In Brussels this week, NI MEP Jim Nicholson, along with his French counterpart Michel Dantin, held a conference to discuss the impact an EU-Mercosur deal would have on European agriculture. It was attended by 80 MEPs, Brussels’s officials and lobbyists. I was happy to address the conference along with Cristina Rueda-Catry, member of the cabinet of Commissioner Hogan, and Dr Siemen van Berkum from the highly respected Wageningen University in the Netherlands.
The event served to debunk many of the myths surrounding the appetite for free market access among the main exporters of the Mercosur bloc. While Brazil, Argentina, Paraguay and Uruguay (Mercosur 4) are often herald as a bastions of free trade, a study by Wageningen University found that these countries impose higher tariffs than the EU on industrial products. Even more enlightening is that when we consider that 50% of agricultural imports into the EU enter at a zero tariff rate, the EU tariff profile is much more pro agricultural trade than Mercosur. Phelim O’Neill goes into more detail here.
Meanwhile, we once again see non-tariff measures (NTMs) being used to great effect to gain increased access to the EU without meaningful reciprocation. The Wageningen research shows that NTMs for EU exporters to the Mercosur 4 are estimated as equivalent to a 160% tariff on beverages, 79% on fruit and veg, and 45% on dairy produce. NTMs include measures such as licences and import quotas.
Interestingly, the Brazilians, who have been so vocal on gaining access to the EU for their competitively priced beef, impose a tariff of between 16% and 28% on cheese, butter and milk powder from the EU. Meanwhile, dairy imports from Mercosur neighbours enter duty-free. Further, Brazil fails to recognise the EU’s dairy quality system, which means each potential EU supplier must wade through Brazil’s backlogged certification process to gain market access.
This two-tiered approach to free trade undoubtedly contributes to the €19bn agricultural trade imbalance between Mercosur and the EU. Currently, Mercosur exports over €20bn of agricultural product into the EU each year, compared to less than €2bn in the opposite direction.
Clearly there should be no pressure on the EU to make further concessions on agriculture in the current negotiations.
In addition to these tariffs, there is also the issue of Mercosur members’ currency management. Brazil and Argentina have presided over devaluations of their currencies over the past decade to the extent that they have halved in value against the euro. On top of the tariff structures in place, this is a further de facto import tariff of goods from euro countries. A weak currency makes it easier to export to the eurozone but at the same time makes products such as German, French or Italian cars more expensive in South America.
It was encouraging to learn in Brussels that the commissioners are to discuss not making a tariff-rate quota (TRQ) offer on beef in the first exchange next week – undoubtedly in response to the resistance from trade and agricultural committees in recent weeks. It would be untenable for the unelected Commission to ignore such a clear message from member states.
Commissioner Hogan has clearly been active in political circles in protecting EU agriculture. While the removal of TRQs would be welcome, it should be seen as a pause pending the outcome of impact assessment. A potential Mercosur agreement with beef included will remain the greatest single threat to the Irish suckler and beef farmers.
It is unfortunate that we are depending on Dutch research to inform the debate and continue to await any meaningful analysis from FAPRI, the economic analysis arm of Teagasc, on the impact for Irish farmers. We are in a very different environment to when offers were exchanged back in 2004. Beef production in the EU has dropped one million tonnes and yet a projected EU beef deficit of one million tonnes by 2015 in reality became a 300,000/t surplus – clearly showing the pressure now on the market. FAPRI must present the impact not only of a Mercosur deal but the combined impact of all ongoing trade negotiations on Irish beef.
Read more
Full coverage: Mercosur trade negotiations
In Brussels this week, NI MEP Jim Nicholson, along with his French counterpart Michel Dantin, held a conference to discuss the impact an EU-Mercosur deal would have on European agriculture. It was attended by 80 MEPs, Brussels’s officials and lobbyists. I was happy to address the conference along with Cristina Rueda-Catry, member of the cabinet of Commissioner Hogan, and Dr Siemen van Berkum from the highly respected Wageningen University in the Netherlands.
The event served to debunk many of the myths surrounding the appetite for free market access among the main exporters of the Mercosur bloc. While Brazil, Argentina, Paraguay and Uruguay (Mercosur 4) are often herald as a bastions of free trade, a study by Wageningen University found that these countries impose higher tariffs than the EU on industrial products. Even more enlightening is that when we consider that 50% of agricultural imports into the EU enter at a zero tariff rate, the EU tariff profile is much more pro agricultural trade than Mercosur. Phelim O’Neill goes into more detail here.
Meanwhile, we once again see non-tariff measures (NTMs) being used to great effect to gain increased access to the EU without meaningful reciprocation. The Wageningen research shows that NTMs for EU exporters to the Mercosur 4 are estimated as equivalent to a 160% tariff on beverages, 79% on fruit and veg, and 45% on dairy produce. NTMs include measures such as licences and import quotas.
Interestingly, the Brazilians, who have been so vocal on gaining access to the EU for their competitively priced beef, impose a tariff of between 16% and 28% on cheese, butter and milk powder from the EU. Meanwhile, dairy imports from Mercosur neighbours enter duty-free. Further, Brazil fails to recognise the EU’s dairy quality system, which means each potential EU supplier must wade through Brazil’s backlogged certification process to gain market access.
This two-tiered approach to free trade undoubtedly contributes to the €19bn agricultural trade imbalance between Mercosur and the EU. Currently, Mercosur exports over €20bn of agricultural product into the EU each year, compared to less than €2bn in the opposite direction.
Clearly there should be no pressure on the EU to make further concessions on agriculture in the current negotiations.
In addition to these tariffs, there is also the issue of Mercosur members’ currency management. Brazil and Argentina have presided over devaluations of their currencies over the past decade to the extent that they have halved in value against the euro. On top of the tariff structures in place, this is a further de facto import tariff of goods from euro countries. A weak currency makes it easier to export to the eurozone but at the same time makes products such as German, French or Italian cars more expensive in South America.
It was encouraging to learn in Brussels that the commissioners are to discuss not making a tariff-rate quota (TRQ) offer on beef in the first exchange next week – undoubtedly in response to the resistance from trade and agricultural committees in recent weeks. It would be untenable for the unelected Commission to ignore such a clear message from member states.
Commissioner Hogan has clearly been active in political circles in protecting EU agriculture. While the removal of TRQs would be welcome, it should be seen as a pause pending the outcome of impact assessment. A potential Mercosur agreement with beef included will remain the greatest single threat to the Irish suckler and beef farmers.
It is unfortunate that we are depending on Dutch research to inform the debate and continue to await any meaningful analysis from FAPRI, the economic analysis arm of Teagasc, on the impact for Irish farmers. We are in a very different environment to when offers were exchanged back in 2004. Beef production in the EU has dropped one million tonnes and yet a projected EU beef deficit of one million tonnes by 2015 in reality became a 300,000/t surplus – clearly showing the pressure now on the market. FAPRI must present the impact not only of a Mercosur deal but the combined impact of all ongoing trade negotiations on Irish beef.
Read more
Full coverage: Mercosur trade negotiations
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