Trade agreement with South America: winners are the cattle barons

The rainforest in the Amazon still burns, in the cities of the world millions protest for species and climate protection - and the EU wants to create just now with the South American Mercosur states the world's largest free trade zone. A first official impact assessment, which has just been published, reads sobering from the EU's point of view.

Experts from the prestigious London School of Economics have calculated two scenarios. In the moderate scenario, tariffs would fall by 90 percent and services fees by 50 percent, and in the "ambitious" scenario, they would be 97 and 75 percent. The most important results of the 253-page study:

• The South American meat producers would be the biggest profiteers; In Brazil alone, production would increase by as much as 5.7 percent by 2032. Overall, the EU would import 30 to 64 per cent more beef and 37 to 79 per cent more meat than before from the Mercosur states of Brazil, Argentina, Uruguay and Paraguay.
• The production of sugar and cooking oil would also rise sharply in some countries, such as Brazil or Uruguay.
• Since cattle, sugar and soy plantations require large tracts of land, the agreement could further favor the destruction of the rainforest .
• According to the experts, the agreement would have a "negligible" effect on the emission of greenhouse gases . CO2 emissions in the EU would increase by only 0.03 to 0.05 percent by 2032, by as much as 0.18 in Brazil and by as much as 0.7 percent in Argentina. No big deterioration, but no improvement.
• "Modest", however, would be the economic gains. Accordingly, gross domestic product in the EU would increase by just 0.1 percent. The consequences for the EU's global trade flows would also be "minimal", even if individual economic sectors such as engine and mechanical engineering would grow by half a percent by 2032. Things are different in the small markets of South America. In Colombia, for example, imports and exports would rise by six percent in the short term and even by as much as ten percent in the long term.

Critics are encouraged by the report in its rejection of the Mercosur agreement. The Green MEP Anna Cavazzini, for example, sees "minimal economic gains, but a rapid increase in meat imports and more greenhouse gas emissions". And that the new Brazilian government under the right-wing populist Jair Bolsonaro weaken environmental authorities and promote deforestation was not even considered in the study.

"So not ready for signing"

Proponents of the agreement argue that the Mercosur states are committed to implementing the Paris Agreement on Climate Change - including the commitment to stop the illegal logging of the rainforest. However, the trade agreement contains no instruments to enforce these commitments and sanction violations.

"That's why this agreement is not ready for signing," says Bernd Lange, head of the Trade Committee in the European Parliament. The fires in the Amazon region have shown that the environmental obligations are already not being met. "Therefore it would be a joke to ratify the agreement in its present form," says the SPD politician.

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Amazon fires: destruction of the rainforest is likely to progress

The EU Commission and the governments of the Mercosur states have already agreed on the trade agreement in June. However, it still has to be ratified by the European Parliament and all EU states. Whether the Mercosur states - above all Brazil - the text would tie up again, is considered questionable. "But you have to try it," says Lange. After all, the controversial investment protection mechanism was also modified during the ratification phase of the Ceta Agreement with Canada. Basically, an agreement with the Mercosur states would be desirable according to Lange. "Otherwise Bolsonaro is completely detached and has no obligations at all," says the SPD man.

Political signal to USA and China

Similarly argues Daniel Caspary, chairman of the CDU / CSU group in the European Parliament. In the expected one and a half years until the final ratification of the agreement, "we will intensively discuss stopping rainforest deforestation". In the long run, the treaty could make Mercosur states more sustainable and more responsive to modern, greener technologies. According to the impact assessment, the profit for the EU, which is manageable, is no counter-argument for Caspary: "Nobody expected the EU's economic performance to skyrocket."

Above all, however, Caspary sees in the contract a political signal. "We want to strengthen the rule-based global trading system and not sacrifice it to the US or China," says the CDU politician with regard to the protectionist policies of US President Donald Trump and the increasingly aggressive methods of Beijing. "With the failure of the Mercosur agreement, nothing would be better."