Mercosur trade deal to return? EU meat, sugar, rice and ethanol sectors uneasy over “polemic” agreement

09 Nov 2022 --- Agri-cooperatives and European farmers’ are fearful that the “scandalous and dangerous” Mercosur trade agreement with the EU could be brought back to the negotiating table following the election of Lula Da Silva in Brazil.

Mercosur would expand bilateral trade and lower tariffs between the EU and South American countries.

“We cannot support the Mercosur trade deal as it stands as it would have detrimental impact in many sensitive sectors, including: beef meat, poultry, sugar, ethanol and rice, as well some negative effects in sectors such as orange juice and honey,” a Copa spokesperson tells FoodingredientsFirst. 

“In addition there are also serious concerns regarding deforestation, and more generally the fact that environmental policies in Mercosur countries are less stringent than in the EU.”

The European Commission notes that it is a “win-win for both the EU and Mercosur,” as it would create jobs and growth. However, imported cheap produce could price out EU farmers in some sectors such as for meat and sugar, sparking concerns from these sectors. 

“Any attempt by the Commission to force the passage of this agreement would be truly scandalous and set a dangerous precedent for EU farming,” highlights Christiane Lambert, president of Copa, which represents EU farmers. 

Mercosur deal back in the menu?
The Mercosur market and associate nations comprise most countries of South America except suspended member Venezuela.

Copa-Cogeca quantifies the amount of poultry that would be imported by Mercosur official members to be equivalent to the combined production of Denmark, Finland and Sweden.Da Silva is known to be more open to foreign deals than his predecessor Jair Bolsonaro who was ousted last week. 

During Da Silva’s first two presidential terms, he tried to consolidate the Mercosur  alliance and expanded alliance within the BRICS bloc born during his presidency in 2008 (BRICS comprises Brazil itself, Russia, India, China and South Africa). 

However, he has stated that any deal with the EU would need to be revised and reworked.

“We want fairer international trade, we have no interest in trade agreements that condemn our country to the eternal role of exporter of goods and raw materials,” the president said in his victory speech. 

Unbalanced agreement
Lambert flags that the agreement disproportionately negatively affects many fragile European agricultural sectors.

“Taking the beef sector as an example, it is easy to understand that this agreement will shift the negotiating power from the hands of European farmers to those of the large operators in the Mercosur countries,” she underscores.

For some commodities like sugar, prices have not risen this year. According to the UN Food and Agriculture Organization (FAO), sugar prices are 8.5% lower than one year ago globally. 

Low sugar prices prompted, earlier this year, European beet producers to condemn sugar imports from India, which are more price competitive due to governmental subsidies.

Furthermore, in Brazil “there are two genetically modified varieties in sugarcane authorized and cultivated, while in EU there is none,” according to Copa.

Moreover, the Brazilian sector is able to move from sugar to ethanol very easily, benefiting from various favorable policy decisions such as lower tax on ethanol than gasoline, flags Copa.Cheap sugar coming from Brazil would hit hard EU producers already dealing with damagingly low prices.

EU sugar producers admitted that they are moving from one crisis to another, and a Mercosur agreement would not help lift prices.

Cheap meat to flood EU markets
Copa-Cogeca quantifies the amount of poultry that would be imported by Mercosur official members (Argentina, Brazil, Paraguay and Uruguay) to be equivalent to the combined production of Denmark, Finland and Sweden.

If an EU-Mercosur deal was signed today, cheap meat products would arrive at discounted prices from overstocked Brazil. Moreover, Copa flags concerns in the traceability in the beef sector in Brazil, which is only mandatory in the last 90 days. 

Alisson Leigus, Brazil sales manager at Gerber Agri International, told FoodIngredientsFirst last month that the South America region, and Brazil in particular, is oversupplied after record months of meat shipments and domestic sales, with prices for poultry being down over 50% since the start of the year.

However, trade is now in a paralyzed state as pro-Bolsonaro protestors are blocking important roads, impeding the normal flow of goods.

Potentially dangerous imports
Lambert explains that Brazilian farmers alone make use of 27 herbicides and insecticides that are banned in Europe – five commonly used in sugarcane.

The European Commission notes that the trade deal it is a “win-win for both the EU and Mercosur.”“Mercosur countries’ average pesticide intensity (kg per hectare) is above that of countries of similar income levels and above the EU average. According to EU policy, the controls done at farm level are delegated to the exporting country and hence it is very difficult to verify standards of production at the farm level,” explains Copa. 

While Copa-Cogeca is currently fighting for the EU Commission not to target aggressive pesticide cuts of 50% by 2030, the organization states that there is a substantial gap in sustainability practices between EU and Mercosur farmers.

“Since the 2019 political agreement, we see a regulatory tsunami unfolding in the EU with the development of the European Green Deal. Dozens of regulatory initiatives impacting agriculture are currently under discussion in Brussels on nature restoration, biodiversity, industrial emissions, the use of plant protection products, animal welfare, etc,” explains Lambert.

“On the other hand, the war in Ukraine is profoundly affecting EU food production, causing costs to surge and exceed those of our competitors. This will be particularly visible in the fertilizer and energy markets. The EU has not yet incorporated into the Green Deal discussions the impact of the Russian aggression on EU agriculture, and we strongly denounce it,” she continues.

Lambert explains that with EU countries being less affected by the Ukraine war, Mercosur farmers will see their competitiveness strengthened.

“Against this backdrop, the implementation of the Green Deal will further increase the gap in standards applied to the EU and Mercosur farmers,” Lambert concludes.

By Marc Cervera