It's not just inexpensive beef. This is the real reason why the EU made a pact with the giant

Rejection of the EU-Mercosur agreement is now presented as a Polish state right. After all, it is bad for Poland. But really? Let's see what the facts are, due to the fact that by any unusual chance, most of the EU has accepted it without large emotion. This is what it means for Poland.


The European Commission has just adopted a trade agreement with Mercosur. For now, it proposes a temporary agreement which the European Parliament and the EU associate States will subsequently accept.

At the same time, the Commission announced a "safety brake", a consequence to surplus products from Mercosur countries and the anticipation to pay compensation to farmers up to €6.3 billion.

Why did KE push for a deal with Mercosur?

First, politics and global politics. The European Union, which we are part of, needs very strong partners, both political and economic. For apparent reasons, it is not in the interest of the EU, including Poland, to strengthen ties with China or Russia. Broadly understood Asia is and will most likely be an crucial trade partner of the Union, but not the most important.

The issue of relations with the US is complicated. Everyone knows that the United States is power, but chimeric and playing its own piano, which is precisely what Donald Trump's policy shows. The EU needs a unchangeable partner, and that is what Mercosur seems like.

Mercosur is specified a South American EU

In this sense there is simply a work frequently called the "EU of South America". This may sound fun, but what kind of business do we have in dealing and bonding with countries so distant, both in terms of distance and economical and political systems?

Well, we do. Mercosur is abbreviated (Spanish Mercado Común del Sur) name of regional political and economical organization. Its members are Argentina, Bolivia, Brazil, Paraguay and Uruguay. There was inactive Venezuela, but it was suspended in 2016. Now look at the map.

Mercosur countries occupy nearly 60% of South America's surface area. In total, they have about 10.5 million square kilometres. The European Union has 4.2 million sq mi, the United States little than 9.9 million. By comparison, Russia has 17.1 million, China has 9.6 million sq mi. km. In the EU there are 450 million people, in the Mercosur countries about 260 million people.

So here's the deal with specified a group that would benefit the EU. Especially as the Mercosur countries have the same problem: they do not see themselves as partners of Russia or China, and the grace of the US rides on a horse. At global level, EU cooperation with Mercosur would be crucial and cost-effective. And it's not known today, due to the fact that the deal itself has been negotiated for... 25 years. It began to be discussed in 1999.

Interestingly, the subject was not hot in Poland either. The PiS governments had not previously seen the threat in the Mercosur deal until the Coalition took power on October 15.

And what will the sides gain from it?

The key assumptions of the EU-Mercosur agreement are to remove trade barriers, including many duties and restrictions. In short, the Mercosur countries can export food and fertilizer to us, and we will sale them cars, machines and services. Poland, which does not have its own automotive brand, but is simply a large component mill for this sector, besides has a strong industry.

The EU will receive 180 000 tonnes of poultry, 190 000 tonnes of sugar, 450 000 tonnes of ethanol (another 250 000 tonnes of reduced duty), 45 000 tonnes of honey, 30 000 tonnes of cheese, free of duty. The low rate will include 99 000 tonnes of beef and 26,500 tonnes of pork. These products are intended to meet the stringent European food quality standards.

That is not all: countries from America will implement European environmental standards, labour rights, sanitary standards, etc.

“Poland should sign this agreement – it opens fresh opportunities for Polish entrepreneurs in times of protectionist madness and it can aid strengthen the EU’s position on the global stage. I am reasoning mainly about the chance of acquiring fresh allies in South America and strengthening cooperation in the area of critical natural materials," says Mateusz Michnik, economical analyst of the Civic improvement Forum.

Does that make sense?

South American countries can produce food truly cheaply. There are excellent conditions and inexpensive labor. Contrary to appearances, soya-growing or cattle farming and transporting these products to the another end of the planet may be little failure to the environment than food production in the EU.

Europe, on the another hand, is highly industrialised and will have a place to send its production. And the Mercosur countries are going to change a small bit, possibly they'll halt robbing the environment and take better care of the workers. They may besides start to care more about the quality of the food exported. Here, the EU has quite a few experience and solutions worth exporting.

– Let us begin by saying that not all farmers in Poland will lose. Only those who are incapable to compete in price with Mercosur products can lose. The tariff quotas provided for in the agreement constitute a tiny part of the EU production," says Barbara Wieliczka, prof. of the Institute of agrarian improvement and Agriculture of the Polish Academy of Sciences.

What's the problem?

Everything looks beautiful on paper and in tables, but the devil is in the details. In the EU, food importers will benefit from the agreement. They'll just buy it cheaper. Worse with exporters, including Poland. The agreement will weaken Polish producers of poultry, beef, sugar, honey and cheese. Consumers are improbable to feel the negative effects of inexpensive food imports.

However, it is not amazing that Polish farmers are against the agreement with the countries of South America. Even if they buy inexpensive soya for animal feed, they will have difficulty exporting meat.

