Blog Posts Ellen Huan-Niemi Agriculture, Economy, Food

The EU and Mercosur agreed to continue negotiations on a long-stalled free trade accord by making fresh negotiating offers in May 2016. Mercosur encompasses Argentina, Brazil, Paraguay, Uruguay, as well as Venezuela, which is not currently participating in the negotiations. This is the first exchange of offers on goods and services between the two blocs since 2004, whereby the free trade negotiations originally began in 1999.

The objective is to negotiate a comprehensive trade agreement, cutting customs duties, removing barriers to trade in services and improving rules related to public tenders, customs procedures, technical barriers to trade and protection of intellectual property. One of the stumbling blocks in the negotiations is European demands to exclude agricultural products — one of the most desired sectors for the South American countries.

The objective is to negotiate a comprehensive trade agreement, cutting customs duties, removing barriers to trade in services and improving rules related to public tenders, customs procedures, technical barriers to trade and protection of intellectual property.

Agriculture controversy

Farmers from various EU member states are openly against the resumption of negotiations, warning the 28-nation bloc’s trade officials not to include sensitive agricultural goods – such as beef and ethanol – in their exchange with the South American countries.

Agriculture was faulted for earlier negotiating breakdowns and has long been a sticking point in the bilateral negotiations. Despite multiple reports that beef and ethanol are set to be omitted from the EU offer, Uruguay’s Foreign Minister, Rodolfo Nin Novoa told reporters that ultimately these products were included in the offers exchanged in May 2016, stating that the trade volumes will be negotiated further down the road. He pointed out that beef and ethanol were not specified, in volume or time periods, for the moment given the sensitivity of the issues.

Farmers from various EU member states are openly against the resumption of negotiations.

In fact, there is strong lobbying from Ireland and UK farmers on the beef issue, and France essentially on all farm produce given the complicated situation President Francois Hollande is facing with the rural sector. EU member states are warning against the inclusion of sensitive agricultural products before a better understanding on the ramifications of duty free access in the EU agricultural sector, given that the South American countries are major exporters of agricultural products.

Bilateral trade between Finland and Mercosur

Mercosur is a major exporter of agricultural and food products to Finland. Almost 30% of the total exports to Finland from Mercosur are agricultural and food products with Brazil as the single largest exporter, while the rest are trailing very much behind.

The total loss to EU agricultural producers could be up to €7.75 billion.

In 2015, Finland has an agricultural trade deficit of €180 million with Mercosur, whereby Brazil alone was exporting over €150 million worth of agricultural and food products to Finland. In comparison, less than 1% of the total exports to Mercosur from Finland are agricultural and food products, amounting to merely less than €700 thousand. However, the bilateral trade between Finland and Mercosur was considerable with a total of €1.3 billion. Hence, trade with Mercosur is important with Brazil as the top trading partner.

Impact in Finland?

The Joint Research Centre of the European Commission has published a study in 2011 indicating that the economic losses and the adjustment pressures arising from a free trade agreement between the EU and Mercosur would fall very heavily on the agricultural sector. There are significant losses to agricultural producers in the EU, but agricultural producers in Mercosur are gaining. The total loss to EU agricultural producers could be up to €7.75 billion.

The main question is what are the ramifications in the agrifood sector in Finland? Another important question is whether the Transatlantic Trade and Investment Partnership (TTIP) agreement with the US will be implemented at the same time with the free trade agreement with Mercosur, and what are the implications in Finland and the EU as well? Negotiations for these trade agreements are ongoing, thus it vital that trade officials in the EU and Finland should not negotiate in the dark. Moreover, stakeholders should be well informed before concessions are made to seal these future trade agreements.

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