Progression on implementing the EU-Mercosur trade deal, agreed in 2019, looks inevitable in 2025 when the new European Commission is in place.
It was close in late 2023 and earlier this year, but a change of government in Argentina at the end of last year and nervousness in the EU ahead of elections this year meant that the final steps weren’t taken.
There are a number of factors that make closing the deal more likely early in the term of the new Commission which is currently being put together.
These were well explained by the recently retired senior EU trade negotiator John Clarke at the recent Agriculture Science Association (ASA) conference.
Geopolitics
The global political context has changed dramatically since 2019, which was BC (before COVID!) and large-scale conflict returning to Europe with Russia invading Ukraine in 2022.
Globally, the EU is caught between the US-China tension, which risks escalating into an even greater trade conflict than at present which would pressurise the EU to follow the US political lead at the EU’s cost because of our greater trade dependency with China.
Meanwhile, China and indeed Russia have been building trade and diplomatic relationships with Brazil, Argentina, Uruguay and Paraguay in South America.
Without an operational Mercosur deal, the EU risks being distanced from that part of the world and conversely with a deal, then a major EU-South American trade axis is created separate from the US and China.
Car industry need
While a Mercosur deal fills Irish beef producers with dread, it is important to note that there are benefits for other sectors of the Irish and EU economies.
One of the biggest beneficiaries would be the car industry, which could increase exports to Mercosur countries with a deal in place.
At present, EU car producers are struggling, as China has taken the lead on the manufacture of electric vehicles (EVs) and EU giants such as Volkswagen are struggling.
An outlet in South America for Volkswagen has already meant the German government has been pushing hard to close the deal.
French President Emmanuel Macron, who had been strongly opposed last year and was a major stumbling block for the Commission, is much weaker after elections in France and the French manufacturer Renault would also gain from a Mercosur deal, even if it was at a cost to French beef producers.
Irish position
Irish beef producers should not assume that the Irish Government will automatically block a Mercosur trade deal because of its negative impact on beef.
Access to the EU for beef is as important for Brazil, Argentina and Uruguay as access to their market for cars is for Germany, France, Spain and Italy.
Ireland doesn’t have a car industry, but our corporation tax revenue is underpinned by the success of our pharma and tech industries, all of which would benefit from having a Mercosur deal in place.
Beef losses
At the ASA conference, John Clarke played down the impact of an additional 99,000 tonnes of South American beef entering the EU market at a preferential 7.5% tariff.
It is true that the South American countries now prioritise China as their main export market, not the EU, and in 2023, Brazil exported more beef to the USA than it did to the EU, though this has changed so far in 2024.
At present, Brazil has better market options for the majority of its beef exports than the EU, but that may not always be the case.
The impact on Irish beef was addressed by a Government economic impact assessment on the Mercosur deal in 2021.
While much has changed since then, it remains a useful guide in considering what Mercosur would mean for Irish farmers. It showed that the Mercosur trade deal will cost Irish beef farmers between €45m and €55m annually, as EU beef imports are forecast to increase by 53,000t.
The biggest impact for Irish beef will be felt in the sale of high-end cuts (steak meat), where the price is forecast to fall by 5% (3.3% to 7.2%).
With a fall in EU beef production forecast at a 1.5% reduction, this would increase to a fall of 6.3%. The assessment concluded that there will be minimal impact on the Irish dairy sector.
Mercosur benefit to Ireland
While Irish beef producers will be the clear losers according to the assessment, overall, the Irish economy would benefit, with exports to Mercosur countries forecast to increase by €1.246bn by 2035.
The biggest winners would be electrical equipment and machinery (1.6% increase) and computer, electronics and optical products (1.2% increase).
However, due to its huge economic size in the Irish economy, the 0.6% increase in Irish exports of chemicals, including pharmaceuticals, would mean an increase in exports of €953m.
Comment
While much has changed since this assessment in 2021, the basic principles remain the same. There are huge benefits for the Irish and EU economies from a Mercosur trade deal, but beef producers will take a substantial hit in the deal.
John Clarke explained that every trade negotiation comes down to beef and cars and it will be no different with Mercosur.
In fact, the deal is done - it is now a case of ratification and that will be a decision that faces the next Irish Government and is likely to be at some point in 2025.
Read more
Government say Mercosur deal will cost beef farmers €44-€55m
Farmers shouldn’t get 'knickers in a twist’ on Mercosur - former EU negotiator
Carberry calls on fellow MEPs to reject Mercosur deal in current form
Progression on implementing the EU-Mercosur trade deal, agreed in 2019, looks inevitable in 2025 when the new European Commission is in place.
