A trade agreement between the European Union (EU) and a coalition of countries collectively known as Mercosur could mean significant losses for American ag exports. Mercosur is made up of Argentina, Brazil, Paraguay, and Uruguay. Once ratified, the agreement will encompass a quarter of world GDP. An analysis from the U.S. Department of Agriculture’s Foreign Agricultural Service details how the agreement will impact U.S. exports.
“A preliminary analysis, based on presumed tariff reductions and TRQs, indicates that U.S. agricultural products that compete with MERCOSUR and EU products will be at a significant disadvantage,” the report states. “A preliminary analysis identifies nearly $4 billion in U.S. products that are potentially threatened by MERCOSUR competition and tariff reductions under the new EU-MERCOSUR trade deal.”
Under the agreement, 93 percent of tariffs for Mercosur exports to the EU would be eliminated. Preferential treatment would also be given for the remaining seven percent. “The EU’s success in securing a commitment to protect GIs, and the language on the “precautionary principle” in the agreement will continue to serve as a template for future EU trade negotiations and potentially serve as a barrier to U.S. exports,” the report reads.
Mercosur imports of agricultural products largely already come from the U.S. and the EU with little overlap. The impact of the EU-Mercosur would have a potentially larger impact on U.S. exports to the EU. American ag exports averaged $15.4 billion annually to the EU between 2015 and 2019. The largest impact would likely be felt in ethanol exports, with Mercosur presumed to gain market share under the agreement.
The trade deal was initially struck in 2019. Although agreed to by both parties, the trade deal has yet to be ratified by the European Commission and European Parliament. Concerns around environmental policies in Brazil have been growing in recent months. There has also been some resistance levied on behalf of EU producers that have concerns about the impact the trade concessions may have on domestic markets.