European Commission determined to conclude EU-Mercosur trade deal this year despite French concerns

Despite the little space dedicated to pure international trade at the latest European leaders’ summit in Brussels, one of last week’s biggest takeaways is that negotiations between the EU and Southern America over a free trade deal may soon gain momentum. On Friday, right at the end of last week’s EU Council meeting, European Commission chief Jean-Claude Juncker said the European Union will push to conclude free trade talks with Latin American bloc Mercosur by the end of the year, despite the concerns some members expressed. French President Emmanuel Macron indeed voiced his opposition to the increase of farm imports an agreement would bring, but it seems that now Europe is getting ready to progress towards what has the potential to become its biggest trade deal yet.

Background

At the beginning of last week, as all EU member States were getting ready for the Thursday-Friday EU Council Meeting in Brussels, the main European media outlets reported that French President Emmanuel Macron had succeeded in “pushing trade” onto the agenda of the upcoming EU summit. Mr. Macron’s plan was to reportedly call for caution in commercial deals that would bring a surge of beef and other agricultural imports, openly referring to a potential trade deal with the Southern American bloc.

Just a couple of days before, on Monday, France’s ambassador to Brazil, Michel Miraillet, underlined there was “heightened concern” in the European Union over food safety in Latin America after a series of recent scandals, including the bribing of inspectors by meatpackers in Brazil to overlook sanitary practices, as reported by Reuters. Mr. Miraillet also said France expected “four or five” EU countries to back its plan to propose updating the Commission’s negotiating authority. The previous week, President Macron said that France was “in no hurry” to a deal with the Mercosur bloc of Argentina, Brazil, Uruguay and Paraguay by the end of the year – a goal the European Commission had previously set, also noting that the mandate dates back to 1999.

Last week’s feelings

However, despite France’s concerns about an EU-Mercosur deal, European Commission President Jean-Claude Juncker insisted on Friday the EU will push to conclude free trade talks with South American bloc Mercosur by the end of this year. “This will be the most important trade agreement in terms of volume”, he said at a closing press conference at a European summit in Brussels. “We will continue to do everything we can to conclude the negotiations with Mercosur before the end of the year. It’s important. We underestimate the importance of Mercosur for the European Union,” he also added.

The European Commission says the savings the EU could make from reduced import tariffs with Mercosur would be three times greater than for deals with Canada and Japan combined. President Juncker said Europe had a great opportunity to seal trade deals with countries across the world, while respecting European values and standards and the “reciprocity sought by the French president”.

French concerns

Indeed, speaking to journalist after last week’s summit, French President Macron stressed the need for including a “genuine principle of reciprocity” in EU’s trade policy, also asking for “a balanced policy between openness and protection”. The main concern coming from Mr. Macron’s country is that the Commission, on top of rushing towards a deal with Mercosur, is also seeking to open talks with Australia and New Zealand, two other countries that want to expand exports of farm products. The French President is currently facing strong opposition to free trade deals at home, where crowds are pushing him to not ratify an EU trade deal with Canada (CETA). However, l’Hexagone is not the only country to oppose to a potential EU-Mercosur trade pact.

Ireland’s echo

Ireland has expressed particular concerns regarding either food safety or the impact of tariff-rate quotas on sensitive agricultural products. Ireland, which is one of Europe’s biggest exporters of meat, is particularly concerned about the advantage that a no-tariff situation would give to countries like Brazil – part of Mercosur, which is already among the biggest beef exporters to Europe. Ireland is also claiming that Brexit is already threatening a potentially heavy impact on the 270,000 tonnes of beef sold by Irish farmers to the UK.

In an interview last month, Meat Industry Ireland’s director Cormac Healy openly said that any progression and completion of the Mercosur trade deal will have negative effects on the EU beef market. “While the outcome of Brexit is still uncertain, it [Mercosur] has the potential to cause serious disruption to the EU beef market, sending the EU-27 market into massive beef surplus”, MercoPress, Southern American news agency, quoted Mr. Healy as saying. “As Ireland is the main exporter of beef to the rest of the EU market, the Irish cattle and beef sector would suffer the greatest consequences of this deal”, Healy also said.

Size of the game

EU exports to Mercosur from cars to pharmaceuticals are subject to duties of about 4.4 billion euros ($5.2 billion) per year. As reported by Reuters, France, said a Commission source, would be among one of the greatest beneficiaries if these were cut. For the four Mercosur countries negotiating with the EU, the EU is the first trading partner, accounting for 21% of the bloc’s total trade in 2015. The EU’s exports to the region have increased from €21 billion in 2005 to €46 billion in 2015. Mercosur’s exports have increased from €32 billion to €42 billion over the same period.

Mercosur’s biggest exports to the EU in 2015 were agricultural products, such as foodstuffs, beverages and tobacco (24%), vegetable products including soya and coffee (18%) and meats and other animal products (6%). The EU is the biggest foreign investor in the region, rising from €130 billion in 2000 to €387 billion in 2014. Mercosur is a major investor in the EU, with stocks of €115 billion in 2014.*

According to latest sources, the next negotiating round is scheduled for 6-10 November this year.

*Source: European Union