European Union (EU)-Mercosur trade agreement

At the end of June 2019 an agreement on the deal was reached at the negotiating level between the European Commission, which is negotiating on behalf of the EU Member States, and the representatives of the Mercosur states (Argentina, Brazil, Paraguay, Uruguay).

European Commission reaches ‘agreement in principle’ with Mercosur

This agreement represents a first step in the process towards an implementation of the agreement. After presentation of the final linguistically and legally checked texts, the EU Trade Ministers will vote on the final adoption of the agreement, which will then be referred to the European Parliament before it has to be ratified by all national parliaments. This process cannot be expected to start before 2020. A final evaluation of the agreement will be possible only after detailed examination of the final texts.

Fair trade agreements are of great importance for Austria’s economy

Austria is a strongly export-oriented country. 60 percent of the gross value added are generated from exports and almost every second job in Austria depends directly or indirectly on the export sector. Fair trade agreements are therefore of high importance for Austria’s economy.

The MERCOSUR Agreement offers Austrian exporters access to a market of 260 million of consumers, improves the legal framework for trade between Austrian companies and the Mercosur countries and creates legal certainty.

Important key points in the negotiations

However, in the negotiations Austria has always pointed out that maintaining the quality of Austrian food and fair market conditions for Austria’s agricultural sector are non-negotiable criteria also in imports. This concerns fair market access quotas for agricultural products, in particular for beef, sugar, poultry and bioethanol, including a review of the burden on European agricultural markets. European environmental, animal welfare, production and food standards have to be clearly defined and monitored for imports as well. The European Union has also made the establishment of the precautionary principle a condition for the conclusion of the agreement.

Challenges for agriculture

The additional market opening in the most sensitive agricultural sectors (99,000 tonnes of beef and 180,000 tonnes of poultry meat) is an extreme challenge for European agriculture. The opening of the European Union’s agricultural market will increase the competitive and price pressure in the sensitive sectors. Whether and to which extent the gradual opening of the market over a period of six years, a bilateral safeguard clause and EU aid measures under the Common Market Organisation will cushion the burden on the markets in the European Union is not yet certain, as there are no appropriate studies and information. Likewise, the direct and cumulative effects on the Austrian agricultural market can presently not be precisely assessed, as suitable data from the Commission regarding market impacts (development of imports and markets from the entry-into-force of the agreement) are not yet available. Therefore, more stringent monitoring of agricultural imports and accurate agricultural market observation regarding the Mercosur countries are of high importance.

Clear definition of EU food standards

Even now the European Union’s food safety rules (including ban on meat produced with the use of hormonal growth promotants) must be met when importing from Mercosur countries (and from all other third countries). For this purpose, official controls are carried out at the border inspection posts of the European Union to ensure compliance with the high EU standards (including verification of the veterinary certificate, approval of third country or export establishment, and physical inspection of goods). These controls ensure that, for example, imported meat complies with the specific standards of the European Union. Therefore, also in the future meat produced with the use of growth-promotants (including Ractopamine) must not be imported to the European Union. Already now exporting companies from Mercosur countries exporting to the European Union are regularly inspected by the Directorate General for Health and Food Safety (in the third country). In the event of objections regarding food safety the companies concerned are blocked from exporting to the European Union.

Likewise, the Mercosur Agreement does not change any of the existing European Union rules on the labelling or the legislation of genetically modified organisms (GMOs) or on imports. GMO labelling and designations of origin enable consumers to make informed choices when purchasing soy products, maize and citrus fruits. In the event of implementation of the agreement, a more stringent monitoring (for all imports at the border inspection posts) of the food and production standards (incl. GMO labelling) is requested for Mercosur imports.

Since 2005 the European Union has determined and controlled harmonised maximum pesticide residue levels based on Regulation No 396/2005 on maximum residue levels of pesticides (among others glyphosate) in or on food and feed of plant and animal origin.

Climate protection and environmental aspects

For Austria, it has always been clear that the goals of the Paris Climate Agreement and their compliance under the agreement have top priority.

In principle, one can say: With the wording “each party shall effectively implement the UNFCCC and the Paris Agreement established there under” the Paris Climate Agreement is definitely included in the agreement. A subcommittee will be established to support and monitor implementation. The sustainability chapter provides for a specific mechanism for dispute settlement including the possibility for calling an expert panel. The European Commission therefore emphasises the effective agreements on climate protection in the agreement. According to the European Commission, non-compliance by the Mercosur countries could lead to the suspension of the agreement. 

Sustainable forest management

Also political coherence with the European Union’s Deforestation Action Plan (“Protecting the forests and promoting reforestation Communication“, 2019) will be a must. An agreement on a uniform (international) definition of “sustainable forest management” (according to UNFF, MCPFE) and a clear reference to the Sustainability Development Goals of the United Nations (SDG 15) could be discussed via the implementation of the agreement (in the committees established).

Foreign trade with the Mercosur states

In the 2018 foreign trade in agricultural and food products with the Mercosur countries EU exports of  2.3 billion euro face imports of 18.2 billion euro (therefore a negative trade balance of minus 15.9 billion euro). About 1.5 percent of the EU’s agricultural and food exports go to the four Mercosur countries. The most important import products of the European Union are soy products, feedingstuffs, coffee, fruit juices, and beef. In 2018, the Austrian agricultural and food foreign trade with the Mercosur countries saw exports of 62.1 million euro and imports of 170 million euro (negative trade balance of 104.7 million euro). Austria’s main export products are energy drinks and processed foods; the main import product is beef (34.7 million euro in 2018).

published at 16.07.2020, Kommunikation und Service (Abteilung Präs. 5)