Mercosur negotiations behind closed doors

Cattle breeding for meat export in the department Treinta y Tres in Uruguay.
Political article
Anger is widespread in Mercosur countries over free trade negotiations with the EU. It is feared that industrial jobs will disappear to make way for a commodity-exporting economy. Things are not much different in the case of EFTA.

The negotiations on a free trade agreement between the European Free Trade Association EFTA (Switzerland, Iceland, Norway, and Lichtenstein) and the Mercosur countries of Argentina, Brazil, Paraguay and Uruguay are hardly on the civil society radar in Latin America. Most federations and labour unions are oblivious to the fact that negotiations have also been in progress with EFTA since last year, but away from the public gaze. The visit of a delegation headed by Swiss Federal Councillor Johann Schneider-Ammann did little to change that.

This contrasts starkly with the free trade negotiations with the European Union (EU), which are being bitterly opposed by labour unions, NGOs, parliamentarians, as well as employer organizations. Launched in 1995 and deadlocked between 2004 and 2010, the negotiations regained considerable momentum a few years ago with the rise of liberal governments in the region. These negotiations are taking place behind closed doors, but thanks to occasional leaks in the EU and based on experience with other negotiations, we do know, however, that the misgivings of civil society in Mercosur countries also apply to the EFTA process.

No studies on the implications for sensitive sectors

The Coordinadora de Centrales Syndicales del Cono Surthe body representing the trade union movement in Mercosur – and the European Trade Union Confederation reject any agreement between countries and/or economic areas at different stages of development, which does not envisage special and differential treatment for less developed countries. They regret that there are no studies on the implications of the agreement for sensitive sectors, which would make it possible to incorporate measures to protect jobs that would risk disappearing or being transferred elsewhere. After all, the industrial and trade policy of Mercosur countries could well be wrong-footed by overly drastic and rapid tariff cuts. Their industries are not competitive enough to withstand cheaper imports from the EU or Switzerland, and must be protected.

In Switzerland, both Alliance Sud and Public Eye are calling for studies assessing the potential consequences, and are supported in this by the Control Committee of the National Council. Yet the Federal Council outright rejected this request in replying to a corresponding interpellation by parliamentarian Maya Graf; it is only willing to support a study that examines the environmental impacts of extensively liberalizing certain agricultural products.

SMEs in danger

Argentine labour unions for their part reject any treaty with the EU, as it would spell the end of domestic industry. They stress that an agreement would negatively affect domestic production in general and certain strategic sectors in particular; mention is made of technology, water transport, public works, government procurement, medical laboratories, the auto industry and regional economic structures. They are also critical of the insufficient protection that would be given to small and medium-size companies (SMEs) under the agreement.

Switzerland has an eye on the enormous Mercosur market, comprising 275 million consumers and still relatively protected. Tariffs on industrial goods average 7 per cent, but can be as high as 35 per cent. Switzerland hopes above all to be able to boost its exports of chemicals, pharmaceuticals and machinery.

In a rare show of unanimity, Mercosur employers' associations issued a harshly worded statement calling for transparent negotiations, and setting conditions that would enable affected industries to adapt to new circumstances. Moreover, the agreement would have to take account of the different levels of development of the parties to it. They call for an "industrial development clause" and for the preservation of various instruments that would protect the job market.

In an article entitled "Being the breadbasket of the world is not a business model", Argentina's Julio René Sotelo, member of the Mercosur Parliament, questioned the rationale behind the agreement. He maintains that the agreement could convert Mercosur into an exporter of agricultural commodities at the expense of its own manufacturing industry, thereby jeopardizing 186,000 jobs in Argentina alone. Other consequences would be the loss of national sovereignty as well as threats to regional integration.

In a country with runaway inflation – in Argentina, one US dollar still sold for 19 pesos at the end of 2017, in early September 2018 it was almost 40 – where the prices of imported goods are rising on a daily basis, import dependence is a major issue.

Agribusiness at the expense of small farmers

In an article published in February 2018, Alianza Biodiversidad, a coalition of 12 regional NGOs, underscored that an agreement with the EU (and EFTA) would benefit mainly Mercosur's agricultural commodity-exporting elites, who are counting on increased sales of cattle and soybean. The signing of the agreement would further compound the problems already being caused by agribusiness, namely deforestation, the displacement of peasant farmers, agrochemical pollution, the destruction of regional economic structures, loss of food sovereignty and diminishing food security.

Today, family smallholdings are the principal producers of food in the region. The model being proposed by the agreement would help the food industry control land, leading to even more of the violence, criminalization and persecution to which the region's small farmers are already subject today, says Alianza.

Mercosur trade unions fear that relaxed rules of origin might lead to the offshoring of production to countries where labour rights are less respected. They denounce the liberalization of strategic sectors, including public services, and deplore the planned reinforcement of patent protection rights, which will make it more difficult and expensive to bring generics to market.

Delayed introduction of generics

As bitter experience has shown in neighbouring Colombia, this fear is not unfounded. On the basis of the free trade and investment protection agreement, the Swiss State Secretariat for the Economy (SECO) some years ago objected to Bogota's plans to bring to market a generic of Gleevec, a Novartis anti-cancer drug.

Switzerland already has investment protection agreements with Argentina, Paraguay and Uruguay – but not with Brazil, which has no such agreement with any country. If, as contemplated in the agreement, intellectual property rights are prolonged beyond the 20 years currently foreseen under the World Trade Organization (WTO), it would pave the way for Swiss companies to file complaints against the four Mercosur countries.

The planned free trade agreement also includes accession to the 1991 UPOV Convention. The abbreviation stands for International Union for the Protection of New Varieties of Plants; the Convention impedes the exchange and use of seeds by the small farmers and has led to the privatization of the seed trade; and this in countries where the use of genetically modified organisms is already very widespread today.

Lastly, European and/or Swiss enterprises would gain access to tender procedures for government procurement in Mercosur. The agreement treats State enterprises like commercial enterprises and exposes them to foreign competition. States would thus lose their steering role.

Argentine economist Claudio della Croce sums it up this way: producers associations, NGOs, trade unions, employers' associations, social movements, politicians and parliamentarians have so far been able to prevent the signing of a free trade agreement with the EU that would be unfavourable to Mercosur. It remains to be seen whether it will be the EFTA or the EU that will succeed in changing that. Or neither.