Mercosur deal would cost EU more than $15bn

17 July 1998

Mercosur deal would cost EU more than $15bn

THE European Union would have to pay up to Ecu14.3 billion ($15.6 billion) a year if it were to compensate farmers for the effects of agreeing to a free trade deal with Latin American trading group Mercosur, a confidential report has revealed.

The report, ordered by the European Commissions budget directorate, said compensating farmers for the fall in prices resulting from a Mercosur pact would cost between Ecu5.7 billion and Ecu14.3 billion.

Beef farmers would need Ecu1bn, assuming prices fell 5%, but the figure could rise to Ecu4.4 billion if prices fell to levels consistent with the Mercosur countries; they include Brazil, Argentina, Uruguay, Paraguay and associate member Chile.

The cereals sector, together with pig and poultry farmers, would require Ecu500 million, sugar Ecu2.8 billion, rice Ecu300 million, fruit and vegetables Ecu900 million, milk and milk products up to Ecu2.1billion and sheep and goat farmers Ecu200 million-Ecu2 billion.

Costs could rise another 25% after the planned enlargement of the EU to take in five central European countries and Cyprus.

Meanwhile, another confidential report by the Commissions agriculture directorate says the main constraint on Mercosur farm production is lack of markets rather than land. It says beef poses the biggest problem for the EU because Mercosur prices are only about 50% of Europes.

The report is a further blow to the aspirations of Manuel Martin, Latin American relations commission, for opening negotiations on a free trade agreement.

The French Government has already indicated that it holds grave fears about a possible pact. It has called for a debate on the issue at next Mondays meeting of EU farm ministers.

  • Financial Times 16/07/98 page 33
  • Financial Times 17/07/98 page 6

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