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It is an accident of timing, but the latest round of Brexit talks and Mercosur negotiations conclude this Friday in Brussels and Brazil respectively. The Mercosur talks are in a final push to conclude a deal at the WTO meeting in Buenos Aires, which takes place during the second week of December.
Irish and EU farmers, particularly those in beef production, have been outraged by the offer of a 70,000t beef quota. Rumours had been circulating in Brussels earlier this week, but denied that there would be an increase in this offer, as the South Americans have demanded.
Mercosur countries regard the 70,000t offer as totally inadequate. It is thought that there will be no formal offer in the talks that conclude this Friday, but with another round scheduled for the first week in December ahead of the main event at WTO in Buenos Aires, that becomes the next critical event on the path to a deal being concluded with Mercosur or not.
There is a great desire in Brussels to demonstrate how the EU is now a global leader in development of free trade, after historically being viewed as the most protectionist trading zone in the world
While nothing major is expected from the sixth round of Brexit talks, they do have a subtle, if completely unofficial, impact on EU thinking. There is a great desire in Brussels to demonstrate how the EU is now a global leader in development of free trade, after historically being viewed as the most protectionist trading zone in the world. With the USA adopting its America-first policy and the UK leaving the EU to chart its own course in world trade, the EU now has a leadership role trust upon it.
There is also the wider attraction of a Mercosur trade deal to the EU outside of agriculture. The only offensives interests that Mercosur has in talks with the EU is getting access for beef, as well as ethanol and sugar. In every other category the EU wins, and by a large margin. It is estimated that a deal with Mercosur will be worth €4bn, with a cost of €1bn (carried by beef and ethanol/sugar mainly). Hence the “beef for BMWs” slogan.
Mercosur to offset hard Brexit – except for agriculture
With the Brexit negotiations plodding along, the reality of a no deal is becoming more of a reality. While it is Irish agriculture that loses out the most in Brexit, there will be some loss, shared across the main trading countries of the EU, particularly Germany, France, the Netherlands, Italy, Spain and Belgium.
The big categories are cars and their associated parts, pharmaceuticals and services. If the EU secured the big deal with Mercosur, it would greatly offset the loss of the UK from part of the free market to third country status.
All of this is little consolation to agriculture, particularly beef and sugar, elsewhere in the EU. The pressure will really come on to move the offer up over the next couple of weeks.
There is one last card the EU beef lobby can play and that: what about the protest about quota allocation for access to the EU post Brexit? The general agreement to divvy up on a pro-rata basis between the EU and UK has been challenged by third countries at WTO. Surely any final offer to Mercosur that would grant access to the EU over and above what they already have should be contingent on the outcome of this protest?
If this logical argument doesn’t find favour, then it demonstrated to EU beef and sugar producers that they can be sacrificed if the price is right elsewhere.
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