The EU's long, drawn-out trade deal with South America is at risk of being rejected

Key Points
  • The trade deal is raising concern in some countries with strong agricultural sectors, such as France and Ireland.
  • EU member states still have to ratify the agreement before its implementation.
OSAKA, JAPAN - JUNE 29: Germany's Chancellor Angela Merkel and France's President Emmanuel Macron talk with Argentina's President, Mauricio Macri, during the announcement of a trade agreement between the European Union and Brazil, Argentina, Uruguay and Paraguay on June 29, 2019 in Osaka, Japan.
Carl Court | Getty Images News | Getty Images

The European Union and four South American countries put an end to 20 years of trade discussions last month, but it is not yet clear whether their deal will ever see the light of day.

Brazil, Paraguay, Uruguay and Argentina agreed to open their markets to the 28 EU member states, despite recent criticism of multilateralism across the world. However, the trade deal is raising concern in some countries with strong agricultural sectors, such as France and Ireland. EU member states still have to ratify the agreement before its implementation as well as the European Parliament, and in some cases the national parliaments in different capitals will have their say too.

"Ratification in Europe is likely to be far from straightforward," analysts at research firm Teneo Intelligence said in a note earlier this month. "The risk of a failed vote would be significant," Teneo added.

In the case of the European Parliament, the chamber is mostly made up of centrist parties, which in theory should give a clearer path for adoption. However, "long-established divisions" within the Socialist members of the European Parliament could lead some center-left politicians to vote against the deal, Teneo also said. The same trade deal will also have to be approved by the four South American countries, which together form what's called the Mercosur trading bloc.

What are the concerns?

Farmers in Ireland and France are worried about the surge in beef imports that could come from South America.

The Irish Farmer's Association said on its website that the deal with Mercosur "would have a severe impact on Irish and European farmers, who are already struggling from the impact of Brexit and falling consumption levels."

BRUSSELS, BELGIUM - JULY 11: Tractors are seen as farmers gather at Schuman Square to protest against EU's planned trade agreement with Southern Common Market (MERCOSUR) in Brussels, Belgium on July 11, 2019. (Photo by Dursun Aydemir/Anadolu Agency/Getty Images)
Anadolu Agency | Anadolu Agency | Getty Images

The opposition in Ireland has been so strong that Prime Minister Leo Varadkar said the government will conduct an economic assessment of the deal on Ireland and claimed he would vote against the deal if the risks outweighed the benefits.

At the same time there are environmental concerns too. Environment associations have warned that the deal could lead to further deforestation in countries such as Brazil, as they increase the available areas for cattle farming.

Why do most leaders defend it?

The European Commission argues that the deal increases access for European firms that make industrial products and cars, which are currently subject to tariffs of up to 35%. The Commission also argues that European firms will be able to compete for public contracts in Mercosur countries.

"The EU agri-food sector will benefit from slashing existing Mercosur high tariffs on EU export products, chocolates and confectionery (20%), wines (27%), spirits (20 to 35%), and soft drinks (20 to 35%). The agreement will also provide duty-free access subject to quotas for EU dairy products (currently 28% tariff), notably for cheeses," the Commission said on its website.

In the eyes of the four South American countries, the trade deal with Europe is beneficial because it increases their exports of beef, sugar, poultry and other farm products.

Farmers hang a banner on the grids of the prefecture of Le Mans reading "Do not import an agriculture that we do not want" during demonstration to protest against a trade pact between South American countries and the EU, on July, 2, 2019, in Le Mans western France. -