The Mercosur trade deal between the EU and four South American countries would boost Irish exports by more than €1 billion while leading to a "marginal" reduction in Irish beef output, according to a report brought to Cabinet on Wednesday.
The study assessing the economic and sustainability impact of the proposed deal with Argentina, Brazil, Paraguay and Uruguay is set to feed into the decision on whether or not Ireland will back the trade deal.
After the deal was announced in 2019, then taoiseach Leo Varadkar said Ireland would not back it if Brazil did not protect the Amazon rainforest amid extensive wildfires that year.
Irish farmers separately expressed concern that imports of beef from South America will affect their livelihoods.
The Government commissioned an independent report from Danish firm Implement Consulting Group on the impact of the trade deal on Ireland.
The Tánaiste and Minister for Enterprise, Mr Varadkar, brought a memo on the study to Cabinet. It includes an analysis of the potential economic benefits of the deal was well as a sustainability impact assessment including the social, human rights and environmental affects the agreement could have.
Mr Varadkar said: "I have made clear to the European Commission and my ministerial colleagues in Europe that Ireland cannot endorse the agreement in its current form.
“Our support is contingent on new and enforceable climate and deforestation commitments and I welcome Trade Commissioner Valdis Dombrovskis’ recent engagement with the Mercosur countries in that regard.”
Mr Varakdar said he does recognise a finding that the agreement might give the EU more leverage to exert pressure on Argentina, Brazil, Paraguay and Uruguay on environmental matters and that failure to ratify the agreement would forgo that leverage. He said if the EU does not do the trade deal they might turn to China, the US or UK instead.
He said “they could be less concerned about the environment and other standards like workers’ rights than we are and won’t be concerned at all about our beef industry.
“We could end up with all of the downsides anyway but none of the upsides. We need to assess that risk carefully.”
He said: “This independent assessment of the EU-Mercosur Agreement shows that there are broadly positive, economic effects for Ireland with over €1 billion additional exports generated due to the agreement.
“The report also finds that the deal will have a marginally negative impact on the environment in Ireland and the Mercosur countries which cannot be ignored.
“The report argues this can be mitigated, through our mutual commitments in the Paris Agreement and for Ireland, the actions set out in our annual Climate Action Plans.”
But he said: “This will no doubt be open to dispute.”
The report found that the Mercosur deal could increase Ireland’s exports to the countries involved by 17 per cent and imports by 12 per cent from a relatively low base.
It predicts that the increase in exports would be worth €1.2 billion in 2035 and the new business opportunities would mainly emerge in chemicals – including pharmaceuticals, computers, electronics, processed foods and beverages, with whiskey offered as an example.
The study says the agreement may add additional challenges for beef producers with 50,000 tons of beef expected to be imported from South America once the deal is fully phased in. It says the additional imports amount only to half the new quota of 99,000 tons.
The report suggests the “fairly modest increase in imports” will be concentrated on high-quality cuts and “will displace some amount of Irish beef in the EU market if no mitigating actions are undertaken”.
This could see an estimated 0.08 per cent reduction in Irish beef output, which would translate “into a marginal reduction in the value of Irish beef output of around €50 million” compared with the total value of Irish beef output of €2.3 billion in 2019.
The report concludes that the EU-Mercosur Agreement “offers a first-mover advantage to a market that historically has been closed to trade and investment, but that is gradually opening”.