The EU-Mercosur trade deal: Will it go up in flames before it’s ratified?

After 20 years, political agreement has been reached on a free trade agreement (FTA) between the EU and the South American bloc, Mercosur – or has it?

Despite both sides declaring it a momentous success, key components are missing from the text and certain EU countries have expressed that they may refuse to ratify the deal. We take a look at what may prevent the deal from going ahead and the potential implications for access to medicines based on what we know at this point.

On 28 June 2019, a deal, worth billions per year on slashed customs duties, was signed by the EU and Mercosur (Argentina, Brazil, Paraguay and Uruguay). The political agreement reached by the two regional blocs declares the intent of all parties to go ahead with the agreement, but it is non-binding until each country has ratified the text. Just two months on, despite both sides declaring this ‘progress’ a success, there are signs that the deal may be far from done.

Jean-Claude Juncker, President of the European Commission (EC), described it as a “historical moment” and “a win-win deal”. The EC’s Commissioner for Trade, Cecilia Malmström, said the agreement “brings Europe and South America closer together in a spirit of cooperation and openness” and referred to “open and sustainable trade”.

It’s been reported as “irresponsible”, “flawed” and “scandalous”.

There’s been a backlash to this declared success. It’s been reported as “irresponsible”, “flawed” and “scandalous”. The political leaders of Ireland and France have said they will vote against the deal unless Brazil takes action to protect the rainforest. The concerns being that the deal will “lock” the South American countries’ “dependency on the export of agricultural commodities… much of which comes from savannah and forest land that has been destroyed.”

As treatment activists and global citizens we are acutely aware of the environment and the wider context that our work takes place within. As ITPC we shared our perspective on “Why HIV activists and allies must care about climate justice”. There is an undeniable intersection between all social justice movements, and we must work to improve systems that prioritize human health and environmental justice over corporate profits and geopolitical negligence.

The words being used by the EU – “win-win”, “openness” and “sustainability” apply equally to the environment and to access to medicines, as well as other elements of the deal. We are concerned that these descriptions do not match the reality. The responses to HIV, TB, Hepatitis C and other diseases can not be sustainable unless medicines are affordable.

We are concerned that these descriptions do not match the reality.

Opportunity or abuse?

Pharmaceuticals are one of the EU’s biggest exports to Mercosur countries.

FTAs present a concern for access to affordable, optimal medicines, and this deal is no exception. Our campaign partners in Argentina and Brazil have followed the long negotiation process, analyzed the impact the deal could have on access to medicines, and advocated against any ‘TRIPS Plus’ measures in the agreement text.

As World Trade Organization members, all the relevant parties have signed the TRIPS Agreement (Trade-Related Aspects of Intellectual Property Rights). TRIPS was intended to protect intellectual property (IP) rights of patent holders and encourage innovation but is regularly abused by profit-motivated corporations. When it comes to essential medicines there are flexibilities built in to the TRIPS Agreement, to balance rights and interests and allow governments to act in the interest of public health.

A trade agreement can present the opportunity (for industry) to tighten up on IP protections, by obliging developing countries to accept stricter terms than in TRIPS Agreement IP rules, known as ‘TRIPS Plus’ obligations. This effectively prevents countries from ensuring access to medicines and using the flexibilities they are entitled to, paving the way for corporations to abuse the power they’ve obtained with further over-pricing.

“Over the course of the negotiation process, the EU has pushed hard for IP provisions that would create additional and longer monopolies over essential drugs,” says Pedro Villardi, Executive Director of Associação Brasileira Interdisciplinar de AIDS (ABIA) in Brazil.

It appears that TRIPS Plus measures are not included in the current (although incomplete) text. If this is the case, then maintaining the status quo, against pressure from the EU, is a success that can be attributed to civil society’s advocacy efforts.

Comparing leaked versions with the final text of the agreement, it is remarkable that none of EUs TRIPS Plus proposals were included – Villardi.

“Thanks to intense and continuous pressure from civil society organizations from Mercosur countries, different generations of trade negotiators have prevented the adoption of TRIPS Plus measures. Comparing leaked versions from the text issued in 2016 and 2018 with the final text of the agreement, it is remarkable that none of EUs TRIPS Plus proposals were included,” says Villardi.

