After ministerial discussions in Brussels this week, the Mercosur delegation has called a three-week time-out to consult among themselves. The meeting between European Commissioner for Agriculture Phil Hogan and European Commissioner for Trade Cecelia Malmström with the ministers from the Mercosur countries was intended to give political leadership to negotiators to push for a conclusion to the deal over the next few weeks. Whether a deal is on or delayed indefinitely is now in the balance.

If it doesn’t happen now, the campaign for Brazilian elections kicks off in March and the European Parliament has elections in the first half of 2019 which means trade talks will be pushed back for a prolonged period and momentum lost.

For Irish beef and EU sugar or ethanol producers, this would be ideal. However, the problem is that they are the only two major sections of the EU economy that a Mercosur trade deal would have a negative effect on.

Even dairy would be expected to benefit according to a study undertaken by the European Commission’s joint research committee in late 2016.

Closing the deal hinges on the Mercosur group of countries getting what they consider sufficient access for beef and sugar/ethanol products. Ireland doesn’t have any particular interest in sugar but the prospect of a 70,000t quota for beef sends shivers through the industry.

The main problem is that it isn’t the equivalent of full cattle that comes in. Rather, the South Americans would prioritise accessing the EU steak meat market, which is among the most lucrative volume markets in the world.

There is something of a stand-off in the EU itself around closing the deal. The EU car and car parts industry, along with other machinery and pharmaceutical industries, all have ambitions of huge sales to the Mercosur countries which have a very closed economy and high-tariff barriers on these products.

In return, the Mercosur group wants access for 200,000t of beef to the EU.

This level of beef access is simply unrealistic and that is known, even if it isn’t accepted, by the Mercosur negotiators.

Similarly, while many EU countries would readily give Mercosur what they want in terms of beef access to close the deal, there is a strong minority group of 10 counties, led by France and Ireland, that oppose any access for beef.

Strong opposition

Despite strong opposition, a 70,000t beef offer was made a couple of months ago, which didn’t particularly impress the Mercosur side.

As a result, they didn’t make any meaningful concessions on the EU export interests in Argentina last month.

The negotiation now hinges on what the Mercosur group will do in terms of giving the EU access on its export interests in return for a further increase in the EU beef offer.

It is thought that the EU would at the end of the day move up to over 90,000t if it was to secure the deal on the interests of cars and pharmaceutical, dairy and suitable recognition of EU geographical indicators.

These are important for southern European countries, particularly in relation to wines and cheese.

The thought of a further increased beef offer to over 90,000t will horrify the Irish and EU beef industry but the reality is that the attraction of the deal for the trade section of the European Commission will make resistance difficult if not impossible.

The question is how pragmatic the Mercosur negotiators will be in accepting an offer below what was made for beef access back in 2004, when the EU tabled 100,000t. The deal could fall if an increased beef offer wasn’t considered sufficient for a meaningful reduction of tariffs on EU sales to the South American countries.

If the steer is given to negotiators by Commissioners Malmström and Hogan to push for a deal in the coming weeks, we will know that the EU is prepared to move its beef offer up from 70,000t, though it is difficult to see it reaching the 100,000t of 2004. It would only be done against the background of a reciprocal offer on cars, pharmaceutical, dairy and GI recognition. Even then, agreement of a deal needs ratification. The first port of call is the European Parliament and then, depending on whatever type of agreement it is classified as it may require national approval by member states as well. That could get very interesting bearing in mind that the Wallonian regional Parliament in Belgium nearly scuppered the less controversial CETA deal with Canada. There is still a way to go despite the current bleak outlook for beef producers.