The G20 summit in Brazil over recent days may have ended without explicit agreement on the Mercosur trade deal in the margins but that doesn’t mean the issue has gone away.
French president Emmanuel Macron has been fighting a rearguard action on behalf of French farmers. In a meeting ahead of the G20 with Javier Milei, Argentina’s president, he is reported to have said that there is no way he could sign off on the deal as it is.
Meanwhile, back in France, farmers were taking to the roads in protest against what is thought to be an imminent deal. Here, Friends of the Earth Ireland issued a statement urging Irish political leaders to reject the proposed EU-Mercosur deal because of “the serious threat it would pose to both farmers and the environment”.
Despite the protests, the signs are that the deal is still very much on the agenda and could be closed over the next couple of weeks. It has been reported that both the EU and Mercosur are ready to convene in a special summit to announce the resolution of the environmental chapter as an addendum to the original deal agreed in June 2019.
At that point to get the 20-year negotiation concluded, an element of vagueness on environmental issues was required to get sign-off.
Conflict with EU policy
However, with the Green Deal being the central plank of European Commission president Ursula von der Leyen’s first term, which began this time five years ago, a more robust environmental commitment was considered necessary to get through the European Parliament, which had a particularly strong Green Party presence following elections earlier that year.
This was added to by the cavalier approach of Brazil’s president, Jair Bolsonaro, to illegal clearence of the Amazon rainforest which increased substantially during his presidency. It has now reduced under his successor Luiz Inácio Lula da Silva, which enables the EU to claim progress on the issue. That helps clear the way to a trade deal that would be popular with many outside of agriculture and environmental NGOs in the EU.
Opposition to the Mercosur trade deal in Ireland, as well as across the EU, is relatively muted. Irish farmers have protested on several occasions, yet many of the politicians are at most equivocal in expressing opposition to the deal.
The default setting for many, as is also the case with President Macron, is that they wouldn’t support the deal as it is. In plain English, that means that they could be persuaded if a few tweaks were made, one of which might be the EU finding some sort of compensatory payment for farmers negatively impacted by the deal.
Impact of deal
Irish beef producers will point to separate economic impact assessments carried out by both the Irish Government and the EU, which show beef and poultry meat producers in particular losing out in a trade deal with Mercosur. However, those same economic impact assessments show that virtually all other sectors of the Irish and EU economy would benefit.
Beef exports to the EU are what South American countries want most from the trade deal
By way of example, the German car industry, which is experiencing a generational difficulty at present with the advent of China as a major global supplier of electrical vehicles, would benefit hugely from the opening of the South American market that would follow the removal of the 35% tariff imposed on imports of motor vehicles.
In Ireland, the pharmaceutical sector which is such a major source of corporation tax revenue, would be able to compete even more effectively in the Mercosur countries, with the removal of the 14% tariff on imports from EU countries.
Price to be paid
Of course, there is another side to the deal and that is that just as auto exports are vital to Germany and pharma exports are important to Ireland, beef exports to the EU are what South American countries want most from the trade deal.
Current negotiations are confined to environmental issues and the deal made back in 2019 to give an additional 99,000t beef quota to Mercosur countries will not be reopened.
This volume is often downplayed at EU level but the important point is that not all beef is the same.
Threat
The biggest threat to Irish and EU farmers comes from the fact that there is no element of carcase balance in this quota, leaving the opportunity for Mercosur countries to concentrate on exporting high-value steak meat cuts to the EU.
At present, Mercosur countries have several global options in the US, China and potentially other Asian markets, so a threat may not be immediate.
However, as the example of increased Australian sheepmeat exports to the UK, which have doubled this year shows, trade can quickly follow when tariffs are removed, if market conditions are right.