South America gives mixed response to EU trade deal

Mercosur countries show little euphoria following conclusion of beef agreement

The trade deal between the EU and South America’s Mercosur trade bloc has been greeted with anger by Irish beef farmers. File photograph: David Moir/Reuters

The trade deal between the EU and South America’s Mercosur trade bloc has been greeted with anger by Irish beef farmers. File photograph: David Moir/Reuters

 

The trade deal between the European Union and South America’s Mercosur trade bloc has been greeted with anger by Irish beef farmers, but there has been no corresponding euphoria from Latin American competitors.

During the torturous 20 years of talks, Brazil, Argentina, Paraguay and Uruguay pushed to be able to export 350,000 tonnes of beef tariff-free to the European Union each year.

However, the proposed deal, though controversial in Ireland, offers the Mercosur bloc the ability to export 99,000 tonnes of beef annually, with an average tariff of 7.5 per cent.

That, Latin American industry sources have pointed out to The Irish Times, is equal to just 1.2 per cent of European beef production of 7.2 million tonnes in 2017.

Many Mercosur beef exporters had given up hope of a deal ever being reached with the EU, so the fact one has finally been agreed is itself cause for some local, limited celebration.

In Brazil, the Brazilian Agriculture and Livestock Confederation and the Brazilian Beef Exporters Association say they are delaying commenting on the deal until they have had a chance to study the detail.

However, the likely share-out of the EU quota between Mercosur countries will give Brazil little more than 43,000 tonnes, a rounding error for a country that rears 11 million tonnes of beef annually.

Equally, the extra sales to the EU that are possible if and when the EU/Mercosur deal is ratified are a drop in the ocean compared with the 1.64 million tonnes Brazil exported last year.

For Brazilian farmers the focus will likely remain East Asia and the Middle East, which account for the vast majority of exports. Just 7 per cent of Brazil’s exports currently go to the EU.

Greater access to a wealthy export market is welcome but Friday’s deal as reported is too limited to be a game-changer for Brazil’s beef sector, industry sources believe.

Amazon rainforest

The Mercosur deal is unlikely to become a major driver of the push by Brazil’s agricultural industry into the Amazon rainforest – something which has already been focused upon by the Irish Farmers’ Association.

The future of the rainforest will be far more impacted by the decidedly un-green administration of Brazilian president Jair Bolsonaro and changes in global trade patterns.

Brazil’s soy industry, which has historically fuelled deforestation, has received a significant boost from the US-China trade dispute, with Chinese soy buyers switching from US to South American suppliers.

In turn, the EU has ramped up purchases of US soy, thus cutting Mercosur exports to the union. Nevertheless, Brazil still supplies one-fifth of all EU soy purchases, used mostly as animal feed.

The reaction to the Mercosur deal in Argentina is more enthusiastic, but the beef industry there was badly damaged by the protectionist Kirchner regimes between 2003 and 2015.

With a quota of 29,500 tonnes under the proposed deal, Argentina has the largest share of the best cuts that can be sold to the EU. Tariffs for such cuts are to drop from 20 per cent to zero.