What is the new South American beef deal that will affect Ireland?
What is the Mercosur deal?
It’s a trade agreement will see, among other things, 99,000 tonnes of South American beef allowed into the European market every year.
Taking 20 years to hammer out between the EU and the Mercosur countries of Brazil, Argentina, Uruguay and Paraguay, it was instantly hailed as “a landmark in global policymaking and a coup for their exporting companies”.
However, the deal has garnered accusations of selling-out from the Irish beef sector following the announcement last Friday and the Government is not so fulsome in its verdict either.
However the deal, which needs member state endorsement and European Parliament backing will be tricky to get over the line due to the current focus on climate issues.
But this is big. It creates a market of close to 800 million people for goods and services comprising almost a quarter of the world’s gross domestic product. In terms of tariff reduction, it’s the largest deal the EU has struck: duties on EU exports to Mercosur are expected to be cut by €4 billion a year. And its scope goes far beyond lifting tariffs. It includes access to public procurement contracts, protection for regional food specialities and greater freedom to provide services.
This trade agreement will have a huge impact on prices, at a time when beef farmers here are already to the pin of their collars. Copa Cogeca, which represent EU farmers, said “agriculture has been the trade-off chapter to facilitate gains in other sectors”.
More than beef
But in agribusiness terms alone the deal is about more than beef. The South American bloc gets access to EU markets in eight years with its beef, poultry, sugar and ethanol. Brazilians expect tariffs on orange juice, instant coffee and fruits to be zeroed. The agreement will ultimately remove duties on 91 per cent of goods that EU companies export to Mercosur.
Beef issues aside, it will provide tangible opportunities for Irish companies. The Irish Farmers’ Association was unequivocal in its condemnation of “a backroom deal with big business and kowtows to the likes of Mercedes and BMW in their drive to get cars into South America”.
The deal goes beyond a cosy pact to help a beleaguered car industry. Considered big wins for Europe are the slashing of duties on cars and car parts; chemicals, machinery and textiles, and improved market access for EU wine and cheese.
How vulnerable are Irish farmers?
Unquestionably, Ireland’s beef farmers will be put under the cosh by this deal. Factor in Brexit; climate impacts from farming, and a shift to plant-based diets – and it reinforces the need for farmers and Irish agrifood businesses to redirect their approach in a fundamental way.
Current reliance on beef could not be clearer. Ireland is the fifth largest beef exporter in the world and the largest exporter of beef in Europe as 90 per cent of product is exported – a €3 billion business in annual revenues.
The prospect of an Argentinian steak selling in a French supermarket at 50 per cent less than the Irish equivalent is real. Complying with demanding traceability, food safety, animal welfare, and environmental standards greatly adds to production costs in the EU. It remains to be seen if Mercosur will be subject to such requirements backed by rigorous enforcement. What’s more, the carbon footprint of South American beef is high and will be added to by flying large quantities of beef to Europe.
“This is a bad deal for Ireland and for Irish farmers, it’s a bad deal for the environment and it’s a bad deal for EU standards and consumers,” according to IFA president Joe Healy. Ireland may be among the most carbon-efficient beef producing countries in the world, where grass-fed beef is less damaging to the environment compared to other major producers, but this may count for little with such a major price differential.
Is the EU turning a blind eye?
Beef production has become a major driver of tropical deforestation; responsible for as much as 65 per cent of rainforest destruction this century as trees are cleared for pastureland.
The IFA says the deal is “turning a blind eye” to double standards and environmental degradation in Brazil. In May, destruction rates hit a new record with an area the size of two football pitches disappearing every hour, according to estimates. And it’s clear the finger of most blame points at Brazil’s president Jair Bolsonaro – a climate science denier noted for Trumpesque pronouncements. Countries are committing to net-zero carbon targets, but climate NGOs warn these will prove meaningless if the planet’s greatest carbon sink is destroyed.
The EU insists there are clear guarantees the Bolsonaro regime meets its commitments under the Paris Agreement and on food safety, while safeguarding the rights of indigenous people. Past sins in the form of fraud in the Brazilian beef sector provides little comfort to EU farmers.
