They are being promoted by the European Commission at the request of countries that were resisting signing the treaty. These mechanisms can affect the flow of goods to Europe, including those included in special quotas.
The agricultural sector and agribusiness celebrated the signing of the free trade agreement between Mercosur and the European Union (EU), but beyond the range of new opportunities that open up for the sector, it includes some gray areas in the regulations of the Old Continent bloc that could condition shipments.
These are the safeguards, which the European Commission decided to implement under pressure from the agricultural sector and European governments, such as Italy, which demanded their inclusion as a condition for signing the agreement. These "protection" mechanisms for the most vulnerable sectors should be discussed in the European Council and Parliament before the agreement is ratified.
According to the draft prepared by the European Commission, 24 agricultural and agro-industrial products would be subject to this type of unilateral sanction by the Europeans: fresh meat; high-quality chilled and frozen beef; frozen meat for processing; fresh, chilled and frozen pork; boneless poultry and preparations; bone-in poultry; powdered milk; cheeses; infant formula; corn and sorghum; rice; sugar for refining; other sugars; eggs; egg whites; honey; rum and other spirits obtained from the fermentation of sugar cane; sweet corn; corn and cassava starch; starch derivatives; ethanol; garlic; biodiesel; and citrus fruits such as lemons, oranges and tangerines.
According to the document, safeguards can be triggered once it is established and demonstrated that an increase in imports of these products has damaged or is affecting local production sectors.
The parameters, although they still need to be defined, would be a considerable increase in the volume of imports: in a short period of time more than 5% in comparison to the average of the last three years, or that the increase in Mercosur exports causes the domestic price to fall by 5%.
What is striking about the case is that this sanction mechanism can even occur in the quotas stipulated in the agreement, such as the case of meat and corn, to cite an example.
These safeguards are not included in the text of the agreement, but rather constitute "a kind of internal regulation of the agreement for Europeans," Nelson Illescas, Director of Content and Communication for the Group of Southern Producer Countries (GPS), told Clarín.
“It’s a trade defense measure and it’s unilateral. What the Europeans have to do with the Mercosur member countries is notify them that they are conducting the investigation and request information from exporters in order to measure the alleged impact and damage to local production. Now, what you have to do when you conduct a competition defense investigation is substantiate that there is damage and, above all, prove it,” Illescas added.
But beyond this process, Argentine exporters are concerned about the discretionary power that European countries can exercise. “It’s a rather worrying situation, because the EU establishes this unilaterally,” said Gustavo Idígoras, president of the Chamber of the Oil Industry and the Center of Cereal Exporters (Ciara-CEC).
“The purpose of an agreement is to create trade, but you can kill it with safeguards, because if they are applied in an unrestricted and reckless manner, they become a huge risk to the flow of trade,” he added.
According to Idígoras, Mercosur's exports to the European bloc once the agreement comes into effect "do not pose any risk to Europe; it is purely political. These products represent 1% of apparent consumption on that continent."
That is why the head of Ciara-CEC insisted that “Mercosur will have to negotiate after the agreement comes into effect. We have discussed this with the government; they are aware of it and don't like it, but they want it approved by Congress. However, we need to discuss the existence of these mechanisms or at least make them more lenient.”
For Illescas, these measures constitute “a threat” to Argentine and regional agriculture, as they “reduce certainty” for the sector. “It’s like what happened in Argentina with the ROEs: with that discretion, you don’t know if you can export or not. The Europeans need it to sign the agreement and send signals to their agricultural sector, given that they have a systemic competitiveness problem in that sector,” he added.
Furthermore, he agreed with Idígoras in considering that Mercosur shipments "do not constitute a threat to the European agro-industry, since the agreement was designed not to create problems for any sector."
“Those who might have had a problem were either excluded or fell into quotas. It's not intended to flood the European market with Mercosur products, but rather to consolidate existing trade. It won't skyrocket sales, and if it does, it will be because it replaces a less competitive supplier,” Illescas concluded.
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