Draft agreement between Mercosur and the European Union: Q&A

On 28 June 2019, the European Commission and the four Mercosur countries (Argentina, Brazil, Paraguay, Uruguay) concluded a political agreement. This paves the way for signing an association agreement which will be based on political dialogue, cooperation and trade. This agreement will cover 91% of trade between the two areas.

What is the next step in the process?

After legal review, the European Commission will transmit the draft agreement to the Council of the European Union for approval. It will then have to be approved by the European Parliament, before being signed by the Council at which point the trade aspect of the agreement will enter into force provisionally as the Union has exclusive jurisdiction on trade. The content of the agreement is within the jurisdiction of the European Union and its Member States, this agreement will therefore be subject to ratification by all Member States, including the French Parliament, before it can definitively enter into force.

What is France’s position on the agreement?

Based on the information at its disposal, France believes that its major demands have been taken into account. This agreement will enable agricultural and industrial markets to be opened up while protecting French geographical indications. The provisions of the agreement offer significant economic opportunities for our exporters with a region where France has a trade surplus of €2 billion and €31 billion of direct investments.

France remains vigilant and has recalled that it would not support the agreement unless the Mercosur countries comply with a series of commitments and that the provisions of the agreement enable them to be closely monitored. France is defending a demanding position, particularly as regards agriculture and sustainable development. It has set the following key points as conditions:

  • the text must mention the effective implementation of the Paris Climate Agreement;
  • European environmental and sanitary standards must be respected and the precautionary principle must be explicitly written into the agreement;
  • sensitive value chains, particularly beef, sugar and poultry must be protected through limited and progressive quotas, and through a safeguarding clause applied to agricultural products subject to quotas which should help manage imports. Obtaining such a safeguarding clause is a first for an agreement of this type.

A transparent national evaluation

France will examine the draft agreement in detail when it is submitted to ensure that its conditions are indeed met. It will follow the same process as for the CETA (adding in the issue of biodiversity) to carry out a total, independent and transparent assessment at a national level, before the agreement is examined by the Council of the European Union. This will enable France to gauge the impact of this agreement on the most sensitive agricultural value chains, including beef and sugar, on French overseas territories and sustainable development.

Why is this agreement good for France?

French exports to the Mercosur currently stand at approximately €6 billion in good and €3 billion in services every year. The agreement will bring about tariff reductions for all European Union exporters, including France, particularly for wines, dairy products, certain fresh and preserved fruit and vegetables. The automotive industry, chemical and pharmaceutical products and textiles will also be concerned. As regards opening up the services market, it should bring about a significant increase in the value of French services once the tariffs dismantling has been completed. French businesses should also benefit from greater possibility to participate in Mercosur public procurement.

Reducing tariff barriers will help guarantee access for French businesses to growing markets in order to provide new markets and help them to remain competitive. This will support both large businesses and SMEs.
The independent national evaluation will aim to analyse the impact of this agreement on France from a macroeconomic perspective.

Does the agreement protect agricultural value chains?

At the request of France and several Member States, a safeguarding clause will apply to European agricultural products subject to quotas, including beef, poultry, ethanol and sugar. If will enable European countries to impose temporary measures to limit imports if there is a significant and unforeseen increase in imports which may create problems on the European market. The details of the clause, its application period and the conditions for invoking it, still need to be analysed.

In the conclusion of this agreement, and to dissipate any fears from the agricultural sector, the Commission has committed to implementing a package of financial measures to support the European agricultural sector, which could be up to €1 billion. The package could take the form of help to store goods should prices deteriorate, funds accessible to beef producers, and financing to promote beef on the internal and international market.

France is also particularly attentive to effectively protecting geographical indications (according to the European definition) and the issue of sensitive agricultural products that are not subject to quotas.

Particular attention will be paid to the impact of the draft agreement on sensitive agricultural value chain during the national evaluation.

What guarantees does the agreement give regarding sanitary and phytosanitary standards?

The agreement mentions the precautionary principle and contains specific provisions on exchanging sanitary information, fighting antimicrobial resistance and cooperating on animal welfare. Products imported into the European Union must respect the standards in force within the internal market. Importing hormone-treated beef into the European Union, for example, is prohibited. Countries wishing to export to the European Union must therefore improve their level to create value chains which comply with European standards.

The text must include provisions regarding international standards, regionalization, and transparency on notification of sanitary and phytosanitary measures. All these provisions will be verified throughout the entire process.

How does the European Commission ensure compliance with sanitary standards?

The European Commission regularly carries out audits in third-party exporting countries. Should serious non-compliance issues or repeated violations of sanitary import standards be noted, the European Union may unilaterally stop imports from a third country, or implement heightened surveillance at the border with systematic checks and analyses. It is also possible to suspend the export authorization for foreign establishments that do not comply with European standards.

Does the agreement take into account our commitments to the climate and protecting biodiversity?

As regards the environment, and in accordance with the position continuously defended during the negotiations, France will analyse whether the agreement negotiated by the European Commission meets its expectations regarding sustainable development. The commitment of the signatories, particularly Brazil, to fighting deforestation taken within the framework of the Paris Agreement must feature within the Agreement. It must include dialogue with civil society.

In addition to renewing the commitments made by the Mercosur countries under the Paris Agreement, the draft agreement also includes provisions taking into account the sustainable forest management and the fight against deforestation. France was one of the countries requesting these provisions.

In addition to the parties’ commitment to ratifying international conventions on the environment (especially the CITES, on the issue of biodiversity), the agreement sees Mercosur countries undertake to implement measures to fight illegal deforestation and to promote the use of wood from sustainably managed forests. It encourages parties to cooperate to ensure that wood imported from Mercosur countries does not come from illegal forestry.

Lastly, this agreement is part of the more general framework of an association agreement and will therefore enable a political partnership to be created between the European Union and the Mercosur on many issues including deforestation issues.

Updated : July 2019