Agriculture commissioner Phil Hogan has defended the safeguards: “If president Bolsonaro of Brazil wishes to follow Mr Trump in pulling out of the climate agreement then this agreement falls. We have identified the problems of deforestation in Brazil and we have set out an agenda in this agreement to put them right.”
What are the political realities behind the deal?
The European Commission says the Mercosur deal is proof the international trading system will endure, despite strains arising from Trump’s protectionism and Chinese state-backed capitalism. It’s also a timely reminder to Brits operating under the notion that instant trade deals can be plucked out of the sky post Brexit.
The farming sector is still a vital cog in Ireland’s economic wheel with the agrifood sector employing 7.9 per cent of the working population. They now face the prospect of a double whammy of a hard-deal Brexit and cheap Mercosur imports. We export around 270,000 tonnes of beef to the UK every year. The nightmare scenario for farmers is having to compete with cheap South American imports in that post-Brexit scenario.
In the meantime, the agreement still needs to be ratified by the national parliaments of all member countries of both blocs, as well as by the European Parliament and EU Council.
The European Union (EU) and South American trade bloc the Southern Common Market (Mercosur) reached a free-trade agreement on Friday in Brussels, one that was two decades in the making.
The breakthrough was hailed by Latin American leaders and decision-makers as a chance to spur regional economies, a boon for free trade and multilateralism, as well as a blow to protectionist trends.
"Today we reached a historic agreement between Mercosur and the European Union, a milestone that culminates a 20-year negotiating process and complements the actions we have taken to achieve greater and better access to the world," Argentina's Secretary of Foreign Trade Marisa Bircher said on Twitter.
"The strategic partnership between Mercosur and the European Union translates into more than 100 billion U.S. dollars of bilateral trade in goods and services, and implies the integration of a market of 800 million inhabitants," Horacio Reyser, the secretary of International Economic Affairs at the Argentinian Foreign Ministry, said in a statement.
"It is a milestone that marks a before and after, with the potential to transform the national productive matrix, increase gross domestic product growth, generate employment and attract investment," Reyser added.
Mercosur is composed of Argentina, Brazil, Uruguay and Paraguay.
"The agreement will provide opportunities to export to a market of more than 500 million inhabitants with an average per capita GDP of 34,000 U.S. dollars, and access to a more diverse and higher quality product range at more competitive prices for our industries and consumers," Argentina's Ministry of Foreign Affairs said.
Brazilian President Jair Bolsonaro called the free-trade deal "historic" and "one of the most important trade deals of all time."
"Together, Mercosur and the EU represent a quarter of the global economy and now Brazilian producers will have access to that huge market," Bolsonaro said on Twitter.
Brazil's National Industry Confederation (CNI) celebrated the agreement, saying it "represents an entry pass for Brazil to the big league economies of international trade."
Uruguayan Foreign Minister Rodolfo Nin Novoa highlighted the benefits of the deal for his country.
"Uruguay wins in meat (exports), in rice, honey, dairy products and in special arrangements for temporary admission," he said.
Hailing it as the largest trade agreement the EU has ever concluded, President of the European Commission Jean-Claude Juncker said the two sides "are sending today a strong signal that we stand for rules-based trade."
The head of the Argentinian Institute for Strategic Planning, Jorge Castro, agreed, echoed that sentiment, saying the agreement "sends a powerful message in favor of multilateralism, free trade and against protectionism."
"In the face of tensions and uncertainties in international trade, the conclusion of the agreement underscores the two blocs' commitment to economic openness and the strengthening of competitiveness," said Brazilian Foreign Ministry on Friday.
Through the agreement, the EU seeks to increase market access for its industrial products and automobile manufacturers, while Mercosur aims to increase exports of beef, sugar, poultry and other agricultural goods.
The two parties began negotiations in 1999, but talks were interrupted between 2004 and 2010 by the reluctance of both sides to make concessions, in the agricultural field for Europe and in the industrial sector for South America.
After the resumption of the negotiations in 2012, they entered another impasse in 2014, but momentum was renewed in 2017.