In a briefing to the INTRA committee of the EU Parliament in Brussels this week, lead EU trade negotiator on Mercosur Sandra Gallina told members that it was now down to the “heavy lifting” on a Mercosur trade deal.

She explained that in Buenos Aires last month, good progress was made on non-agriculture issues and that the 90% threshold had been reached for a full liberalisation of tariff lines. The issues that remain outstanding are Mercosur access to the EU on agricultural products and EU access to Mercosur on cars, car parts and dairy, with geographical indications (GI’s) and sustainable production also issues that remain outstanding.

On beef access, Gallina said any agreement would have to be in the context of Brexit and name-checked Ireland and its exposure.

Next Tuesday 30 January is D-Day in the Mercosur discussions, with the foreign ministers from Brazil, Argentina, Paraguay and Uruguay due in Brussels for discussions with EU Commissioner for Trade Cecilia MalmstrÖm and Commissioner for Agriculture Phil Hogan. The Agriculture Commissioner is always involved in the endgame of trade negotiations as agriculture is usually the last issue to be resolved.

Impetus

It is thought this meeting will give political impetus to the negotiations to get a deal concluded before the end of March. After that date, elections due in Brazil in October followed by elections to the EU Parliament in the second quarter of 2019 are likely to frustrate the conclusion of a deal.

There is speculation in Brussels that there will be a push for a political deal at a minimum where agreement would be reached in principle to have a deal but leaving some of the more complex details to be sorted out. A variation of this occurred with Japan where the political work was done last July and heads of agreement reached but the details were concluded just before Christmas, out of the spotlight.

This push was agreed at what was considered an unsatisfactory outcome of last month’s negotiations in Brussels followed by further discussions in the margins of the WTO conference in Buenos Aires in the second week of December. Cecelia MalmstrÖm made no secret of her ambition to reach a deal before the end of 2017.

All this means that the efforts to bridge the gaps over the coming weeks will be intense. So far, the agriculture lobby has defended well but the opposition it faces is immense. The basic statistic of the wider economy in the EU benefiting on a four-to-one proportion is persuasive. A strong pro-agriculture lobby has been built in the EU with Ireland at its centre. However, the problem is that of the major EU countries, only France has a major interest in agriculture, and even that is somewhat lowered since the election of President Macron, who is considered less protective of farmers.

The case against further opening the EU market to Mercosur has been made on multiple occasions now. The EU market for beef is at best stagnant and in just over a year from now one of the major net importing countries, the UK, is due to leave. There is also the issue with standards in South America, with Brazil in focus since last year’s Operation Weak Flesh scandal. The EU is currently on a mission to audit the auditors but ultimately trade negotiations are separate from this.

The fear among Irish and EU farmers above all is what level of beef access might be considered to close the deal. Phil Hogan has been advocating the view that countries exporting to the EU have to be realistic in their ambitions. The problem is that Mercosur’s ambitions stretch well beyond the 70,000t offer that is currently on the table. This had been as high as 200,000t and there was certainly an expectation that it would be ahead of the 100,000t offer that was made back in 2004.

It is thought that this could be a red-line figure for the Mercosur negotiators and rumours had been circulating around Brussels before the last round of formal negotiations in December that the EU would move on the present 70,000t offer, but as of now the EU Commission hasn’t decided on a further increase in this offer.

Whether an increased offer emerges over the next week and the EU and Mercosur close the deal is very much in the balance. Despite the trade part of the EU Commission being enthusiastic, there is also a reality that making the deal is just the first step. Brexit showed that there are consequences of getting out of sync of the population in member states. When EU treaties need ratification, there is a huge risk to credibility if this should fail.

In this context, the EU needs to proceed with care. For example, the CETA agreement with Canada, although it is effective provisionally, hasn’t been ratified yet. It is much less controversial yet there is plenty of opposition to it, including from within farming as it gives access for 45,000t of beef. If CETA generated passionate opposition, imagine what an unfavourable Mercosur deal would do, irrespective of what benefits that might accrue to other sections of the EU economy. Conceding beef access for BMW sales won’t appeal to beef farmers anywhere in Europe.

For more from Brussels this week, watch an interview of Sean Kelly MEP in our video below: