EU-Mercosur Free Trade Agreement

22 October 2004
Article

Summary

While negotiations for a Free Trade Area of the Americas (FTAA) remain on hold in relation to the US elections, the governments of the Mercosur countries (Argentina, Brazil, Paraguay and Uruguay) are hastily negotiating a free trade agreement (FTA) with the EU that is also harmful for the region. Negotiators are rushing to meet an October 31st deadline, when European Commissioners will be changed, meaning that if the agreement is not signed by that date, the negotiations will have to restart anew.

The social movements and CSOs in the region that have campaigned against the FTAA want to make public and explain our opposition to this harmful agreement with the EU. This proposed agreement jeopardises our sovereignty and our future and the prospects to advance and make progress in a truly sustainable sub-regional integration within the Mercosur area and with the European peoples and nations.

As we shall see, our governments in the MERCOSUR countries are ready to offer and hand over key sectors of our national economies to uneven competition with big European transnational corporations in sectors such as industrial goods, fisheries and maritime transport, insurance, environmental services (including water and sanitation), financial services and telecommunications, government procurement. The agreement also proposes tougher rules on intellectual property rights (IPRs) that will hinder the transfer of technologies and facilitate bio-piracy and an illegitimated appropriation of knowledge associated with biodiversity use and additional legal guarantees for European investors - all in exchange for alleged profits and benefits for a few exporting agribusiness sectors in the Mercosur region.

We declare that this trade-off exercise is absolutely unacceptable, as is also the total lack of transparency with which these negotiations are being conducted.

Therefore, we demand that MERCOSUR governments and negotiators:

  • decline from signing this treaty with the European Union
  • immediately stop the negotiations
  • undertake wide and participatory, popular and sectoral consultations and binding referendums before re-initiating any negotiations
  • ensure full involvement of national parliaments in all the stages of the new negotiations, prior to the signature of any agreement
  • conduct social and environmental impact assessments of liberalisation in the region in the last decades

1. Market access in agriculture - the survival of family farming and peasant agriculture at stake

The MERCOSUR governments are playing all their cards to obtain market access in Europe for some of the agricultural commodities and processed agricultural products from our region (specifically meat, soya and etanol). But in order for that to happen, market access must be mutually granted, which means that we will have to further open our markets to subsidised agricultural imports from Europe (e.g cheese, chocolates, liquid coffee), leading the vast majority of our peasants and family farmers to bankruptcy and ruin.

One of the areas of greatest concern in this field of negotiations is the fate of the dairy sector in Mercosur, where milk is considered to be a sensitive product, thus protected with a 27% tariff applied to European milk imports. Nevertheless, the Mercosur's exceptions list for acknowledged sensible products is not being applied to the EU-Mercosur trade agreement. In the case of Brazil, peasant and family farmers (small holders) account for 82% of the 1.8 million dairy farms and at least 80% of milk production. If this FTA were to be signed according to the schedule before November 1st, the current applied tariff of 27% would be reduced to 0% over a period of ten years (except for powder milk) with serious impacts on family farming, because that would result in important tariff reductions (approximately 50% tariff cuts). Increased imports, which are already abundant, would be catastrophic and have a huge impact on national price levels and the livelihoods of millions of small holders. Probably more than a million small farmers that currently produce approximately 30 liters per day each would not qualify to the productivity levels required to be able to compete with European milk producers and would go bankrupt, loosing their livelihood, thereby becoming part of the mounting rural exodus. Production of onions, garlic, grapes, peaches and other farm produce will experience the same fate. All of these are grown in small holdings.

In addition to what this agreement means in terms of prying open our own markets, the fact that our governments are basing this alleged economic integration on increased exports of agricultural commodities and processed agricultural products implies giving priority to export agriculture both nationally and regionally, rather than to peasant and family farming and the satisfaction of the dietary and other needs of our population. Export agriculture benefits only a minimal fraction of the farmers in the region (the biggest producers and landowners). In fact, the whole agriculture and food processing chain in the region -from seeds to processed foods-is already largely controlled by big transnational corporations, many of which are European. This emphasis and priority granted to export agriculture threatens our peoples' food sovereignty, given that we run the risk -as is currently the case in Argentina-that export (soy) production displaces the production of foodstuffs such as milk for the domestic market, or as in Uruguay where tree plantations for export are encroaching into good farmland, in both cases displacing small and medium sized farmers that supply the domestic market. It also threatens our food sovereignty, security and safety because export agriculture is to a great extent highly polluting of the soil, water and air and is based on the principle of uniformity rather than on the rich diversity of our peasant agriculture. These environmental and safety concerns will be seriously aggravated in the region with the proliferation of GM crops for export.

Furthermore, the negotiations of this agricultural chapter clearly reveal the extent to which the European alleged market access offers are really a deceptive fraud. In the beef sector, for example, the EU is in fact offering us less than we are already exporting to Europe -that is, 116,000 tons while we are currently exporting 275,000 tons. As if this were not bad enough, the export quota they are offering us for beef is not granted all at once but piecemeal throughout a 10 year period, for the four countries of the Mercosur. In other words, even if our governments would give away all of our domestic markets with the illusion that the EU would open their markets to increased agricultural exports from the Mercosur in sectors where we have a comparative advantage, the EU will still be protecting its own markets while our governments negotiate everything away.

