these crit­i­cisms.

“We have lis­tened to the con­cerns of our farm­ers, and we acted on them. Our European health and food stan­dards remain untouch­able,” von der Leyen said. ​“Mercosur exporters will have to com­ply strictly with these stan­dards to access the E.U. mar­ket.”

“This is the real­ity of an agree­ment that will save E.U. com­pa­nies €4 bil­lion worth of export duties per year,” she added.

Von der Leyen urged that the deal not be seen solely ​“as an eco­nomic oppor­tu­nity” but as ​“a polit­i­cal neces­sity,” espe­cially after the elec­tion of for­mer President Donald J. Trump in the United States, who has threat­ened to impose tar­iffs on E.U. imports.

However, insti­tu­tions in sev­eral European coun­tries have already expressed their oppo­si­tion to the deal.

Their stance is crit­i­cal: for the agree­ment to come into force, it must first be approved by the Council of Ministers of the European Union, com­posed of min­is­ters from all 27 mem­ber states.

If approved, the agree­ment will move to the E.U. Parliament, where many rep­re­sen­ta­tives have already expressed con­cerns or out­right oppo­si­tion.

A neg­a­tive vote in the Council or the Parliament would pre­vent the agree­men­t’s rat­i­fi­ca­tion.

France, Europe’s largest agri­cul­tural exporter, has been lead­ing oppo­si­tion to the agree­ment for years and has now reaf­firmed its posi­tion.

Poland and the Netherlands appear to share this stance, while Belgium, Ireland and Austria will likely oppose the agree­ment.

Italy’s posi­tion is still under dis­cus­sion. As an agri­cul­tural pow­er­house and major E.U. econ­omy, its oppo­si­tion could play a deci­sive role in halt­ing the rat­i­fi­ca­tion process.

Notably, Germany, Portugal, Sweden and Estonia have openly expressed sup­port for the agree­ment.

Spain, a major olive oil pro­ducer, is also back­ing the agree­ment, though promi­nent farm­ing orga­ni­za­tion, includ­ing the Young Farmers Association (Asaja), have announced their oppo­si­tion and mobi­liza­tion against it.

German Chancellor Olaf Scholz described the agree­ment as piv­otal for enhanc­ing the E.U.’s eco­nomic resilience and strength­en­ing the bloc’s geopo­lit­i­cal alliances. His sup­port for the deal reverses the posi­tion of his pre­de­ces­sor, who was skep­ti­cal that Brazil would com­ply with rules around defor­esta­tion.

Brazilian Vice President Geraldo Alckmin praised the his­toric pro­to­col. ​“it is the largest agree­ment between blocks in the entire world,” he said.

If the deal is approved, Alckmin noted, it could increase Brazilian exports to the European Union by 6.7 per­cent annu­ally.

According to the Brazilian Trade and Investment Promotion Agency (ApexBrasil), Brazilian exports to the E.U. could rise from €103.5 bil­lion to more than €110 bil­lion.

“The agree­ment is good for our coun­tries here in Mercosur, it is good for the European Union, but it is also good for the world, for global geopol­i­tics,” Alckmin said.

“At a time of frag­men­ta­tion, polit­i­cal ten­sion through­out the world, two large blocks are open­ing up mar­kets, sign­ing a treaty, a great part­ner­ship,” he con­cluded.

• Financial Times
• Agencia Brasil
• Carta Capital