South American producers fret over new rivals from EU trade deal

European farmers once feared South American competition, but now that the EU-Mercosur free-trade deal is in effect, some producers in Brazil, Argentina, Uruguay, and Paraguay are experiencing those same concerns. The deal, which took effect in May, has created a free-trade zone of 780 million consumers but also brought fierce competition from European goods at home.

Industries accustomed to protectionism are now having to contend with the trade-off of accessing the EU market. While safeguards may help many sectors, producers of goods like wine, cheese, honey, and chocolate are bracing for increased competition. Some will also have to abandon famous product names due to rules restricting their use on goods produced outside of Europe.

The premium cheese sector, in particular, is expected to be hit hard. Mercosur negotiators focused on the upsides for exporters to avoid backlash from farmers in European nations. However, producers may face challenges adapting to the new dynamics, as the bloc is currently negotiating subsequent deals with other countries. Supporters argue the benefits outweigh the drawbacks, but critics warn it could cement Mercosur as suppliers of raw materials, benefiting large-scale agribusiness at the expense of small family producers.

The first test of adaptability is underway as members haggle over how to share duty-free quotas for products like honey and rice. Adjusting the system will require agreement among the four members by September for implementation next year.