In the same vein, the EU maintains proposals for a system of progressive import tariffs vis a vis increasing exports from the Mercosur region. Thus, the more we export the higher the EU tariffs will be. Such a system will only benefit those who are already exporting beef to Europe, given that they will increase their profit margins without exporting more. In other words, there will be no additional market access for new producers, and no difference in the amounts of beef exported under the terms of this trade agreement.

Last but not least, the EU offers under negotiation include a set of conditionalities which we consider to be absurd: on one hand, Mercosur is asked to secure higher levels of IPR protection for products with specific geographical indications that apply to wines, cheese, jam and others, leading possibly to ban the use of terms such as parmesan cheese, rocquefort cheese, bologna sausage, champagne, etc., given that this geographical indications have already been patented in Europe. On the other hand, the EU is offering import quotas that it plans to grant piecemeal throughout a ten year period and divided into two distinct phases, where the second phase would be conditional to the results of the negotiations in the WTO.

2. Mercosur's right to establish autonomous industrial policies threatened

MERCOSUR governments have agreed to open up to 90% our domestic markets for industrial goods, while the EU is demanding that they be 100% open - the same level to which they have agreed to open the EU market for industrial products from Mercosur countries. This is an unfair equation, because if we analyse the item lines which we trade with the EU, it becomes clear that Mercosur countries export primary products, mineral resources and low priced manufactures while the bulk of its imports from the EU are industrial goods. Proposed market access levels for industrial products would further aggravate these imbalances.

The latest UNCTAD report warns about the fact that during the period stretching from 1980 to 2003 the purchasing power of developing countries grew much less than the strong increase in the volume of their exports. This results from the fact that the prices they pay in the international market for the products they import from developed countries, such as machinery and equipment, IT products and high tech industrial products and high R&D value added products (such as medicines, for example) grew much higher - more than 9% in 2003 alone - than the prices of their own exports. What is worse, the terms of trade for example for Brazilian exports of manufactured products such as shoes, textiles, and steel or aluminum products, deteriorated despite the growth in export volumes of these products.

This trade agreement will further aggravate this worsening terms of trade for MERCOSUR, resulting in unacceptable damage to the environment and over exploitation of natural resources in our countries, permanently locking the region into a role in the international division of labor as exporters of increasing amounts of ever cheaper raw materials.

With regards to the automotive sector, the auto-parts industry in Mercosur has denounced the serious blow it would receive if the proposed market access rules are approved, given that many of the automobile plants established in the region are European and the high likelihood that these plants would change their production strategies to privilege their European suppliers and intra-firm trade. The elimination of proposed restrictions will facilitate the circulation of products within the production chains of the big transnational corporations.

3. This FTA transforms water, sanitation and our territorial seas into commodities

In the negotiations on services the stakes are to (further) open up our markets to European service providers in sectors such as telecommunications, banks, insurance, "cultural and education services", "environmental services" (water, sanitation and pollution control), postal services, construction and tourism services. Water is critically important in this regard, most specially the fresh water reserves in the Gauaraní Acuifer that all four Mercosur countries share. Even though it is not part of what the EU is CURRENTLY requesting, there can be no doubt that big water TNCs (a majority of which are European) will push for unrestricted access to the Guaraní Acuifer once the initial agreement is signed, given that this agreement will be open to renegotiation of further liberalisation commitments.

With regards to the negotiations on fisheries and coastal navigation, the EU is pushing for a reduction of our territorial seas from current 200 nautic miles to barely 12 nautic miles; if this agreement were approved, European fishing fleets would be able to consider everything they fish outside of that 12 mile limit as their private property. This is nothing less than the first step towards the privatisation of the seas of the world! As if this were not sufficient, Mercosur is offering European investors the same treatment it gives to our own national investors and industries.

4. Mercosur offers preference to European providers in government procurement

In the negotiations on government procurement, Mercosur is offering preferential treatment to EU tenders vis a vis other countries and regions. This means that once the agreement is signed, our governments at every level (national, provincial, municipal and decentralised bodies) would have to give preference to European suppliers in all public tenders beyond a certain amount of money. Obviously, there are a number of areas in which European suppliers are more competitive than our domestic industry, and they would then be allowed to compete for public investments in infrastructure, potentially resulting in lost opportunities to generate domestic employment.

5. This treaty is illegitimate and damaging for our peoples

It is a matter of the most serious concern that enormous pressure is being exerted for the approval of this agreement by some agricultural sectors (and within governments, for example in the Brazilian case, by the Ministry of Agriculture and the Ministry of Development, Industry and Trade whose interests are prevailing) when the Mercosur governments haven't even had a chance to assess the EU proposals globally. The EU says that assymetrical treatment in specific sectors such as textiles will be maintained and is not up for discussion. We are very concerned about the unbalanced nature of this negotiations and for the fact that our governments are not addressing such imbalances, while they have strongly held this tenet in the FTAA negotiations, not accepting to negotiate unless the differences in economical, industrial and commercial development are taken well into account.

