EU-Mercosur Deal is a Symptom of Neoliberal Exhaustion

The culmination of twenty years of intermittent trade negotiations, the EU-Mercosur trade deal stands to open up fissures in Irish life. Aiming to liberalise trade barriers between the EU and the four membered South American bloc over a ten year period, the deal has been championed as a beacon of economic liberalisation in an increasingly protectionist planet.

The preliminary text was agreed in principle in late June 2019 with key points including

• €4 Billion Euro of annual tariffs to be lifted on goods such as cars (35%) and chemical imports (18%) with tariffs on imported agricultural produce being reduced in tandem.
• Transition period of up to ten years for majority of tariffs to be phased out between the blocs.
• Greater market access for Mercosur agricultural goods with quotas established for tariff free importation of certain agricultural products.
• 357 European traditional products being given protection as “geographical indicators” prohibiting cheap imitations from Mercosur nations.
• Allowance made for European companies to bid for public contracts on equal terms as Mercosur companies.
• Both EU and Mercosur blocs being obliged to follow International Labour Organisation Conventions on child labour and collective bargaining.

With 91% of European exports to the bloc being affected and onerous tariffs on manufactured goods scheduled to be lifted, the deal has been met with the expected laudations from Brussels technocrats and economists alike. Four times larger than a similar agreement hammered out with Japan, the deal looks set to be the jewel in the Crown of a concluding Junker Commissionership. With €40 billion worth of exported goods going to Mercosur per annum and with the EU making up 20.1% of Mercosur’s total exports, the agreement has been welcomed by major players on both sides.

While by no means rubber stamped and having to be approved by both the European Parliament and national assemblies, it is a welcome feather in the cap of Brussels heading into the G20 summit in Osaka.

Despite commitments towards implementing the Paris Climate Agreement and protection of labour laws and product standards, the deal has engendered the ire of green and farming groups alike.

Described by Irish Farmer Association President Joe Healy as giving a ‘green light’ to further deforestation in Brazil, the deal has resulted in protests by the farming lobby. With allowances of an additional 99,000 tons of South American beef to enter the EU market tariff free, a very real fear exists of Irish and European markets being inundated with cheap imports. A 2016 report by the EU Commission’s Joint Research Centre around the issue of trade liberalisation with Mercosur projected a potential 16% drop in EU beef prices resulting in losses of up to €750 million euro for Irish farmers as a whole.

From the more ecologically minded the deal is drawing fire with concerns over emissions and general sustainability. Green Party spokeswoman on Agriculture Pippa Hacket cited the potential negative effects on largely family based farms specialising in suckler farming, as well as the need for Irish beef to establish itself as a world leader in quality.

The logic of the deal stands to tip many smaller Irish farmers into insolvency with a third of our agricultural exports based on the over exposed beef sector. A sudden wave of South American imports brings the risk of land abandonment in marginal rural areas furthering the contracting of rural communities.

The beef export sector currently valued at €2.9 billion stands at a precipice with 51% of exports already directed towards a soon to be departing Brexit Britain, which may see its own market flooded with cheap imports as well.

With €4 billion of annual duties scheduled to be phased out with an emerging market the deal is a textbook example of the advantages of liberalised trade. However it is this very two-dimensional textbook that has resulted in the rise of populism in the first place.

The French rioter who dons a yellow vest each week, or the European voter who ticked the box last May for populist parties will not be moved one inch by this deal. The deal, while supposedly validating the need of international bodies like the EU, instead highlights a certain exhaustion within liberal institutions. Populism was born out of the same myopic economic reasoning that underlines this agreement and certainly won’t be extinguished by it.

In cynical economic terms the Agreement prioritises European manufacturers over Irish and Continental farmers. The standard Leaving Cert level reasoning that goes with these agreements is that enabling the EU to specialise in high return manufactured exports to the South American nations brings better net economic effects. The actual reality will be a potential reduction in standards as an already saturated Irish and European market is hit with cheap Mercosur imports.

Ireland’s seven million cattle herd matter very little against the two hundred and thirty millions of Brazil reflective of Ireland’s general position within global economics. 

In a joint letter to the EU Commission, An Taoiseach Leo Varadkar alongside French President Emmanuel Macron highlighted concerns over the agreement and the risk posed to European farmers. Arguing for the need to protect safety standards and to not increase import quotas, the letter typified the extent to which disquiet exists about the deal even at the highest levels of EU life.

The logic of the agreement by its nature incentivises South American cattle ranchers, resulting in deforestation, as well as European car manufacturers to export across the planet. This runs contrary to the trumpeted green line pushed from Brussels from which Irish taxpayers will feel the brunt in the form of carbon taxes and miscellaneous charges . With the spectre of global warming why does the EU seem committed to opening up trade from halfway across the world?

Irish broadsheets were unusually peppered with scepticism around the Agreement, among them the Fine Gael-aligned Sunday Independent. A strong likelihood exists that even the europhillic Dublin government may see the need to lobby against the deal.

Proponents of the one size fits all model of economic liberalisations cite these agreements as being necessary. Globalisation is not going into reverse even if political liberalism may be, so it is best for economies to open up on their own terms and with liberal democracies taking the lead. Despite hiccups these agreements provide better standards of living on the whole it is argued.

However embodied by the agreement is an economic model intent on cannibalising itself, and opening up the pathway of populism from the left or right.

An alternative to the EU-Mercosur agreement is not to be found in the national autarky of old, however it is a failure of imagination to think this is the only model of globalisation on offer. No amount of neoliberal sophistry can remedy an absurd situation whereby Ireland has its beef industry flattened by foreign exports.

Those who tell you this is an inevitability with globalisation make the same cardinal mistake made by Marxists in the 20^th of putting an overemphasis economic factors. The human and societal cost of a collapse of Irish family farming outweighs any GDP increases

A potential alternative lies in a radical fusion of ideas around sustainable eco-farming and reinvigorated national communities taking control of food supplies. Making Ireland dependent on food imports from across the world in goods it can easily produce to a high standard is a doomed economic model. 

The green movement while often chastised as being a pursuit of South Dublin hippies offers certain alternatives to the Mercosur Agreement. The Food Sovereignty Movement aims to give local communities control over their consumption and production of food, bypassing the need for opaque transnational agreements.

While more often than not, these agreements are prone to a lot of scaremongering from the left and right, the pitfalls of this emerging agreement can be seen. The Irish farmer cannot be allowed to go the same way as the northern English steel manufacturer, thrown under the bus due to the apparent necessities of globalisation.

Since the Brexit process began the Dublin government has shown a willful ignorance about the realities of being a small administration unit in a wider transnational union. Ireland mattered as a prop during the Brexit negotiations but matters very little in international trade agreements. These agreements are tailored around what benefits the Union as a whole not the individual concerns of small nation states.

Facing into ever increasing globalisation we cannot fall back onto the stale neoliberal recipe reliant on devil may care liberalisation. 

Ireland may so far be missing its own Gilet Jaune movement or Trumpian figure, however the mindless pursuit of myopic trade agreements sets the stage for an inevitable rise of populism a decade hence.