However, articles are missing from the text that has been published.

A great deal of unclarity

“With regards to IP chapter of the agreement, there are discrepancies in the versions that have been published by some of the FTA parties and articles are missing, so we cannot consider it definitive,” says Lorena Di Giano, Executive Director of Fundación Grupo Efecto Positivo (FGEP). “Therefore, until the text is finalized we remain cautious and urge the Mercosur governments to ensure the right to health is not jeopardised in the final text.”

“The content of the agreement not only has implications in terms of trade tariffs but also covers a series of non-commercial areas that will force our countries to change national legislation to be adapted to EU requirements, including IP, arbitration processes, border measures, and regulation on public purchases, among others. For example, in Argentina we have a law that prioritizes products of national manufacture in public purchases compared to those of other origin, regulations that will have to be changed to put European suppliers on equal terms with Argentines,” says Di Giano.

Until the text is finalized we remain cautious and urge the Mercosur governments to ensure the right to health is not jeopardised in the final text – Di Giano.

Until the agreement is final, there is a lack of “openness”, and it remains unclear whether the response to HIV, TB, Hepatitis C and other diseases can be “sustainable”, or if indeed it will be “win-win” overall, contrary to how the agreement has been described.

With regards to access to affordable medicines a number of concerns remain in relation to the agreement, including:

  • Mercosur’s decision to eliminate the 14% customs duties on pharmaceuticals exported by the EU signals Mercosur’s desire to gain access to future EU pharmaceutical innovations. While on face-value access to EU innovation could appear to be a benefit to Mercosur nations it does nothing to foster national pharmaceutical industries, which could provide long-term benefits. Instead, it preserves a status quo, and with it the market barriers imposed by EU patent holders.
  • The EU has used the agreement to gain access to the government procurement processes of Mercosur nations. These are processes that could serve as a significant avenue for local investment. The encroachment of the EU into this process will have a negative impact on the local production and could undermine the purchasing power of Mercosur’s national governments.
  • The current text includes comprehensive provisions on the protection of trade secrets and IP rights. In practical terms, this means that life-saving advancements could be held back to protect the interests of profit-motivated corporations, rather than benefit the advancement of science and its equitable distribution.
  • The agreement also includes scope for IP enforcement at customs. This addition could imply border measures that provide custom authorities with the power to seize and destroy generic medicines based on suspicion of IP infringement. Incidences of wrongful seizures of legitimate generic medicines in transit have already occurred in European customs where such regulations exists, so this addition could significantly damage Mercosur’s access to medicines.
  • No progress has been made towards a new approach to medical innovation or patent monopolies. In the European Union there is growing momentum around challenging high drug prices and the need for a new and innovative pharmaceutical system; and in Mercosur countries, long-standing debates about the innate biases of the TRIPS Agreement and the need for alternatives continue to dominate public discourse – yet, despite shared concern over the pharmaceutical industry, the FTA makes no commitments to foster a needs-driven approach to research and development (R&D) or any innovations designed to increase access to essential medicines.

What’s next?

The right to health, the decision as to whether someone lives or dies in Argentina, Brazil, Paraguay or Uruguay, cannot be in the hands of the EU – Villardi.

We will be reviewing all versions of the text as they become available and our partners are continuing national advocacy in the Mercosur countries, including discussions with parliamentarians and keeping the public and media informed.

“As treatment activists we are determined to prevent any agreements that make it harder for governments to afford to provide universal access to healthcare. The right to health, the decision as to whether someone lives or dies in Argentina, Brazil, Paraguay or Uruguay, cannot be in the hands of the EU,” says Villardi.

“As Brazilians we are concerned about the wider picture, which includes medicines, but also that the deal does not result in a number of other destructive and irreversible actions with regards to both people and planet.”

We have decided not to include a link to the current text/s because of the confusion, gaps and different, inconsistent language versions. When the final text is available, we will share, along with our analysis of the implications for access to medicines, and the next steps for civil society and governments.