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Why a new trade deal between EU and South American countries has gone down badly in Ireland

The so-called Mercosur deal has been met with celebrations and opposition on both sides of the Atlantic Ocean.

The agreement will see EU markets opened up to South American agriculture products.
The agreement will see EU markets opened up to South American agriculture products.
Image: Empics Entertainment/PA Images

LAST WEEK, THE European Union announced that it had agreed its biggest ever trade agreement with the bloc of South American countries known as Mercosur.

The agreement was reached after two decades of negotiations, and is expected to remove more than 90% of agricultural and industrial tariffs on both sides.

It could save European companies billions of Euro in trade duties every year, but not everyone is happy about it.

A Government minister, opposition TDs, farming lobbyists and environmental groups have all criticised the deal, and the Government is facing pressure to vote against it when the agreement eventually comes before the EU Trade Council.

So what exactly are the details of the deal? How did it come about, and why is everyone up in arms over it?

An EU hope

News that the EU and Mercosur had sealed a significant trade deal after 20 years of tough negotiations was first announced last Friday.

The agreement will open up the 28-nation trading bloc to Mercosur, a four-nation group of South American countries made up of Argentina, Brazil, Paraguay and Uruguay.

The group, headquartered in the Uruguayan capital Montevideo, has a population of 264 million and a GDP equivalent to almost one-eighth that of the EU.

Until now, Mercosur has operated a system of common tariffs on external goods and services, but its members still struggle with restrictive rules and the bloc hasn’t consolidated its own customs union or common market.

Experts say the grouping of the countries has actually held back progress in individual bilateral agreements, because each country in the bloc requires the consent of Mercosur’s other members for such agreements to go through.

Brazil: Jair Bolsonaro participates in the March for Jesus Brazilian President Jair Bolsonaro, leader of one of four Mercosur countries Source: SIPA USA/PA Images

“It still has a very high level of non-tariff barriers that affect the growth of intra-regional trade,” Ignacio Bartesaghi of Montevideo’s Catholic University told AFP.

“[The EU-Mercosur agreement] will help improve Mercosur’s cohesion, support its modernisation and make it a more attractive market for Japan, South Korea and even the United States.”

The art of the deal

Currently, the EU and Mercosur exchange €88 billion worth of goods every year.

However, the new agreement has opened Mercosur up to a market of 780 million people with the EU, and could see more than 90% of duties on goods removed for both sides.

The deal is expected to affect things like government procurement, intellectual property rights, sanitary and phytosanitary measures and sustainable development.

It is estimated that it could save European companies more than €4 billion in tariffs every year, and it will potentially give them greater access to large South American motor markets and see indications like Cognac and Irish whiskey protected from cheaper, unauthorised brands.

The EU also hopes the deal will improve access to the South American market for telecommunications, transport and financial services.

Under the agreement, Mercoscur has pledged to eliminate taxes on wine, chocolate, spirits, biscuits, tinned peaches, carbonated drinks, and olives.

ULSTER Whiskey 3 Irish whiskey: the indication would be intellectually protected under the terms of the agreement Source: PA Archive/PA Images

In return, the EU will open its markets to South American agricultural products – its biggest concession.

This will be done via a system of quotas: 99 tonnes of beef per year at a preferential rate of 7.5%, as well as a supplementary quota on 180,000 tonnes of sugar and another one on 100,000 tonnes of poultry.

The deal also contains a “safeguard mechanism” which allows both blocs to impose temporary measures to regulate imports, if unexpected increases of certain products would harm certain sectors on either side of the Atlantic.

And it makes explicit reference to the Paris climate agreement, with both sides committed to “fighting climate change and negotiating a transition to a sustainable low-carbon economy”, including commitments to fight deforestation.

‘This is a historical moment’

After such a long time in the making, the announcement of the deal saw leaders from both blocs in a naturally celebratory mood.

In a show of unity, all the European and Mercosur leaders who were at the G20 summit in Japan gathered for a joint photo, with Argentine President Mauricio Macri hailing the occasion as a “historic day.”

“I measure my words carefully when I say that this is a historical moment,” echoed European Commission President Jean-Claude Juncker on the sidelines of the summit.

“In the midst of international trade tensions, we are sending today a strong signal with our Mercosur partners that we stand for rules-based trade.”

Japan G20 Summit EU South EU and South American leaders pose for a photo at the G20 summit on Saturday Source: Eugene Hoshiko/PA Images

But not everyone was as optimistic, with EU agriculture commissioner Phil Hogan among was those who recognised the challenges the deal presents.

“For this agreement to be a win-win… carefully managed quotas will ensure that there is no risk that any product will flood the EU market and thereby threaten the livelihood of EU farmers,” he said.

Mass deforestation 

At home, farmers groups and TDs worried how the introduction of such a substantial increase in beef imports to the EU would affect Ireland’s agricultural sector.

Minister for Agriculture Michael Creed called the agreement “very disappointing”, while Joe Healy of the Irish Farmer’s Association said it was a “bad deal”.

“This deal represents a backroom deal with big business and kowtows to the likes of Mercedes and BMW in their drive to get cars into South America,” Healy said.

It is a disgraceful and feeble sell out of a large part of our most valuable beef market to Latin American ranchers and factory farm units.

Farmers groups also argued that the deal showed double standards from the EU.

They argued that by importing South American beef, the EU would be supporting an agricultural industry that is partly responsible for mass deforestation in the Amazon, and which does not have the same standards of traceability, animal welfare, or food safety.

“For 25 years, environmental scientists have focused on the destruction of South American forests by ranchers for beef production as possibly the single biggest threat to our ability to control carbon emissions and global warming,” Pat McCormack of the Irish Creamery Milk Supplies Association said.

“Now we have the EU signing-off on a trade agreement that will accelerate that destruction; it is almost beyond belief.”

An unlikely alliance

Despite high levels of celebration and opposition, the agreement still needs to be ratified by both the European Parliament and the four Mercosur countries – something which could take years.

Speaking yesterday, the Taoiseach said that Ireland could not block the deal at the EU Trade Council – even if it voted against it – before adding that a vote on the deal was at least two years away. 

“This would go to the Trade Council for a Qualified Majority Vote in about two years’ time, so there’s a long way to go yet,” he said.

Under this system, a vote needs 55% of member states representing at least 65% of the EU population for a vote to pass, and a minority blocking an agreement from going through must include at least four council members representing over 35% of the EU population.

In other words, Ireland will need to find support from other countries if it wants to prevent the deal from going through.

BELGIUM-BRUSSELS-EU-SPECIAL SUMMIT Leo Varadkar arrives for the special summit of the European Council in Brussels yesterday Source: Xinhua News Agency/PA Images

But despite the country’s relatively small size, this might not be as difficult as it initially seems.

Farmers and environmentalists throughout Europe have formed an unlikely alliance in their opposition to the deal.

The head of Germany’s main farming union, Joachim Rukwied, has called the agreement “totally unbalanced” and said it would threaten the livelihoods of “many family-run agricultural businesses”.

Meanwhile, French MEP Yannick Jadot said it is “shameful” of the European Commission to have signed a pact with Brazil’s climate-sceptic leader Jair Bolsonaro. 

For now, Varadkar says his Government will assess the impact of the deal on the Irish economy and jobs, saying it will vote against the agreement if this impact is negative.

But with plenty of time left before a vote on the agreement takes place, don’t be surprised if the Government begins to worry about more than just jobs and the economy.

With reporting from - © AFP 2019

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