EU and MERCOSUR Agreement: Despite Benefits for Exporters, There Are Skeptics in the Croatian Government

A recent protest by farmers in Brussels showed that the issue of importing agricultural and food products into the EU continues to trouble them. This time they protested against the EU’s free trade agreement with South American countries from the MERCOSUR bloc (Argentina, Brazil, Paraguay, and Uruguay) that is in preparation.

In addition to receiving support from French farmers, it is not insignificant that the French government is not in favor of signing such an agreement, and as we learned, there is no complete unity in Prime Minister Andrej Plenković’s government either, as the Ministry of Foreign and European Affairs supports it without reservation, while the Ministry of Agriculture expresses skepticism. Therefore, we asked the European Commission (EC) Representation in Zagreb to clarify what this is about, but we also wanted to hear the views of the Ministry of Agriculture and the Ministry of Foreign and European Affairs.

Namely, many in Europe believe that such an agreement will jeopardize European agricultural production as it will open up imports of agricultural goods from South America. However, the EC firmly believes in this agreement, which, as they convey from Brussels, is of exceptional political and economic importance. This agreement will be the first of its kind that MERCOSUR has negotiated with a global partner. It would open new opportunities for both sides as the agreement will balance the strategic and economic partnership connecting two regions with over 700 million people. The EC believes that new opportunities will be provided on both sides, giving EU companies a competitive advantage in the MERCOSUR region.

Four Billion Euros in Savings

The agreement also provides geopolitical significance for both regions as, in addition to economic benefits, it will deepen the political and economic ties of the EU with key partners in the global south, which is important due to pressing global issues such as climate change. Namely, as the EC believes, this agreement will support the continuation of the green and digital transition by the EU and MERCOSUR countries. They also expect it to strengthen the economic security of the EU in a divided world as ‘in today’s complex geopolitical climate, securing trade agreements with reliable partners is crucial for the economic resilience and security of the EU. Such agreements protect key supply chains, reduce dependencies, and ensure access to critical resources.’

– The EU-MERCOSUR agreement includes the latest standards for trade and sustainable development, reflecting the EU’s commitment to modern, responsible trading practices as seen in its recent agreements. President von der Leyen held bilateral meetings with Argentina, Brazil, and Paraguay on the sidelines of the UN General Assembly. She reiterated the EU’s commitment to concluding negotiations. The EU remains focused on ensuring that the Agreement meets the EU’s sustainability goals while respecting the EU’s sensitivities in the agricultural sector – they convey from the EC Representation in Zagreb.

When asked what the specific benefits of the Agreement for the EU are, they say it will increase competitiveness for companies in the EU. Namely, MERCOSUR countries will reduce high tariffs for EU companies, significantly increasing their competitiveness in those markets, opening new opportunities in various sectors and allowing EU exporters to save more than four billion euros annually on customs duties. Furthermore, customs procedures will be simplified, facilitating trade flows for EU exporters — which is particularly crucial for over 26,000 small and medium-sized enterprises from the EU currently exporting to MERCOSUR. The Ministry of Agriculture also adds that MERCOSUR countries will protect around 350 EU products with protected designations from imitation. However, as we will see later, there is some skepticism in the aforementioned Ministry, headed by Josip Dabro, regarding the potential consequences after the signing of the Agreement.

Does the Croatian Government Support the Agreement?

In any case, the EC Representation in Zagreb emphasizes that, in addition to all the above, EU companies will gain the opportunity to compete for public contracts in MERCOSUR countries under equal conditions, which is the first time in any third country since MERCOSUR previously limited its public tenders to internal companies. They will also have secure access to key raw materials and green goods, ensuring a stable, secure, and sustainable flow of essential raw materials. In this way, the Agreement supports the EU’s commitment to the global green transition and the growth of environmentally friendly industries. Finally, they convey from the EC Representation in Zagreb, it will strengthen economic security and resilience of supply chains. Namely, strengthened supply chains according to the agreement will improve the economic security of the EU, increasing resilience and safeguarding critical imports essential for European industries.

However, besides all the mentioned advantages, the EC has not indicated why it believes that EU farmers will not face unfair competition from South America. It was also conveyed that technical negotiations are ongoing and they conclude that the agreement is aligned with sustainability goals and addresses sensitive areas, especially in agriculture, which is a priority for the EU.

And does the Croatian Government support the Agreement? That is the right question. They support it, they convey from the Ministry of Foreign and European Affairs, headed by Gordan Grlić Radman, reiterating everything that has already been stated.

– We believe that signing and the prompt implementation of this agreement would not only bring economic benefits to both sides but would also strengthen the global presence of the EU, which is in the interest of strengthening strategic partnerships through the creation of solid trade ties. Equally important is the geostrategic argument considering the influence of China and the USA in the region – they say at the Ministry of Foreign and European Affairs.

Given that not all countries are still sure how good this agreement is for farmers, with France being the most important due to its leading agricultural production, the Ministry of Foreign and European Affairs states that ‘following the political agreement from 2019 and the additional instrument accompanying the Agreement from 2023 that addresses the concerns of certain member states regarding sustainability, the Croatian Government supports the work of the European Commission in finding solutions to bridge the remaining concerns of certain member states and to conclude this important agreement as soon as possible.’

Sensitivity of Agricultural Production

However, that there is, to put it mildly, caution within Prime Minister Plenković’s government regarding the signing of the agreement is evidenced by the response from the Ministry of Agriculture. Along with the aforementioned advantages that the Agreement brings, the Ministry of Agriculture emphasizes that there is still a risk that products produced under lower environmental and food safety standards will appear on the EU market and that the import of cheaper agricultural products will jeopardize the sustainability of small and medium-sized farmers in the EU. This problem already exists, just recall the protests of farmers across the EU in February of this year.

The Ministry of Agriculture reminds that the Ministry of Foreign and European Affairs, which represents the Croatian government in negotiations, consults with them on trade issues related to agricultural and food products, and in those consultations, Dabro’s ministry has repeatedly pointed out the sensitivity of Croatian agriculture and the possible risks of potential liberalization of certain agricultural-food products, such as beef, sugar, and poultry.

– The sensitivity of trade liberalization is not solely related to this agreement but also to the effects of other agreements concluded by the EU, as well as those currently under negotiation. Our general stance is that the EU’s trade policy should be better aligned with agricultural policy and that market liberalization should not be an end in itself. The interests of EU member states should be a priority. We advocate for the application of the same standards that producers in the EU must meet and believe that this requirement must be included in the trade agreements concluded by the European Commission. Although we are aware of the importance of concluding the Agreement with MERCOSUR, we must emphasize several facts. It is positive that since 2019, there have been discussions about applying high food safety standards and other conditions prescribed in the EU, however, observing the potential effects of this agreement, the mass protests of farmers across the EU, which were prompted by dissatisfaction with rising production costs and the import of cheap products that ultimately do not meet those standards, should not be overlooked. Since a political decision regarding the entry into force of this Agreement was expected in this case, the Ministry of Agriculture, Forestry, and Water Management, in accordance with its powers in the trade policy of our country, has warned about the sensitivity of the agricultural-food sector and the need for European, and thus Croatian agricultural producers to be protected from potential negative effects of the implementation of this Agreement – they say in the Ministry of Agriculture.

Thus, it is clear that the matter is not yet settled, as we can see, within the Croatian government there are those who wholeheartedly accept the Agreement with MERCOSUR, but also those who are skeptical and seek additional safeguards that agriculture will not suffer. It is likely that similar doubts exist in other EU member states, so we assume that is why no one could answer the question of when the signing of the Agreement is expected.