Let’s break some (European) eggs

I would like to start off by apologising for the pun to my fellow European friends, but as the famous saying goes, you can’t make an omelette without breaking eggs. This is very true for international relations.  Brazilian negotiators are historically not too keen on doing that, and to be fair Brazil’s ‘on the fence’ diplomacy has had its benefits, but it is arguable whether that is the best strategy to adopt in terms of agricultural trade negotiations. And this question gains particular relevance as the negotiations of the trade agreement between South-American bloc Mercosur and the European Union (EU) start to progress at a faster pace towards a conclusion*. The outbreak of the wide-scale tainted egg scandal in Europe in recent months and, Brazil’s reaction to it (or lack thereof), sheds some light on this concern.
Since late July, eggs contaminated with the insecticide fipronil have been discovered in 40 countries, including 24 of the European Union’s 28-member states. According to the European Commission, the only EU member states so far unaffected are Lithuania, Portugal, Cyprus and Croatia. Millions of eggs have been pulled out from European supermarket shelves, and some national regulators have already shown concern that contaminated eggs have entered the food chain through processed products. The British Food Standards Agency (FSA) estimates that over 700,000 contaminated eggs hit the UK alone. Dutch authorities talk about more than 10m imported tainted eggs.

Eggs

Fipronil is commonly used in veterinary products to treat pets for ticks and fleas, but its use in the food chain is forbidden. According to the World Health Organization, the insecticide is considered moderately toxic as it can cause abnormalities of the thyroid and the kidneys, seizures and even death when consumed by humans in great quantities.

Dutch and Belgian authorities traced the source of the insecticide to a supplier of cleaning products in the Netherlands. Since then, two men have been arrested.  But the regional diplomatic and sanitary crisis remains.

As it emerged in early August, Dutch authorities received a warning that fipronil was being used illegally in farms in the Netherlands in November 2016. Belgium learned about the contamination in early June. Neither notified the European Commission’s Rapid Alert System for Food and Feed (RASFF) in time. More surprisingly, it is alleged that the European commission’s IT system also failed to transmit the alert in early July to the RASFF.

The Netherlands does not export many eggs to Brazil. Even though, according to the ITC, the country ranks in the 5th place among the main origins, it represented less than 2% of all eggs imported in 2016, for example. Still, France, the United Kingdom, and Germany – all of which have been directly affected by this crisis – are also on that list with higher shares. Given the health risks associated with the consumption of these products, and the demonstrated lack of coordination between the local sanitary authorities, this scenario begs the question: what are Brazilian authorities doing about it?

On the one hand, some response to Brazilian consumers is due. On the other hand, and perhaps more important for the sake of our argument, is this scenario not enough to question the European sanitary standards? As British newspaper The Guardian reported in August, this “has been the latest in a long line of food scares highlighting the vulnerability of the human food chain to modern farming and the continued gaps in its supervision.”

Yes, Brazil has its own glass ceiling when it comes to “supervision gaps”. Earlier this year, Brazil’s meat exports were hit hard after a police investigation into alleged bribery of food-sanitation inspectors sparked a wave of trade bans from Europe to China. Police have accused about 100 people, mostly inspectors, of taking bribes in exchange for allowing the sale of rancid products and failing to inspect meatpacking plants. The scandal involved 21 of the over 5,000 processing plants in the country. As a response, the EU asked Brazil to voluntarily suspend shipments of meat to its member countries to avoid a more “cumbersome” formal ban. And this has been prolonged to date. European authorities visited the country in May and understood that not enough measures were in place yet to ensure the safety of exports. Whether they are wrong or not, in technical terms, is arguable. But, solely in the context of trade negotiations for market access, they are right.

Brazil, Latin America’s biggest economy, is one of the world’s leading exporters of several agricultural goods, from coffee and orange juice to sugar, soybeans and meat – poultry, pork, and beef. European producers are aware of that and have been placing pressure on their local governments to ensure the best scenario for them in the context of the Mercosur-EU negotiations. With a wider experience in negotiating agreements than Brazil, or Mercosur in general, including negotiations of plurilateral agreements with complex partners in Asia and the USA, the EU authorities and private sectors have learnt that sanitary negotiations are not isolated, they are encompassed in this context and represent bargain power.

Negotiations – be it between countries, sectors or people – are all about finding common ground. Given that Brazil and the European countries are willingly seeking to deepen trade relations, and their respective productive sectors support that – in different degrees – we may assume that there are enough benefits to all to look forward to. An ‘omelette’ can be beneficial to all parties. Still, given that free trade comes to a cost – at least in the short term, to the less efficient segments – one needs to negotiate well, which means, sometimes, recognizing not only one’s own glass ceiling but that of the counterpart.

 

* Initiated in 1999, the Mercosur-EU negotiations were re-launched in May 2010. Ten negotiation rounds took place mostly focused on rules (as opposed to market access) before they were paused again in 2012. On 11 May 2016, the Parties exchanged offers for the first time since the re-launch. The next round of negotiations should take place in Brasilia between 2 and 6 October 2017. The Agreement is a priority on the foreign trade agenda of the Brazilian government as well as of Mercosur in general. The level of interest of the European counterpart has been less clear. In any case, the expectation in Brasília is that the two blocs will be able to reach a positive result in 2018.


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