Rhein on Energy and Climate

At the insistence of the Spanish presidency, the EU high Level meeting with the four Mercosur countries (Brazil, Argentina, Uruguay and Paraguay) has decided to reopen negotiations on a free trade agreement, which had been suspended in 2004 after five years of unsuccessful negotiations. Negotiations are to be resumed before the end of June.

From a European perspective such an agreement is not a priority and should not be concluded.

In commercial terms, Mercosur is a small trade partner, amounting to less than 3 percent of EU external trade. The EU has been running a persistent deficit, € 8 billion in 2009.

Agricultural products – soybeans, maize, sugar and beef make up the bulk of Mercosur exports to the EU. Brazil, the main the main exporter, will want to obtain additional concessions for its agricultural products. That is legitimate but bound to meet with resistance from EU countries with beef and grain production and no big export interests in the Mercosur. 10 Member states have already formally voiced their opposition to a free trade agreement with the Mercosur.

Opening up its agricultural market will make it more difficult for the EU to lower its agricultural subsidies, which is overdue to focus EU budget expenditures more on strategic programmes for its future economic development, like research and advanced technologies in the energy and climate sector. Spanish suggestions of compensating EU farmers for additional meat imports are absurd, but show to what ends EU diplomats seem ready to go for reconciling contradictory policy objectives.

Last and not least, lowering import duties on beef would be counter-indicated from a climate perspective. Cattle are responsible for high methane emissions, an extremely toxic green house gas. Moreover, the rapid expansion of cattle ranches has been a driving factor behind the rapid pace of destruction of the Brazilian forest cover, which makes Brazil the fourth biggest emitter of green house emissions. It is time for EU policy makers to also evaluate potentially negative climate impacts of their flurry of free trade initiatives.

In conclusion, the moderate levels of import duties in the Mercosur and the EU are no obstacle to flourishing bilateral exchanges of industrial and agricultural goods. Instead of aiming at free trade in goods the two sides should focus on encouraging trade in services and private investments.

Brussels 20.05. 2010 Eberhard Rhein

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