The free trade treaty recently announced by the Mercosul governments (Brazil, Argentina, Uruguay, Paraguay) and the European Union (EU) during the G20 meeting in Japan will have a disastrous impact on the industries of the southern cone, while it will increase the opportunities of offshoring Europe’s industries.
According to this treaty, which still has to be ratified within the next five to ten years by the parliaments of these South American countries and by those of EU member countries, those countries will become members of the EU-Mercosul bloc with import-tax exemptions. This concerns auto industries (today paying 35 % import taxes), spare parts (now paying between 14 % and 18 % taxes), industrial equipments (from 14 % to 20 %), chemicals (up to 18 %), textile industries (up to 15 %) and pharmaceuticals (14 %).
Besides, the European industries will introduce sophisticated agri-food products such as wine (today paying 27 %), chocolates (20 %), alcoholic drinks (20 % to 30 %), cheeses (28 %), biscuits (16 % to 18 %), tinned fish (55 %) and even soft drinks (20 % to 35 %) without tariffs and excise duties.
It will be the same with service industries: the doors will be flung wide open to foreign enterprises which at present cannot openly operate in Mercosul countries.
The serious threat to the environment is caused by the fact that the treaty provides what goes under the name of “investor’s rights”, which means that
multinational companies implanted in one of the countries concerned by the treaty have the right to claim that “environmental protection” laws breach on their profits, thereby enabling them to demand arbitration by a “conflict solving” panel (outside any democratic control of national states) as well as hefty compensations and rectification. For instance, the taking into account of the “investor’s rights” will make it possible to by-pass, foil or even cancel those laws considered as binding such as those on deforestation in the Amazon region which impact on agri-food production, mining industries or woodcutting.
If deforestation has considerably increased in the Amazon region since Bolsonaro came into power, the EU-Mercosul treaty can further hamper the implementation and strengthening of existing environmental protection laws against violation by enterprises.
“Investor’s rights” is also a powerful weapon in the hands of multinational companies against the human and social rights of those countries concerned by the free trade treaty. After the free-trade treaty was signed between the EU and Mercosul, the Bolsonaro government says it would welcome an ambitious bilateral free trade agreement with the United States. This leads to the conclusion that the EU-Mercosul treaty, initiated by Brazil’s PT government and Argentina’s Krichner government, could be used as a forerunner of the true objective of a free-trade agreement with the United States.
Correspondent in Brazil