Measures in place to protect Irish farmers' interests in Mercosur Trade Agreement

Measures in place to protect Irish farmers' interests in Mercosur Trade Agreement

Mercosur is a challenging market, difficult to enter and with low consumer purchasing power...

A marginal reduction of around €50m, compared to an annual €2.3bn value of Irish beef output, would result from ratification of the EU-Mercosur Trade Agreement, according to an assessment of the EU-Mercosur Trade Agreement commissioned by the Government.

Additional beef supply could be expected from Mercosur countries, but the amount will be limited, and phased in over six years, according to the assessment prepared by the EU-based Implement Economics consulting group, with inputs from stakeholders representing agriculture, business and industry, NGOs, government departments and enterprise and environmental agencies, and from a steering group of representatives from the Departments of Enterprise, Trade and Employment, and of Agriculture, Food, and the Marine, and from Teagasc.

The fairly modest increase in imports would, however, be concentrated on high-quality cuts, and will displace some Irish beef in the EU market, if no mitigating actions were undertaken.

Irish beef sector

For the Irish beef sector, an upper-end estimate of the impact is a 0.08% volume reduction in output, but the value of Irish beef output could fall by slightly over 2%.

In the assessment, it was noted that several EU-level measures are in place (or planned) to protect the interests of Irish farmers and consumers.

These include a support package of up to €1bn to assist EU farmers, including Irish beef farmers, in the event of significant market disturbance.

The trade agreement includes a safeguard clause, which can be used if the EU agri-food sector is, or is at threat of being, seriously disturbed by increased imports.

All beef and other food products imported would have to comply fully with the EU’s food safety standards.

The EU

The EU is currently importing around 200,000 tons of beef from the Mercosur countries, of which 75,000 tons is out-of-quota imports paying a high tariff of 40-45%. In the trade agreement, the EU would maintain existing beef import quotas, and high out-of-quota tariffs. But the EU would commit to a controlled and gradual opening of a new quota (with a 7.5% in-quota tariff), and to reducing the in-quota tariff on existing quotas to zero.

The expected additional imports of around 50,000 tons of beef to the EU, when the trade agreement would be fully phased-in, after six years, is only half of the new quota of 99,000 tons, because existing out-of-quota quantities will make use of the new quota, and the lower in-quota tariffs will increase the use of existing quotas.

The expected import increase corresponds to around 0.7% of total EU beef production.

This is an upper-end estimate, based on Mercosur exchange rates remaining competitive, and the EU market being attractive relative to other Mercosur export beef importers (such as China).

The assessment prepared for the Irish government envisages that an increase (of up to 1.1%) in Mercosur agri-food exports to the EU after the trade agreement would not involve increased use of land, nor illegal deforestation. Extra production would instead come from more intense use of the existing agricultural land.

An expected increase in beef exports from Brazil to the EU, of around 20,000 tons, would correspond to a 0.2% increase in Brazil’s beef production. No increase in agricultural land use for beef production in Brazil is envisaged.

According to the assessment, only 7-10% of agricultural land in Brazil and Argentina is for beef, with grains, vegetables, and fruits accounting for 85-90%.

Negotiations

However, more than 340 civil society organisations have urged the EU to halt trade negotiations with the Mercosur countries (Argentina, Brazil, Paraguay, and Uruguay) on grounds of deteriorating human rights and environmental conditions in Brazil.

According to the new assessment, a co-operative approach to bring about sufficient policy changes in Mercosur countries and the EU to offset negative impacts of trade on biodiversity and forests, the climate, and the environment, is part of the EU-Mercosur trade agreement. And without the trade agreement, it might be harder for the EU to exercise any influence with Mercosur trading partners.

A key responsibility of the EU’s recently appointed Chief Trade Enforcement Officer would be to ensure Mercosur beef production meets EU rules and regulations, and that commitments to sustainability and the environment required of EU farmers are also observed by Mercosur producers.

Liberalised trade with Mercosur would slightly increase the reduction requirements needed to meet the Paris climate commitments in Ireland, by 0.06%.

However, measures in the Irish Climate Act Bill could neutralise this impact.

On the plus side, it is pointed out that the EU is bidding to be the first major trading bloc to conclude a trade agreement with the Mercosur bloc. Failure to ratify the agreement would risk damaging the credibility of the EU in future trade negotiations.

There could be a first-mover advantage, giving the EU a competitive edge in the Mercosur market of more than 260 million consumers.

Challenges

However, Mercosur is a challenging market, difficult to enter, with low consumer purchasing power, and low prices would make it difficult for Irish firms to be competitive.

Overall, the EU-Mercosur Agreement is forecast to increase Ireland’s exports to Mercosur by 17% and imports by 12%, and to add €0.5 bn to Ireland’s GDP in 2035 (a 0.13% increase).

At the recent Council of EU Agriculture Ministers in Brussels, Minister of State at the Department of Agriculture, Food and the Marine Martin Heydon said the EU-Mercosur Agreement is a prime example of the need for a level playing field: “We support the Commission’s efforts to have additional, robust, and legally enforceable commitments on environmental and climate action added to this agreement.

"These commitments should include a sanction regime for non-compliance including the potential removal of preferential tariff rate quotas.”

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