But is it big? That's the mystery. Duty-free quotas of products from Mercosur countries seem comparatively small. These 180 000 tons of poultry are small. For comparison: in Poland, about 3.5 million tonnes of poultry were produced last year, of which about 2 million tonnes went on export. But looking at the another hand: these 180 1000 tonnes are about 15-20 percent of Polish export surplus in this category within the framework of intra-EU trade (Cred Agricole calculations).

Therefore, it is not amazing that Polish food producers are being alarmed. Many will just be harder. But the economy and consumers will benefit from the Mercosur deal. But let us see at what cost.

– The actual possible losses are hard to assess. This depends on how attractive the Mercosur offer will be to EU buyers and whether imports from another markets will be transferred to Mercosur. erstwhile trade agreements concluded by the EU show that the forecasts and concerns of individual groups do not work fully," adds Dr Barbara Wieliczka.

"In general, the agreement is just a pretext for EU farmers to remind them that the budget of the Common Agricultural Policy has truly shrunk in the face of inflation over fresh years, and that, in the face of the fresh EU objectives, industry, defence, there is no chance of expanding support for agriculture," he explains.

– As regards farmers, yes, vulnerability to competition can be perceived as a failure from the position of European agriculture. Nevertheless, it should be noted that European agriculture is in good conditions – it has maintained trade surplus for years and production is growing. Moreover, there will be no crucial liberalisation in the agri-food area. For beef or poultry, quotas will apply. In specified a situation it is hard to say that imports from Mercosur countries will flood us," explains Mateusz Mihcnik.

He adds that alternatively of losing farmers, we should think more about how much agriculture is productive.

– In Poland, farmers in 2022 accounted for as much as 8.5 percent of employees and generated only 3% of added value in relation to GDP. Government privileges and subsidies keep Polish agriculture little productive and can even slow down changes in the increase in the size of farms – he recalls.

Money isn't everything?

There are inactive a number of questions that are at least curious and disputed. It is not known from now on that in South America a virgin forest and rainforest are cut to power to fit more fields. Soya and corn plantations are being formed there, which serves as feed for increasing flocks of cows, pig farms and poultry.

Even if the Mercosur countries warrant food quality, they are not present able to combine this with animal welfare, sustainable improvement or minimising environmental damage, about stopping exploitation of the poorest layers of society, not to mention.

Farmers in the EU must meet more and more stringent standards, and this entails costs. In Mercosur countries, specified standards are simply unknown, so agricultural production is much cheaper.

The fact that European farmers are against the agreement is not surprising. The EU first placed their powerful responsibilities to guarantee the highest quality of food and then decided to import inexpensive products from the another end of the world. That doesn't sound logical.

Food safety is simply a separate issue. It doesn't seem to be in danger. The full EU is fundamentally independent in this respect. Yes, EU countries import feed and food, but they produce adequate to feed the full continent. In addition, the Mercosur quotas are not large adequate to seriously disrupt agricultural production in the EU.

Agricultural lobbyists add that food safety from South America can be illusory. In the Mercosur countries there are no more stringent controls on breeding and quality than in the EU. However, the European Commission ensures that EU food safety standards are maintained and strictly respected against imports from Mercosur countries.

Little is said about the fact that the EU from South America will not only draw food. Mercosur has rather quite a few things that we (Europe) lack: lithium (necessary for batteries), graphite, nickel, manganese and uncommon earth elements. The rhetorical question is, do we like to buy them from China or Brazil?

Can anyone support Poland?

Another issue worth looking at is political support for the Mercosur deal. Poland has a strong agricultural lobby and is simply a food exporter. This agreement will affect farmers negatively, so Poland is against it. The problem is, we can be alone in the square.

Until recently, it seemed that France and Italy were behind us. These countries besides have strong agriculture, but they besides have strong industry. They betrayed us? No, I think they counted the cost and the profit.

Farming brings only 1.3% of its value to the EU budget (about EUR 234 billion). 4% of employees in this sector are employed. The full EU's GDP is around EUR 18 trillion. In Poland, employment and GDP impact rates are about twice the EU average. The problem is simply a large fragmentation.

Polish farms are comparatively tiny and inefficient, so they make comparatively low income. That's why we're a country that could lose a lot on a deal. another countries do not have specified a problem (or much smaller ones), which is why the Mercosur agreement does not origin much excitement there. Yes, they'll lose a little, but they'll gain a lot more.

Financially, both the EU and Mercosur will be on the plus side. According to estimates, the London School of Economics will lead to a GDP increase of 0.1% for the EU and 0.3% for Mercosur by 2032. In addition, European companies will save about €4 billion on customs.

Perhaps 0.1% of GDP does not look impressive, but it is now around EUR 18 billion, so it is definitely unacceptable. There are besides inexplicable (but undeniably positive) geopolitical considerations. So the question is to make certain that the agreement does not cost any hidden expense. And this is fundamentally the only thing the Polish government can do now.

Because it all points to the fact that we're gonna make money on the deal anyway, but for any farmers. However, these have promised compensation, so the problem can solve itself.