45 billion euros on the table. Expert: EU farmers can make a profit thanks to the new agreement

EU farmers will not lose out on the agreement with Mercosur, provided that protective instruments, such as tariff quotas or the so-called entry prices – told PAP prof. Stanisław Kowalczyk, head of the Food Market and Safety Department of the Warsaw School of Economics.

January 17 this year The head of the European Commission, Ursula von der Leyen, signs a trade agreement between the European Union and the Mercosur bloc of countries: Argentina, Brazil, Paraguay and Uruguay. It assumes that EU countries will introduce customs preferences for certain agricultural products, and in return, Mercosur markets will open to EU industrial and agricultural goods. Farmers' protests are a reaction to the agreement, including: in Italy, France, Ireland and Poland, who believe that the EU will be flooded with cheap food that does not meet EU safety standards, and that EU agriculture will collapse.

Farmers can benefit from this

EU agriculture expert Prof. does not agree with such a bleak scenario. Stanisław Kowalczyk. – The agreement contains provisions that protect community agriculture. The point is that it is not known how EU protective instruments, such as tariff quotas or the possibility of suspending imports in the event of excessive price drops, will work – he said.

He reminded that the agreement assumes, for example, the possibility of restoring higher customs duties when market prices fall by five percent compared to the three-year average. –

However, it may be difficult to prove that the drop in prices is the result of duty-free imports, e.g. from Argentina or Uruguay, the professor pointed out.

He said that currently tariffs from Mercosur countries range from 25 to approximately 30 percent.

Another instrument protecting the EU market is: tariff quotas (quantitative)which determine how many and what agricultural products the EU can accept in particular years. There are approximately 20 commodity groups on this list, mainly sensitive ones, such as poultry, beef and dairy products.

– In the first year of the agreement, Mercosur countries can sell only 30,000 to the EU. tons of poultry meat. This is a trace amount, considering that Poland produces approximately 3.5 million tons of meat and its products annually and exports 2 million tons of it, he explained.

He also noted that the maximum amount, i.e. 180 thousand. tons of this meat will be imported only in the sixth year of the agreement. As for hard cheeses, the full quota will only be available in 10 years.

Another brake that the EU can apply in the event of turmoil on the food market is entry price system for imported vegetables and fruits. This means that the EU will have the opportunity to introduce prices below which, for example, tomatoes, cucumbers, apples, plums or pears cannot be imported. – All in all, if we analyze the provisions of the agreement with Mercosur, it turns out that the most sensitive products, i.e. beef and poultry meat, even if they were introduced in full quotas, i.e. those that will be in force in 6 years, their exports will constitute less than 1.5 percent. production of the entire EU – he pointed out.

Additional EUR 45 billion for farmers

He also noted that, taking into account the additional EUR 45 billion in additional aid for farmers under the Common Agricultural Policy, it may turn out that EU agricultural producers can benefit from the agreement with Mercosur.

However, the expert admitted that understands farmers' fear of the agrarian power that Mercosur is today. These countries have an agricultural area of ​​approximately 380 million hectares, while the agricultural area in the EU is less than 160 million hectares. Additionally, in Argentina alone, the area of ​​pastures can be increased by approximately 10 million hectares per year if it is profitable.

The second fear that keeps EU farmers awake at night, and which – according to the professor – is justified, is different production and environmental regimes. In the European Union, they are among the highest in the world, while in Latin America they are of little importance. These include, for example, restrictions on the use of plant protection products, veterinary drugs, or the obligation to green some areas in order to maintain moderation in the use of the environment. The requirements that EU farmers must meet make production costs in the EU approximately 30% higher than in South America.

It is true – as the PAP interlocutor pointed out – the agreement with Mercosur states that as part of trade exchange, both parties must comply with the so-called sanitary and phytosanitary rules (The Sanitary and Phytosanitary Agreement the World Trade Organization), i.e. a set of standards and regulations introduced by the World Trade Organization, but there is no clarification on, for example, what the control of imported goods should look like. It is also not specified how the EU is to check whether, for example, fruit imported from Brazil is not grown in fields created after forest clearing.

The professor pointed out that the programming document, which is the basis for the development of the financial agenda until 2034 and the agreement with Mercosur, states that “the European Commission will strive, in accordance with international regulations, for greater adjustment of production standards applied to imported products, in particular in the field of pesticides and animal welfare.” – If this sentence contains such a soft phrase as “will strive for greater adjustment”, one may have concerns about the extent to which the EU will check whether the welfare of Argentinian slaughter cows that went to beefsteaks is ensured – he said.

The EU must reduce the technological gap with the US and China

The economist emphasized that agriculture is only part of the trade agreement with Mercosur, and the agreement enabling increased exports of electronics, machinery, cars and medicines is very important for the economy of the European Union as a whole.

– In order to survive, the EU must reduce the technological gap with the United States and China, increase competitiveness and reduce dependence on selected sales markets, i.e. increase export diversification, he said. He added that the agreement with Mercosur gives it such an opportunity.

He pointed out that until Donald Trump took over the presidency in the US, the United States was one of the key economic partners of the EU. He emphasized that after the customs war that Trump declared on the EU and the world, Europe had to stop treating the American market as a serious partner in long-term trade talks.

– This is mainly why negotiations were accelerated and the agreement with Merosur was finalized – says the professor.

However, he did not specify how much the signing of the agreement would benefit the EU economy, e.g. by increasing GDP.

It will be difficult for the EU to compete with China

However, the expert has no doubt that it will be difficult for the EU to compete with China, which has become the main trading partner of the Mercosur countries over the past 15 years. He calculated that trade turnover between the Mercosur bloc and China has increased over 15 years from EUR 25 billion to EUR 175 billion, while with the EU it amounts to PLN 110 billion (PLN 60 billion in 2010).

– Unfortunately, the EU is currently well behind when it comes to the technological advancement of some sectors. At a time when the United States and China were devoting their time and money, for example, to the development of artificial intelligence, the European Union was wondering how to attach a cap to a plastic bottle – said Stanisław Kowalczyk.

When asked about the impact of the agreement on consumers' wallets, he said: Importing cheaper products does not necessarily mean lower prices in stores. He recalled that two years ago, when the EU market was flooded with grain from Ukraine, grain products such as bread, flour and groats did not become cheaper at all. This was due, on the one hand, to high inflation driven by energy prices, but also to the export of this grain from the EU to third countries. – Therefore, it is difficult to predict what phenomena will dominate in the global economy in the coming years and how they will affect food prices – he said.

Asked when EU consumers will see the effects of the entry into force of the agreement with Mercosur, he pointed out that it may take up to several months because Argentina, Brazil, Paraguay and Uruguay must ratify such an agreement separately.

The value of foreign trade between the European Union and Mercosur countries is currently approximately EUR 110 billion. As for Poland, the total value of imports and exports is approximately PLN 4 billion.

Ewa Wesołowska (PAP)

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