The agreement between Mercosur countries and the European Union would harm South Americans and needs to be rediscussed: that is what some representatives of people’s movements in urban and rural areas say about the text, which is partially supported by President Luiz Inácio Lula da Silva (Workers’ Party).
Lula is the current president of the group formed by Argentina, Paraguay, Brazil and Uruguay. Venezuela is suspended, and Bolivia is in the accession process.
Last week, during his visit to Germany, Lula said the negotiations (underway for 23 years) are at a decisive moment. He stated he will fight to conclude it while it is possible and will not accept something that is not positive to Mercosur.
In July, when Lula assumed the presidency of the bloc, he said “We want to discuss the agreement, but we don’t want to impose anything. That’s an agreement between partners. Nobody will put a sword on the other’s head. We will sit down, solve our differences and see what works for Europeans, Mercosur and Brazil.”
However, for the members of Via Campesina, the Movement for People’s Sovereignty in Mining (MAM, in Portuguese), the Brazilian Network of People’s Integration (Rebrip, in Portuguese) among other organizations, the agreement is irremediable and, therefore, unacceptable. During the Mercosur Social Summit, which took place in Rio de Janeiro early before the bloc’s meeting that began on November 6, they expressed dissatisfaction and demanded the end of the negotiations.
“That’s a complex agreement. For a thing of such a scale, one year is not enough to discuss and reassess the initial proposal presented to the previous misgovernments. How good is it to include Brazil and other Mercosur countries as mere ‘beggars of modification' [in the text]? Restarting or even ending the negotiation on this agreement would be strategic, given the divergence and imbalance in the relationship of forces,” said Raiara Pires, a member of Via Campesina and MAM.
When talking about “misgovernments”, Raiara refers to the governments of Former President Jair Bolsonaro (Liberal Party) and Former Argentinian President Maurício Macri. During their terms, the bulk of the agreement was defined. Now, it is officially being changed.
Economist Diana Chaib, a researcher at the Center for Regional Development and Planning of the Faculty of Economic Sciences (Cedeplar, in Portuguese) of the Federal University of Minas Gerais (UFMG, in Brazil), highlights that the text does not benefit Brazil.
“This agreement has a terrible vision of foreign affairs,” she said. “The European Union is not giving in in areas that interest us. So, it's not an agreement where both sides benefit from.”
What are the problems?
Paulo Nogueira Batista Jr, former vice president of BRICS New Development Bank and executive director at the International Monetary Fund (IMF) representing Brazil and other countries published an article in Brasil de Fato about the Mercosur-EU agreement. He states there are so many problems with it that 50 pages would be necessary to list all of them. However, he mentions five to exemplify how erratic it is:
1) According to Batista Jr, the Europeans would have free access to our industrial markets, but they are making few concessions in the areas Brazil and Mercosur are competitive. The agreement zeroes the import taxes on over 90% of goods trade. It turns out that, in Brazil, the tax for importing industrialized goods is 15.2%; in the European Union, 1.8%. “In other words, the reduction to zero on our side is an important advantage for the Europeans. However, the decrease on their side is residual, insufficient for Brazil to be able to export industrial goods.”
2) The agreement prohibits the collection of export taxes, which are allowed under World Trade Organization (WTO) rules. According to Batista Jr, if properly adjusted, this tax can contribute to investments in adding value to agricultural and mineral commodities. “This is what China and Indonesia, among other countries, do,” he said.
3) Batista Jr highlights that the agreement prohibits state-owned companies from establishing public policies on product prices and purchases of local products. It would harm, for instance, the development of policies and supplier training programs used by Petrobras, Brazil’s state-owned oil major. He recalls that Argentina excluded from the agreement many state-owned companies that are strategic to the country. Brazil did not do the same.
4) The agreement weakens Brazil’s family farming, since it allows the trade of almost 100% of what it produces, Batista Jr wrote. “Our family farmers would be threatened by imports from Europe, which are produced with high subsidies.”
5) Agribusiness gains little to nothing from this agreement because the sector would continue to be managed by quotas. He explains that quotas are insufficient (lower than the current exports from Mercosur to the EU), “fictional” (aimed at products in which the competitiveness of European products hardly leaves room for South American exports) or “inoffensive” (aimed at products that do not have trade barriers in Europe).
Economist André Roncaglia, a professor at the Federal University of São Paulo (Unifesp, in Portuguese), confirmed part of the same problems Batista Jr listed. To him, considering these issues, the agreement would harm the national economy. “It’s an agreement that would harm our economy, wouldn’t bring big gains to agribusiness and clearly exposes the power asymmetry [in place]. Europe gains a lot and gives almost nothing,” he said.
Mauricio Weiss, an economist and professor at the Federal University of Rio Grande do Sul (UFRGS, in Portuguese), points out that the agreement provides for punishments for Mercosur countries in cases they do not comply with climate goals – which do not apply to EU countries. He recalls that Lula has strongly opposed this topic. However, even if it is excluded from the agreement, it would continue to be far from ideal.
“The Lula government has been improving important topics, but it does not make his agreement a good one: it changes from being a terrible agreement to being a bad agreement. An agreement that is not worth it,” he said. “For Brazil, it would be good South-South agreements that can add to production and with that complement [our industry etc.]”.
FTAA rebranded?
Giorgio Romano Schutte, a professor at the Federal University of ABC (UFABC, in Portuguese) and coordinator of the Observatory of Foreign Policy and International Insertion of Brazil (Opeb, in Portuguese), explained that the problems with the Mercosur-EU agreement are a consequence of the way it was discussed.
According to Schutte, the agreement began to be negotiated in 1999, when the United States pressured Brazil and other South American countries to join the Free Trade Area of the Americas (FTAA, also known as ALCA). At that time, Europe was seen as a more flexible partner. Therefore, it would make more sense to reject the FTAA and get closer to the Europeans.
Schutte recalls that, in 2004, Lula was already president, and the Mercosur-EU agreement had advanced. However, Lula rejected it precisely because the text already prohibited state-owned companies from acting for the strategic development of countries. During the first Lula government, Petrobras assumed an essential role in the growth of the national economy.
Schutte explained that the EU agreement was back on the agenda under Macri's leadership over Mercosur. He saw in the negotiations the possibility of reactivating the Argentinian economy under an “ultraliberal” agenda. With Bolsonaro, he accepted all kinds of European requests so that everything could be concluded as quickly as possible.
According to Schutte, the agreement was not signed definitively because the European Union saw political risks in allying with Bolsonaro. The EU added to the text environmental conditions that were not debated before Lula took office due to lack of time.
Lula, whose government has an environmental agenda, has said that the way Europe treats Mercosur is too rigid. For Schutte, he has asked for changes to the agreement as a way to buy time and show a willingness to negotiate. Behind the scenes, it is possible that his government is no longer interested in negotiations because it contradicts the country's reindustrialization projects.
“This agreement does not match the guidelines of the new Lula government. It fits in Paulo Guedes's [former Bolsonaro minister] liberal agenda,” Schutte said. “It's an agreement from the 90s, a decade that saw liberalization as a way of developing the economy. This is something that has proven time and again a failure all around the world.”
“I think President Lula played a game by saying he wanted to approve it, knowing that the Europeans would be intransigent on several measures, particularly on environmental issues and those that protect their agribusiness,” added Roncaglia, who also sees the Lula government as disinterested in negotiating.
Edited by: Rodrigo Durão Coelho
