An EU-Mercosur trade agreement is far from a done deal following last week’s intervention by France, report and Sarah Collins
THE likelihood of a trade deal between the EU and Mercosur nations being struck by the current December deadline has receded following a major intervention by French president Emmanuel Macron.
Last week, Macron (inset) said France was not in a hurry to reach a free-trade deal with the Mercosur bloc: “I am not in favour of hurrying to conclude before the end-of-the-year trade negotiations for which the mandate was given in 1999.”
Macron is to ask EU leaders at a summit this week to put the brakes on Mercosur, but the European Commission is intent on closing a deal by year’s end, or at least before the end of its current term in 2019.
France is one of 11 member states — including Ireland, Austria, Hungary, Poland and Romania — strongly opposed to the proposed deal as it stands.
The big backers of the deal are Spain and Portugal, which have cultural ties to South America, and northern European countries like Germany, which wants improved market access for cars.
Many countries also see opportunities to open up South American markets to Europe’s retail giants and get access to lucrative public procurement contracts.
There is a big push in the EU’s Trade Directorate General to reach at least the bones of agreement by year end.
Not many people believe that an agreement will be reached, at least within the current timeframe, even though Argentina wants to announce a deal at a World Trade Organization conference it is hosting on December 13.
The one certainty is that no deal will be struck unless it includes beef.
The key sticking point concerns “sensitive” agricultural products beef and ethanol. In relation to beef, there are additional unresolved food safety, animal welfare and environmental concerns, particularly in relation to Brazil.
At the heart of the divisions within the EU is the current offer to the four Mercosur nations of an additional 70,000-tonne preferential market access quota, involving a tariff rate of 7.5pc.
This includes 35,000t of fresh beef, made up of high-value Hilton beef and young grazing beef, plus 35,000t of frozen beef. A six-year transitional period is proposed.
This 70,000t is the first formal offer to Mercosur by the EU since negotiations restarted after a decade-long freeze.
A 2016 proposal of 78,000t was withdrawn before being formally offered due huge outcry across several member states.
However, while opposition to the deal in Europe centres on the quota offered being too big, Brazil’s chief negotiator Ronaldo Costa Filho has also criticised it, for being too small.
According to Argentina’s powerful farm lobby, the beef quota as proposed is equivalent to just two hamburgers a year per EU resident.
But, given that each carcass yields only about 12pc in prime cuts, the EU offer could entail total slaughterings of up to 600,000t, which is greater than Ireland’s entire annual beef exports of 535,000t.
Joe Burke, beef and livestock sector manager with Bord Bia, said they would be “hugely concerned” about the impact of the proposed Mercosur offer. “In a European market of 7mt beef, 70,000 might not seem that significant but it could have a major impact in terms of competition for our high-quality cuts going to Continental Europe,” he said. “It’s an additional negative force within the EU, in light of Brexit and the growing numbers of cattle available for processing in Ireland.”
A report last year by the EU Commission’s own Joint Research Centre showed that upcoming trade agreements, led by Mercosur, could slash European beef prices by up to 16pc. The cumulative cost across the European beef sector could rise to €5bn annually, by 2025.
Because of Ireland’s heavy dependence on exports, the IFA fears that the impact would be proportionally higher, potentially costing the sector €500€750m.
Cattle represent 8.1pc of total EU agricultural output and 18.8pc of its animal output (excluding milk). In 2016, the EU imported a total of 333,957 t beef carcase weight equivalent, three-quarters of this (246,743t) from Mercosur countries.
The majority of these imports are covered by what are called Tariff Rate Quotas, agreed under various rounds of GATT. These comprise a GATT frozen beef quota, A+B processing quota, Hilton quota and High Quality Beef (HQB).
This is a complex area, and the amount of tariff paid varies between the various quotas and the form in which the meat is sold, ie whether fresh or frozen.
For example, the High Quality Beef Quota (or HBQ), which has a zero-tariff rate, applies to high-quality fresh, chilled and frozen grain-fed beef that meets