Project

EU-Mercosur trade agreement update

In a parliamentary motion of 31 January 2024 (Kamminga c.s. motion; kst-36410-XVII-24), the cabinet is requested ‘prior to decision-making on the EU-Mercosur treaty, to receive an update of Wageningen Social & Economic Research's report, and specifically to study what the effects will be on the Dutch agricultural sector if the Mercosur treaty is to be implemented’. This study is being conducted in response to the Kamminga et al motion and is an update of a 2020 study.

EU-Mercosur Agreement: Questions and Answers

What is the main aim of the EU-Mercosur agreement?

The primary goal of the EU-Mercosur agreement is to promote mutual trade. To achieve this, import tariffs will be reduced over a fifteen-year period, tariff-free import quotas will be increased, and market access will be improved. This will be done in part by aligning rules and regulations on food safety, technical standards and certification.

What are the expected macroeconomic effects of the agreement for the Netherlands?

The expected macroeconomic effects for the Netherlands are very limited. Compared to a scenario without the agreement, the gross domestic product (GDP) in 2040 is projected to be 0.02% higher.

Which sectors in the Netherlands are likely to benefit the most from the agreement?

The mechanical engineering and business services sectors are expected to benefit most from improved access to the Mercosur markets. These sectors are likely to see the strongest growth in exports. On the other hand, the beef processing industry is expected to be negatively affected due to increased competition from imported meat from Mercosur countries, both in the Dutch market and across the EU.

What are the expected effects on the incomes of Dutch agricultural businesses?

Due to the trade agreement, agricultural businesses may face slightly lower prices for their crops, milk or meat, while animal feed is expected to become somewhat more expensive. By 2040, veal farming businesses are projected to earn on average €590 less per year (a decrease of 1.2% compared to the 2018–2023 average), while laying hen farms may see a reduction of €530 per year (a decrease of 0.3%). Income losses are expected to be smaller for other types of agricultural businesses.

There are concerns about the environmental impact of increased trade between the EU and Mercosur, particularly regarding deforestation and biodiversity loss in Mercosur countries. There are also concerns about animal welfare and whether food safety is adequately ensured when importing agricultural products from Mercosur. Are these concerns justified?

This report focuses on the economic impact for the Netherlands and does not assess potential environmental or biodiversity effects. However, these concerns are valid and are being addressed within the framework of the agreement. At the end of 2024, the EU and Mercosur agreed on additional measures in the sustainability chapter. As for food safety: the EU applies strict import controls. The European Deforestation Regulation (EUDR) has not yet come into force, but it is expected to influence future imports as well.

Publications