Deal done. After more than twenty years of negotiations, the European Union has concluded the trade agreement with Mercosur (South American Common Market). Blitz by the President of the European Commission Ursula von der Leyen aimed at Montevideo and brought home the agreement. Brussels rejoices, considering it a turning point and an opportunity at a time when China is getting its hands on Latin America. They applaud Germany (thinking of the car industry) and Spain (looking at the solid and historic economic relations with the countries of South America). But beef, rice, sugar, soya and honey from Mercosur countries scare European agriculture, especially Italian and French agriculture. “I don’t agree with triumphalism, we need guarantees on reciprocity and protection of our products”, commented the minister Francesco Lollobrigida. And the various Italian trade associations (from Confagricoltura to Confagri) fear “damage” for the sector.
The agreement eliminates duties on most exports: 91% of EU exports to Mercosur and 93% in the opposite direction. This will lead to annual savings of around 4 billion euros for European businesses, especially in the automotive, technology and textile sectors. At the same time, Mercosur agri-food products (beef, poultry, sugar) will be able to access the European market at reduced tariffs, but with quotas to mitigate the risk of overproduction. Among the main innovations is the protection of over 350 European geographical indications (including Parmigiano Reggiano, Prosecco and Parma Ham) against imitations in Mercosur countries. Furthermore, European companies will be able to participate more easily in public tenders in South America, while customs procedures will be simplified to facilitate trade.
The agreement, which involves a market of 780 million people and is worth 25% of global GDP, received strong criticism from Italy and France, concerned about the impact on European agriculture and consumers. Paris strongly opposes the deal, with President Emmanuel Macron calling it “unacceptable”. France complains of the risk of an invasion of cheap food and denounces the failure to respect workers’ rights and environmental standards in Mercosur. In Italy, the Minister of Agriculture Francesco Lollobrigida asked for guarantees on the reciprocity of standards and the protection of Italian products, while the Deputy Prime Minister Antonio Tajani showed greater openness, while underlining the need for corrections.
Farmers report three critical issues. First, production standards: South American companies would be subject to less stringent environmental and health rules, including the use of antibiotics and hormones in livestock farming and pesticides banned in the EU. The second aspect is unfair competition: lower labor costs and less stringent regulations would make South American products cheaper, damaging the competitiveness of European producers. The third critical issue is the health of consumers with the risk that products that do not comply with EU standards arrive on European tables. According to Coldiretti, the trade deficit in the agri-food sector between the EU and Mercosur could worsen, which currently amounts to 23 billion euros in favor of South American countries.
According to Brussels, the agreement represents a great opportunity for European industry. Germany, the leading European exporter to Mercosur, celebrated the agreement, underlining the potential to create almost a million jobs in Europe. Even in Italy, where over 8 thousand companies export to Mercosur for a value of 1.2 billion euros per year, the agreement could benefit small and medium-sized businesses thanks to the reduction of bureaucratic burdens and better access to public procurement. To appease critics, the agreement includes binding clauses on the Paris Agreement, which allow the agreement to be suspended in the event of serious violations.
So the deal is done, but the game is still open. Ratification will have to pass through the European Parliament and national parliaments. And it won’t be a process that will proceed as smoothly as Brussels would like.
