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ECONOMY | 06-07-2019 08:41

Murmurings of discontent emerge over historic EU-Mercosur deal

While locally, the reaction has been a mix of praise and criticism, for the most part split along ideological lines, this week also saw a range of reactions from European nations, especially from France.

Top EU officials reached a breakthrough in market-opening negotiations last week with counterparts from the Mercosur group of Argentina, Brazil, Paraguay and Uruguay, paving the way for an agreement that would expand goods shipments worth almost 90 billion euros (US$102 billion) a year.

However, the EU-Mercosur draft accord still needs to be fine-tuned over the coming six months to a year. Before entering into force provisionally, the deal would then need to gain approval from EU governments and the European Parliament in a process likely to last about another year, placing any potential startdate outside President Mauricio Macri’s current term in office.

While locally, the reaction has been a mix of praise and criticism, for the most part split along ideological lines, this week also saw a range of reactions from European nations, especially from France.

FRANCE WARNS BRAZIL OVER CLIMATE STANCE

European Union countries won’t ratify its free-trade deal with the Mercosur if Brazil doesn’t take steps to achieve the greenhouse gas emissions targets it agreed to in the 2015 Paris climate accord, French Ecology Minister Francois de Rugy warned this week.

“The deal will be ratified only if Brazil meets its commitments,” the French minister said Tuesday on Europe 1 radio. “We’re not signing trade deals with countries which exit the Paris accord. Signing the Paris accord isn’t just about signing it, it’s also about implementing a policy that allows to achieve cuts in greenhouse gas emissions, and to protect the Amazon forest.”

While President Bolsonaro has stepped back from a decision to withdraw Brazil from the Paris Agreement, he plans to open up more of the Amazon, having laid out initiatives to loosen restrictions on farming and mining activities in protected areas.

CONCERN OVER PRODUCTION IN MERCOSUR NATIONS

France’s Economy Minister Bruno Le Maire on Friday called for Europe to be “vigilant” over the conditions of the deal with the Mercosur nations, expressing concerns over “sanitary, environmental [and] animal welfare standards in the South American nations.”

“We must be very vigilant with the implementation of the Mercosur agreement, to ensure that Mercosur producers respect the same sanitary, environmental, animal welfare standards, and that we ensure that the guarantees that have been given are respected,” he said.

Le Maire, however, defended this treaty, which has been described as “hard blow for agriculture” and “deception” by the president of the French Federation of Farmers’ Union, Christiane Lambert.

“The wealth of the farmers, the producers of milk, of pork, of beef, comes from the ability to export our products, because it creates wealth in France,” he said.

In an attempt to reassure critics, he added that there is a safeguard clause, “which means that if these commitments are not respected, we can immediately suspend the application of the agreement.”

MACRON DEFENDS DEAL, AS FARMERS PROTEST

French President Emmanuel Macron defended the deal this week, warning against “neo-protectionism,” as farmers and environmentalists step up their resistance to the accord. Speaking in Brussels late Tuesday, Macron defended the agreement, despite a government spokeswoman earlier saying France was not yet rushing to ratify the trade deal.

He warned against what he termed “neo-protectionist” attitudes, which would refuse reciprocity and exchange. “We are not protectionists,” he declared. Macron added that measures had been taken on the European side to protect, via quotas, sensitive sectors such as beef and sugar.

European Commission President JeanClaude Juncker, meanwhile, billed it as a rousing endorsement of “rules-based trade” at a time of growing protectionism in the US, which is embroiled in a trade war with China and disputes with the EU.

On Tuesday evening farmers gathered across France to protest against the deal, while Christiane Lambert of France’s biggest agricultural union FNSEA tweeted: “Unacceptable signature of a MercosurEU accord, which will expose European farmers to unfair competition and consumers to total deception.”

Criticism also emerged from Germany, where the head of Germany’s main farming union, Joachim Rukwied, called the deal “totally unbalanced”, saying it would threaten the livelihoods of “many familyrun agricultural businesses.”

Local beef industry fears

Criticism also emerged from local industry groups, including Argentina’s beef industry and trade group Ciccra.

Mercosur members will be allowed to export 99,000 metric tons of beef to Europe under a tariff rate of 7.5 pecent. That tonnage is measured in carcass weight equivalent, which includes fat and bones. In meat-only terms, that’s about 67,000 tons in net weight.

The deal is only about a third of what the South American bloc needed to help prop up markets, according to Miguel Schiariti, Ciccra’s head, who described it as a “miserable allocation.”

One bright spot: 20% duties will be eliminated on premium steaks. That could save Argentine slaughterhouses US$70 million a year, Schiariti said.

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