Whatever concessions are made in the context of this agreement will set a precedent , and it will be very difficult not to grant the same preferences to other partners in the context of other trade agreements and fora. This means that the very generous offers that the Mercosur is making to the EU will have to be the starting point for any other trade agreements were Mercosur countries are involved, most importantly when the FTAA negotiations resume. There is no doubt that the US government will restart the FTAA negotiations demanding that the Mercosur countries be as generous with them as they have been with the EU.

In terms of the possibilities for a re-launch of a MERCOSUR that can be a viable instrument for the creation of an integrated economical and political community of nations in South America, the terms of the agreement that is currently being negotiated with the EU are unacceptable.

If our diplomats were successful in halting the FTAA negotiations because it does not meet the requirements and hopes for an autonomous, sustainable development project, why are they now allowing this agreement with the EU to proceed? This agreement threatens important sectors of peasant and family agriculture in the region, of our domestic industry and services, and the jobs of millions of citizens in the Mercosur countries. Who wants to give up all this in exchange for nothing? This agreement is just one more "free trade" agreement that will fill the pockets of the European TNCs and a few agribusiness sectors in the Mercosur.

The approval and signature of this agreement would not only represent an imposition on the incoming European Commission, but also on one of the members States of the Mercosur that will be electing a new president and parliament on the same day the governments had agreed as a deadline to sign this agreement (October 31st, national elections in Uruguay). An agreement that has been stitched up in such a haste would no doubt deceive the will of the people on both sides of the Atlantic.

6. Conclusions

We don not understand why nor accept the reasons with which our governments and the capitalist interests they protect are trying to justify such haste in celebrating so called "free trade" agreements. The EU itself has given the world a lesson of patience and moderation in taking no less than fifty years to construct an agreement amongst the European nations, but now they want to impose on us a very comprehensive and far reaching agreement in less than no time.

In order to address the threat of such a damaging agreement from being signed at the cost of the vast majority of the people in our society, it is crucially important that the social movements and CSOs that campaigned and mobilised against the FTAA demonstrate our opposition and pressure our governments to:

  • decline from signing this treaty with the European Union
  • immediately stop the negotiations
  • undertake wide and participatory, popular and sectoral consultations and binding referendums before re-initiating any negotiations
  • ensure full involvement of national parliaments in all the stages of the new negotiations, prior to the signature of any agreement
  • conduct social and environmental impact assessments of liberalisation in the region in the last decades

Signatories

Brazil

  • Campanha Brasilera de Luta contra a ALCA
  • Coordinación de Movimientos Sociales
  • Associação Brasileira de ONGs
  • CUT - Central Única dos Trabalhadores
  • REBRIP - Rede Brasileira Pela Integração dos Povos
  • Via Campesina Brasil (Movimento dos trabalhadores rurais sem terra- MST, Movimento dos pequenos agricultores- MPA, Movimento das mulheres camponesas- MMC, Movimento dos atingidos por barragens - MAB, Comissão pastoral da Terra- CPT)
  • FETRAFSUL
  • CONTAG
  • Jubileu Brasil
  • PACS
  • FBOM
  • Argentina
  • Autoconvocatoria No ALCA
  • Barrios de Pié

Uruguay

  • Campaña nacional por la soberanía y contra el ALCA

Paraguay

  • Consulta Popular Paraguay
  • MCNOC

Chile

  • Alianza Chilena por un Comercio Justo y Responsable ACJR

Peru

  • Alianza Social Continental - Capítulo Peruano

Colombia

  • Recalca

Venezuela

  • Alianza Social Continental - Capítulo Venezuela
  • Fuerza Bolivariana de Trabajadores
  • Unión Nacional de Trabajadores

Ecuador

  • Ecuarunari - CONAIE

Bolivia

  • Movimiento Boliviano de Lucha Contra el ALCA
  • Trinidad and Tobago
  • Federation of Independent Trade Unions and NGOs (FITUN) of Trinidad and Tobago

Canada

  • Polaris Institute

Europe

  • ATTAC Germany
  • FDCL - Centro de Investigación y Documentación Chile-América Latina Germany
  • World, Economy, Ecology & Development (WEED), Germany
  • Corporate Europe Observatory (CEO), The Netherlands
  • One World Action-Central America, United Kingdom
  • SOMO (Foundation of Research on Multinational Companies), The Netherlands
  • Transnational Institute, The Netherlands

Asia

  • YungChan Choi / Christian Park Korea
  • All Together / Globalize from Below Korea
  • Focus on the Global South Thailand
  • South East Asian Council for Food Security and Fair Trade ( SEACON ) Malaysia

Continental Networks

  • Hemispheric Social Alliance (HSA)
  • World March of Women
  • ALOP
  • Consumers International
  • Oxfam International