Sugar is the sweet spot of an EU-Mercosur trade deal

Written by Géraldine Kutas on 5 September 2017 in Opinion Plus
Opinion Plus

EU-Mercosur trade talks have progressed on many issues this year, but sugar - a critical area for Brazil and a huge source of potential for EU industry - has been left out, writes Géraldine Kutas. 

EU-Mercosur trade talks have progressed on many issues this year, but sugar - a critical area for Brazil and a huge source of potential for EU industry - has been left out | Photo credit: Fotolia


EU trade policy is on a roll. After reaching a deal with Japan, the largest bilateral free trade agreement yet, the EU has set its eyes on a deal with Mercosur (Argentina, Brazil, Paraguay and Uruguay). 

Such a deal offers huge potential for EU industry: it would greatly improve access to emerging markets of over 250 million consumers and many of Europe's key sectors - automotive, machinery, chemicals and pharmaceuticals, but also agricultural and food producers such as garlic, olive oil, wine and pears - are set to benefit. 

Since this would be the first trade deal that Mercosur closes with another major trading bloc, the EU would have a first mover advantage, allowing its businesses and products to establish themselves in the Mercosur markets before other competitors can move in. Altogether it would strengthen the EU's role as a trading power and create jobs and growth.

As an observer of these negotiations since their inception, I must admit that they have historically been slow, but the Mercosur countries are showing unprecedented political will and strong alignment to get a deal done. 

This year, talks progressed on many issues such as sustainable development, technical barriers to trade and public procurement. A measure of Mercosur's willingness can be seen in opening up its procurement markets to European business - the first time ever it has opened these up to third parties. 

However, some so-called 'sensitive' areas have not yet been included in the negotiations, in particular sugarcane products - sugar and ethanol. For Brazil this is critical. The sector is highly competitive and provides more than one million jobs. 

Brazil is the world's largest producer and exporter of sugar, yet it only accounts for four per cent of all EU sugar imports. 

In comparison, Mauritius alone accounts for 28 per cent of EU sugar imports and EPA/EBA countries for 54 per cent. 

I strongly believe that increasing sugar imports from Brazil will promote social and economic development. Brazilian legislation stipulates that sugar exports from Brazil to Europe be sourced in the north east region of the country, one of its most vulnerable areas. The GDP per capita of this region was US$5834 in 2015 (US$ 8757 for Brazil). Compare that with the US$9252 GDP of Mauritius in the same period. 

European industry would also gain from imports of Brazil's sugarcane products. Ethanol is an important feedstock for the chemical industry and today the high tariffs on imported bioethanol puts the European bioindustry at a disadvantage. The same is true for sugar, which is a key raw material for the European food and drink industry, but also for the chemical sector.

So far the European sugar industry is rejecting any concessions to our sector, claiming the industry is highly subsidised. In particular, they confuse and miss-label the high economic efficiency, industrial integration and product diversification of Brazilian sugar mills as cross-subsidisation. But the truth is that the EU provides at least the double of the support we receive in Brazil. 

Successful trade agreements require give and take, and Mercosur countries are prepared to grant important advantages to EU industries, more than they have ever offered before. If the EU really wants to increase its access to the major growth markets of Mercosur and reap the benefits of a close partnership in South America, it needs to also be open to concessions in the areas that are of critical importance for Brazil and other Mercosur countries. The EU cannot have its sugar-coated cake and eat it too. 

 

About the author

Géraldine Kutas is Head of International Affairs at the Brazilian Sugarcane Industry Association (UNICA)

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