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Europe’s farmers should calm down about Mercosur

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BRUSSELS — Europe’s farmers are hopping mad: Agrochemical companies are bilking them upstream, food manufacturers and supermarkets fleecing them down. Many producers are older than the Common Agricultural Policy (CAP), the European Union’s fusty subsidy pot from 1962, and attention has long since shifted to green and digital tech.

Throw in a chunky trade deal and you’ve got a recipe for rural revolution. The latest target is the EU’s agreement with the Mercosur bloc, a Brazilian-motored agricultural powerhouse that includes Argentina, Paraguay, Uruguay and Bolivia. A quarter-century in the making, it looks set for conclusion next month, hatching a free-trade area spanning 800 million people.

The Mercosur nations dominate the global market for beef, soybeans and certain cereals, banking on cheap land and sunny climates to feed entire continents. Europe’s farmer unions say this makes them the sacrificial lamb so that German carmakers can get rich in South America. Those in France, Europe’s farm king, are especially concerned.

This agreement “risks having dramatic consequences for agriculture,” said Arnaud Rousseau, the head of the country’s powerful FNSEA association, earlier this month, as he argued that lower environmental and food safety standards meant Brazilian meat would massively undercut the local stuff and close family farms across the continent.

It was the FNSEA’s nationwide protests in January that pushed President Emmanuel Macron to attempt to knife the treaty, sending a deal-killing text to European Commission President Ursula von der Leyen. But with the deal now back on, the group is returning to the streets from Monday in a bid to hamstring negotiations on the home stretch.

Their counterparts in Belgium, Italy and Poland threaten similar action, while those in Germany, Austria and Ireland watch with discontent. The “dreaded Mercosur agreement” is “a no-go zone for European farmers,” concluded Copa-Cogeca, the EU’s largest agri-lobby, in a letter to the Commission last week. 

But are farmers justified in panicking? And, if not, why the ruckus?

Two-burger terror

Despite all the hoopla, Mercosur offers a net gain for Europe’s agri-food industry.

“The pigmeat sector does very well out of the agreement. Ditto the dairy sector, wine, spirits, beverages and virtually all processed agricultural products: jams, preserves, biscuits, breakfast cereals, infant formula, pet food,” rattled off John Clarke, until recently the EU’s top agricultural trade negotiator.

The same is true for geographical indications (GIs), regional foods whose production is trademarked and bring in big bucks for European farmers. From French cheeses and Italian hams to Irish liquor and German sausage, “they’ll be a couple hundred protected in Mercosur,” Clarke said. 

It was the FNSEA’s nationwide protests in January that pushed President Emmanuel Macron to attempt to knife the treaty. | Pool Photo by Michel Euler via Getty Images

These are businesses that are hurting right now, particularly in France. Angry at Paris over an EU probe into Chinese electric cars, China has clipped preliminary tariffs on imports of EU brandy and is set to tag pigmeat and dairy next. Likewise, Donald Trump’s election in the United States promises another tussle over exports of high-value goods like wine and olive oil.

This doesn’t mean everyone wins from Mercosur of course. Beef is taking a slap and poultry, sugar and rice will get scratched, too. But it’s important to place these negative effects in context, insist Commission officials.

First off, the tariff-free quotas Brussels has afforded the South Americans are low. For beef, these account for 1.6 percent of Europeans’ annual consumption by volume and a smidge more by value. It’s even less for poultry and sugar, which by volume weigh in at 1.4 percent and 1.2 percent respectively. Rice is below the single digit.

“It will be like two burgers per EU citizen per year that’s going to be allowed in these quotas,” calculated Bruno Capuzzi, a Brazilian trade economist currently teaching at Italy’s European University Institute. For poultry, “it would mean two chicken filets per EU citizen per year.”

The effect is hence predicted to be small. For beef, the combined impact of the Mercosur deal, an already-concluded New Zealand deal and a potential one with Australia is expected to tap down producer prices by 2.4 percent and output by 0.9 percent by 2032, according to a Commission report from February.

“That is not a life-changing adjustment by any means,” said former negotiator Clarke. “There are far bigger impacts through exchange-rate fluctuations or increases in the price of feed and grain and energy.” 

Trading arguments

Beef and poultry lobbies counter that the type of meat matters. South America exports its best cuts to Europe: tenderloins, striploins and rumps for cows, and breasts for chicken. For local producers, it’s these lucrative sales that justify raising the animals, meaning the increased imports are a bigger blow than what initially shows up on the trade ledger.

“Since EU producers rely on breast meat sales to justify raising chickens, each two filets imported from abroad represent one chicken not raised in the EU,” said the AVEC poultry association. “The import of poultry filets therefore directly undermines EU production.”

Others disagree with this reasoning. For EU meat producers, it is actually the export of the cheaper bits — cow forequarters for minced beef, poultry legs for drumsticks — that subsidizes the expensive ones. So in order to become self-sufficient in poultry breast, Europe would have to find much bigger demand for the by-products than exists, argued Capuzzi.

The beef and poultry quotas are also higher than what is actually being shipped. Right now, Mercosur countries only send one burger and a filet-and-a-half per person, suggesting there isn’t the huge demand for South American protein that farmers imply when they talk of a surge of foreign meat.

South America exports its best cuts to Europe: tenderloins, striploins and rumps for cows, and breasts for chicken. | Ronaldo Schemidt/Getty Images

Moreover, EU negotiators have carved out emergency safeguards for these products that mean Brussels can intervene if imports disrupt the single market. This is unusual for quota-restricted goods, marking an extra buffer for local farmers, one Commission official said at a news briefing last week.

All in all, the official said, the current panic is reminiscent of the 2010s, as the EU negotiated the CETA trade deal with Canada. “We were told that CETA was the end of the beef industry in the EU,” he remembered. In the end, Canada’s difficulty in meeting EU standards means it hasn’t exported much, while actually increasing its imports of some cuts from Europe.

“There is a difference between the things that are said in the streets and the things that we see when we analyze the figures,” added the official, who spoke on condition of anonymity.

Blood will tell

For Chris Hegadorn, adjunct professor of global food politics at Sciences Po Paris, the concern from the agricultural sector — and particularly French farmers — isn’t really about lost earnings.

“It would be hard to argue that this would not ultimately benefit producers of French cheeses or French wines or French higher value-added [goods]. Now, is that a broad swath of the agricultural community? Who benefits? I would say it’s broad enough,” he told POLITICO.

Rather, “they feel like there’s a double standard: EU policy has been all about climate, has been about deforestation rules, has been about health of consumers,” Hegadorn said. “Making it easier to import and consume more red meat,” especially from methane-belching cows from deforested areas in Mercosur, involves, if not hypocrisy, then “certainly competing narratives.”

That said, European farmers haven’t been any more consistent. From livestock emissions and anti-deforestation rules to pesticide overuse and animal welfare, agricultural lobbies have decried unsustainable practices abroad while weakening regulation at home.

Many environmental and health laws have suffered “strong pushback from these same lobbies that are protesting this trade deal,” remarked Hegadorn. “I would rather see the EU fighting to bring others up to their higher standards on sustainability, rather than reverse gears on ecology, biodiversity and health standards.”

Giorgio Leali contributed reporting.

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