Minister for Agriculture Michael Creed expressed his concern on the drive towards an EU-Mercosur trade deal in a letter to the European Commissioner for Agriculture Phil Hogan earlier this week. He reinforced his concern in an interview with Irish Farmers Journal beef editor Adam Woods on a trade mission to Japan and South Korea. Mercosur is the group of South American countries that includes Brazil, Argentina, Paraguay and Uruguay, with Venezuela also a member but currently suspended.

Much of the drive appears to be coming from the South American side, where Brazilian President Bolsonaro has been in office since January. The leaders of Argentina and Uruguay have elections coming up in the autumn, and all these parties are keen to conclude a deal.

The case for agreement has been made on multiple occasions over the two decades since discussions began in 1999

Meanwhile, in the EU, the current commissioners complete their term at the end of October and the view in Brussels is that a conclusion to the long-running Mercosur negotiations would be a final ambition of Commissioner for Trade Cecilia MalmstrÖm’s successful stint.

The case for agreement has been made on multiple occasions over the two decades since discussions began in 1999. Trade between the blocs was fairly evenly divided in 2018, with the EU selling €45bn of goods and services to Mercosur countries and importing €42.6bn worth. In terms of a trade deal, the main EU interests in selling to Mercosur are cars and car parts, with up to 35% tariffs, general machinery also with tariffs up to 35%, and pharma with tariffs up to 14%. Dairy products could also be sold in Mercosur countries, but they are subject to tariffs of 28%.

Beef is the issue for Irish farmers

The ambitions for Mercosur sales to the EU are on meat, primarily beef and poultry and ethanol or sugar in which Ireland doesn’t now have a particular interest. It is Ireland’s €2.5bn beef industry that is most exposed to a Mercosur trade deal because it is expected that up to 99,000t of South American beef would be granted a preferential tariff in any deal. Any extra imports in a market that is currently fully supplied as the EU is would have a depressing effect on prices.

Steak meat is the most valuable part of the carcase and its value is created by the fact that it makes up such a small part of the carcase

However, there are some types of beef imports that would do greater damage than others and in the case of the EU from Mercosur, it is the risk of an uncontrolled inflow of steak meat that presents the greatest risk to Irish farmgate prices.

Steak meat is the most valuable part of the carcase and its value is created by the fact that it makes up such a small part of the carcase, approximately 10% or 30kg of a typical 300kg beef carcase for the striploin, fillet and rump. Therefore, if it was left to the Mercosur countries to fill a 99,000t quota in any way they pleased, they could send the steak meat from 3.3m cattle to the EU which would collapse the value of the EU steak meat market.

Meat Industry Ireland lobbied for any quota to be divided on a “specified end use” basis, meaning a split between steak meat and manufacturing beef. However, it seems the Commission rejected this, and even if there is a fresh-frozen split, it could still all be filled with steak meat.

There is, however, some hope from the fact that a deal has been close before. Many EU member states will share Minister Creed’s view that the present Commission shouldn’t be pushing a deal through in the final weeks of its term. Also, while it is believed that the South Americans have moved on the EU export interests and recognition of PGIs, there is no certainty and the Commissioner for Agriculture’s soundbite on the issue recently is that we have been here before. When asked by the Irish Farmers Journal this week, a spokesperson for the Commissioner made the predictable comments about the desire to bring the talks to a successful conclusion.

The other big issue in a deal with Mercosur is the environment

However, they added that while the most recent technical discussions in May were constructive and progress was made in all areas, there were key issues including EU asks outstanding. What’s more, when pressed on next steps, it was clear discussions about arranging another technical round were ongoing, meaning it isn’t fixed yet. While things can move quickly, this doesn’t suggest the deal is over the line yet.

The other big issue in a deal with Mercosur is the environment. During May 2019, 740km² of Amazon rainforest in Brazil was deforested in addition to 863km² of Cerrado savanna and combined these cover a greater area than Co Leitrim. These figures were released by the National Institute of Space Research (INPE), part of Brazil’s Ministry of Science, Technology, Innovation and Communications. Surely the European Parliament with its expanded green membership could never countenance endorsing a trade deal that further encouraged this and the Commission would know not to ask?