The European Union and the Mercosur countries announced a long-anticipated trade deal on Thursday, setting up what could be a rocky approval process from EU member states.
The EU-Mercosur partnership agreement aims to reduce tariffs and trade barriers between the two economic blocs, creating one of the largest global free trade zones in the world. The five Mercosur countries are Brazil, Argentina, Paraguay, Uruguay and Bolivia. Venezuela's membership has been suspended since 2016.
In a fact sheet, the European Commission touted the deal’s opportunities for EU agricultural producers, arguing farmers and food producers would enjoy “unprecedented access” to South America’s “growing and dynamic markets.”
“This is a win-win agreement, which will bring meaningful benefits to consumers and businesses on both sides,” Ursula von der Leyen, the commission’s president, said in a statement announcing the deal. She said it would save EU companies some €4 billion ($4.2 billion) in duties but insisted that more than 350 EU products would remain protected by geographic indicators and that Mercosur exporters would still have to meet the EU’s health and food standards.
The deal will, however, eliminate tariffs on a slew of European agriculture exports, including olive oil and chocolate, and establish tariff rate quotas granting duty-free access for a limited quantity of European cheese, milk powder and infant formula.
Notably, the deal does not grant beef or poultry from the Mercosur nations duty-free access to the European market. Instead, only limited quantities will be able to enter the bloc at a reduced tariff rate.
Quotas will also apply to EU rice, ethanol and honey imports, for which import volumes under the quota threshold will receive duty-free treatment.
While the deal brings a conclusion to negotiations that began more than two decades ago, it still needs to advance through a lengthy EU approval process. At least 15 of the 27 EU nations will have to sign off on the deal in a vote at the European Council, and it will also need the support of a majority in the EU Parliament.
The French government is leading a coalition to oppose the agreement. French President Emmanuel Macron reportedly told von der Leyen that the deal is “unacceptable” due to the threat it would pose to French farmers.
Von der Leyen cancelled a stopover in Paris on her way back from Montevideo, Uruguay, following the comments, where she was supposed to attend the reopening of Notre Dame alongside President-elect Donald Trump, Euractiv reported.
Poland has also signaled it will join France in opposing the agreement; Italy has indicated that its support is conditioned on additional guarantees for its farmers.
The deal’s backers, which include the German Chancellor Olaf Scholz and Spanish Prime Minister Pedro Sanchez, argued on Friday that pursuing a trade-liberalizing agreement would spur EU competitiveness and improve trade resiliency.
“At a time when protectionist pressures are growing, a partnership agreement between the EU and Mercosur sends a clear signal to the world that two of its largest economies: reject protectionism, and are open for business and for trade on the basis of fair rules and high standards,” the European Commission said in a statement.
Some in the U.S. agriculture industry also see the deal’s potential and are eying its benefits for EU ag producers with trepidation.
“That could be a huge game-changer for them,” Constance Cullman, president and chief executive officer of the American Feed Industry Association, told Agri-Pulse on Friday. Brazil, the largest economy in the Mercosur, has been a target export market for the U.S. animal feed industry, Cullman said, as the sector attempts to diversify its markets.
“Every time one of those agreements happens and we're still on the sidelines, we pay attention and we're a little nervous about that,” Cullman said. “We'd like to see us in that game a little bit more intensely than we have in the last several administrations.”
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