New quota ‘good start’ for Brazilian beef farmers

Mercosur will have the right to export 99,000 tonnes of beef annually to the EU at a reduced tariff of 7.5 per cent

Brazil’s agriculture minister Tereza Cristinao: ‘There isn’t an agreement where only one side wins.’ Photographer: Andre Coelho/Bloomberg

Brazil’s agriculture minister Tereza Cristinao: ‘There isn’t an agreement where only one side wins.’ Photographer: Andre Coelho/Bloomberg

 

For Brazilian beef farmer Jonatan Pereira Barbosa the draft trade agreement between the European Union and the Mercosur trade bloc in South America is an occasion for some local pride.

In Brussels last month taking part in final talks that clinched the deal after 20 years of stop-start negotiations was Brazil’s agriculture minister Tereza Cristina, a former director at the cattle-breeders association of Mato Grosso do Sul, the organisation he presides over.

“She told us she was working to have the deal ready for the G20 summit in Osaka so we were waiting for it,” says Barbosa, whose “small” ranch in one of Brazil’s wealthiest farming states holds 2,000 head of cattle.

But on the terms of the agreement, he sounds only moderately enthusiastic however. “Our members have concluded it is a good start. We never had a quota with Europe before. Now we do. So it is an advance,” he says.

This lack of euphoria at Mercosur – comprising Brazil, Argentina, Paraguay and Uruguay – finally gaining a beef quota in the lucrative EU market is explained by its size and terms. Mercosur will have the right to export 99,000 tonnes of beef annually to the EU at a reduced tariff of 7.5 per cent.

This tonnage is minuscule compared to the bloc’s overall beef exports and represents just 1.2 per cent of beef production within the EU itself. It also falls far short of the 350,000 tonne tariff-free quota Mercosur beef producers originally sought. One Brazilian senior beef executive speaking on the condition of anonymity labelled the final agreement as “much ado about almost nothing”.

Nevertheless the granting of a quota to Mercosur has provoked immediate claims of a sellout among many EU beef producers, with Irish farmers prominent among them. Cristina, Brazil’s agriculture minister, has even highlighted this anger as evidence that it is not only certain sectors in Brazil’s protectionist economy, ranging from cars to wine, that could shortly face stiff challenges from greater trade competition as a result of the deal. “There are gains for both sides. There isn’t an agreement where only one side wins,” she said in a video selling the agreement.

There is an emerging consensus in Brazil’s powerhouse beef sector that the agreement’s symbolic importance will be greater than any practical impact on the dynamics of the world’s top exporter.

“When you look at the numbers for the meat quotas you see these are not going to transform the bilateral relationship. But we are a very closed economy so the most important aspect of the deal is not necessarily accessing the EU market but the signal it gives to other commercial partners that we are now open for negotiations,” says Lígia Dutra, superintendent of international relations at the Brazilian Agriculture and Livestock Confederation.

Asian links

Already the agriculture minister has said that the EU accord “could open the way” to further deals for Mercosur, specifically targeting agreements with Canada, South Korea and Singapore.

Even before the full details emerge, the agreement is being viewed as another means of expanding burgeoning links with Asia.

“Compared to our beef exports to Hong Kong and China the amount in the EU agreement is small. But Europe gives us a seal of approval which will help us gain access to other markets as well. Being able to export to the EU is very important for our image,” says Péricles Pessoa Salazar, the president of the Brazilian association of meat processing plants, many of whose members have helped drive the phenomenal growth in Brazilian meat exports in recent decades.

“The Brazilian producer today is very focused on the Asian market.

“China now exerts an influence on global exports that is incomparable with the EU. That will not change with this accord,” explains Dutra.

The reality of this continuing Asian focus has left many in Brazil wondering why many EU beef farmers claim the modest new quota for Mercosur will lead to their ruin.

Some see typical protectionism at play. “This is part of the game. Brazil imports milk and you see Brazilian milk producers trying to lock these imports out,” says Salazar. “But what you cannot do, what is illegitimate, is blame us for sins we don’t commit,” saying sanitary and environmental concerns with Brazilian beef exports raised by European competitors are unjustified. “We have the total conviction that Brazil has all the conditions to meet the requirements of the European Union, which are built into the accord.”

Milk and wine

In a concession to get the deal over the line Brazil’s president Jair Bolsonaro had to abandon his threat to imitate Donald Trump and pull his country out of the Paris climate agreement.

With the EU already the world’s biggest exporter of agricultural products, exporting twice as much as Brazil, many also question why it is beef farmers that have dominated the reaction in Europe when other agricultural sectors, such as milk and wine, could prove major winners from the agreement. “European producers should look more at the opportunities the deal creates. These are very big for Europe. It is an illusion to say that only Mercosur will take advantage of it,” says Dutra of the Brazilian agricultural confederation.

She adds that locking out South American competitors, as France’s agricultural minister has threatened to do, will not solve the problems of European beef producers. “The crisis in the EU beef market is much deeper than any commercial quota. They receive a high level of subsidies and as we see with other sectors here in Brazil that receive subsidies, this leads to inefficiency. They need to look at their own internal competitiveness issue and not blame others.”

But these long-standing grievances at the distorting effect of EU farm subsidies exist alongside hope that the deal, which marks a rare victory for free trade at a time when global commerce is under increasing threat from trade wars and, will soon come to be seen as a win-win proposition that will spur a new era of growth and cooperation across the Atlantic.

In Mato Grosso do Sul Mr Barbosa says he is looking forward to accompanying his Brazilian steak with more affordable European wines and cheeses. “We have to have this commercial exchange. Europe produces many great things. The Brazilian farmer has no desire or interest in harming other farmers in other countries. The sun rises for everyone. We are all involved in this mission of working in the country to feed the city.”