It was close in late 2023 and earlier this year, but a change of government in Argentina at the end of last year and nervousness in the EU ahead of elections this year meant that the final steps weren’t taken.
There are a number of factors that make closing the deal more likely early in the term of the new Commission which is currently being put together.
These were well explained by the recently retired senior EU trade negotiator John Clarke at the recent Agriculture Science Association (ASA) conference.
Geopolitics
The global political context has changed dramatically since 2019, which was BC (before COVID!) and large-scale conflict returning to Europe with Russia invading Ukraine in 2022.
Globally, the EU is caught between the US-China tension, which risks escalating into an even greater trade conflict than at present which would pressurise the EU to follow the US political lead at the EU’s cost because of our greater trade dependency with China.
Meanwhile, China and indeed Russia have been building trade and diplomatic relationships with Brazil, Argentina, Uruguay and Paraguay in South America.
Without an operational Mercosur deal, the EU risks being distanced from that part of the world and conversely with a deal, then a major EU-South American trade axis is created separate from the US and China.
Car industry need
While a Mercosur deal fills Irish beef producers with dread, it is important to note that there are benefits for other sectors of the Irish and EU economies.
One of the biggest beneficiaries would be the car industry, which could increase exports to Mercosur countries with a deal in place.
At present, EU car producers are struggling, as China has taken the lead on the manufacture of electric vehicles (EVs) and EU giants such as Volkswagen are struggling.
An outlet in South America for Volkswagen has already meant the German government has been pushing hard to close the deal.
French President Emmanuel Macron, who had been strongly opposed last year and was a major stumbling block for the Commission, is much weaker after elections in France and the French manufacturer Renault would also gain from a Mercosur deal, even if it was at a cost to French beef producers.
Irish position
Irish beef producers should not assume that the Irish Government will automatically block a Mercosur trade deal because of its negative impact on beef.
Access to the EU for beef is as important for Brazil, Argentina and Uruguay as access to their market for cars is for Germany, France, Spain and Italy.
Ireland doesn’t have a car industry, but our corporation tax revenue is underpinned by the success of our pharma and tech industries, all of which would benefit from having a Mercosur deal in place.
Beef losses
At the ASA conference, John Clarke played down the impact of an additional 99,000 tonnes of South American beef entering the EU market at a preferential 7.5% tariff.
It is true that the South American countries now prioritise China as their main export market, not the EU, and in 2023, Brazil exported more beef to the USA than it did to the EU, though this has changed so far in 2024.
At present, Brazil has better market options for the majority of its beef exports than the EU, but that may not always be the case.
The impact on Irish beef was addressed by a Government economic impact assessment on the Mercosur deal in 2021.
While much has changed since then, it remains a useful guide in considering what Mercosur would mean for Irish farmers. It showed that the Mercosur trade deal will cost Irish beef farmers between €45m and €55m annually, as EU beef imports are forecast to increase by 53,000t.
The biggest impact for Irish beef will be felt in the sale of high-end cuts (steak meat), where the price is forecast to fall by 5% (3.3% to 7.2%).
With a fall in EU beef production forecast at a 1.5% reduction, this would increase to a fall of 6.3%. The assessment concluded that there will be minimal impact on the Irish dairy sector.
Mercosur benefit to Ireland
While Irish beef producers will be the clear losers according to the assessment, overall, the Irish economy would benefit, with exports to Mercosur countries forecast to increase by €1.246bn by 2035.
The biggest winners would be electrical equipment and machinery (1.6% increase) and computer, electronics and optical products (1.2% increase).
However, due to its huge economic size in the Irish economy, the 0.6% increase in Irish exports of chemicals, including pharmaceuticals, would mean an increase in exports of €953m.
Comment
While much has changed since this assessment in 2021, the basic principles remain the same. There are huge benefits for the Irish and EU economies from a Mercosur trade deal, but beef producers will take a substantial hit in the deal.
John Clarke explained that every trade negotiation comes down to beef and cars and it will be no different with Mercosur.
In fact, the deal is done - it is now a case of ratification and that will be a decision that faces the next Irish Government and is likely to be at some point in 2025.
Read more
Government say Mercosur deal will cost beef farmers €44-€55m
Farmers shouldn’t get 'knickers in a twist’ on Mercosur - former EU negotiator
Carberry calls on fellow MEPs to reject Mercosur deal in current form
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