Battle win in Mercosur not end of the story

EU Commissioner for Agriculture Phil Hogan caused little surprise when he announced that agriculture would be withdrawn from the Mercosur offer on his visit to Northern Ireland on Monday.

Ever since the frank discussions at the Trade Policy Committee two weeks ago and the subsequent meeting between Commissioner Hogan and his trade counterpart Cecilia Malmström, it has been well flagged that this premature offer would be removed.

Responding to the news that beef was withdrawn from the exchange of offers between the European Union and Mercosur on Wednesday, IFA president Joe Healy said: “Minister for Foreign Affairs and Trade Charlie Flanagan must be very strong and make it clear to Commissioner Malmström that there is no justification for the reintroduction of beef on to the negotiating table.”

It was always foolish to contemplate such a position, especially as it will take several months to do an updated impact assessment.

The EU beef market is in a different place today than where it was a decade ago, when the previous assessment was carried out. Back in 2005, coupled payments for producing to the standard required by the EU represented 80% of CAP payments. Now that figure has collapsed to 5%, with 95% of payments decoupled from production. This means EU farmers are no longer supported by CAP to produce the way the EU wants them to and they are left exposed to the open global market.

What’s more, when the previous impact assessment was carried out in 2004, the then EU had a considerable deficit of production compared with beef consumed. In 2006, the EU exported over 260,000t less than it imported, which left the EU market capable of accommodating significant quantities of imported product.

By 2015, with the expansion of the EU to 28 countries, a severe drop in consumption and an increase in production, this deficit had not only been wiped out but the EU had a surplus of 275,000t of beef exported over imports.

Now discussions have resumed with Mercosur and the EU was too quick to contemplate throwing beef tariff rate quotas (TRQs) into the first offer. Outcry from farm organisations and the robust discussions in the Trade Policy Committees have brought perspective to the issue, with the Commissioners getting the message. While beef and other sensitive agricultural products may be left out of the initial EU offer, they won’t be off the agenda long term. It is the big issue for Mercosur countries given its dominance in the trade balance with the EU at present. Mercosur countries sell 10 times more agricultural produce to the EU than EU countries sell to Mercosur.

The first round of negotiations are scheduled for September, and we can expect the exchange of further offers and adjustments if the talks progress after 17 years of stopping and starting.

A beef offer will come back as an issue even if it is gone for now. It is a case of when, not if, and it is difficult to envisage sufficient change in the EU beef market to accommodate more beef imports anytime in the near to medium future.

Comment

Trade deal a huge threat to beef industry

Of all the trade discussions between the EU and external countries, Mercosur is the one that has most potential to damage Irish agriculture, and beef in particular. There is simply no way that the small family suckler farm can compete against the industrialised low-cost production system in South America. If we give tariff-reduced access to cheap beef producing regions that don’t have to operate to the costly welfare, quality and environmental standards of the EU, then Irish and EU specialised suckler beef production will be squeezed out of business.