With global trade agreements becoming increasingly difficult to achieve over the last decade and more, there has been a greater focus on regional and bilateral agreements between countries and trading blocks. For the Europe Union and the United States, the financial crisis in the US banking sector in 2008 quickly spread to the EU. The crisis was to last for years and focused minds on the need to achieve growth and kickstart economies.

The US and UK responded with a programme of quantitative easing, or printing money, and these were the first two economies to get out of recession.

In the euro trading area of the EU, growth remains elusive and it is only in recent weeks that the European Central Bank has embraced the notion of a more relaxed money policy as it attempts to follow the US and UK.

There was a view on both sides of the Atlantic that a freeing up of trade between the EU and US trade blocks would contribute to growth. The first official position emerged during the Irish presidency of the EU in February 2013, when an EU-commissioned ad-hoc high-level expert group published a paper highlighting the need for a free-trade area between the European Union and the United States.

This was immediately taken up by the political leaders, with US president Barack Obama and European Commission president José Manuel Barroso embracing the idea immediately. It was announced at the G8 summit in Enniskillen in June 2013 that discussions would begin and the first round of the Transatlantic Trade and Investment Partnership (TTIP) negotiations were held in Washington in July 2013. Eight rounds of discussions have since taken place.

Speaking at a press briefing on the fringes of the launch of the Copenhagen Economics report last Friday, European Commissioner for Trade Cecilia Malmström advised that she expected to have two more rounds before the end of the summer, with technical issues being agreed before September.

It is clear that there is strong political will in Ireland and the EU for a trade deal with the US. There is opposition across Europe, driven by environmental, trade union and left-leaning political representatives. In the other corner are business leaders and politicians of the free market nature.

Irish agriculture is in an awkward position. Minister for Jobs Richard Bruton stated at the launch of the Copenhagen Economics report that in the Irish presidency he insisted on the precondition for negotiations that equivalent standards would be met.

These red-line issues were reinforced by Commissioner Malmström at the launch event and later in a meeting with the EU joint affairs committee, declaring that there would be no EU weakening on hormones or GM. The report highlights that Ireland would benefit from an US-EU trade agreement in every category except beef.

The real difficulty in agriculture is the number of people who would lose out – up to 80,000 beef producers. It is a sector that has had a particularly difficult year, only just recovering in recent weeks with the weakening of the euro.

Yet the Irish beef industry really needs access to international markets, including the US, which reopened recently to Irish beef after a ban of almost two decades. It is perhaps more accurate to say partially reopened. Only hindquarter cuts of beef are presently approved and the industry awaits anxiously approval for forequarter manufacturing beef, which is currently worth up to a euro per kilo more in the US than it is in Europe.

Quota restriction

Discussions are ongoing about veterinary certification and no doubt if there was recognition of an equivalence of standards, as championed by Commissioner Malmström, then we would benefit. Additionally, if we were to get approval tomorrow, we would quickly run up against the ceiling of the 64,000 tonne quota restriction.

Given the relative values of different beef cuts in Europe and wider global markets, another potential problem arises for Irish beef farmers and processors. If a trade agreement allowed access for boneless beef without specifying particular cuts, then there is potential for the US to offload huge quantities of steak meat, throwing the whole EU market out of sync and wrecking trade.

Commissioner Malmström was very strong in all her engagements on Friday about not compromising on hormones and GM, but this issue hasn’t been mentioned yet and we need to make sure it is also a red-line issue.

Despite the negativity for beef in the Copenhagen Economics report, there may be some grounds for optimism. The report paints a bleak picture for beef.

Its chief executive, Martin Hvidt Thelle, confirmed to the Irish Farmers Journal that it was their intention to adopt a prudent view. The difficulty any organisation has in doing a piece of work like this is that it has to base its projections on historical data and model assumptions for the future.

US outlook

Given the dramatic changes that have occurred in the US over the past two years, it is unlikely that these have featured in their analysis. In many ways that is prudent as it could well be argued that the US will return to a more normal relative beef price in time.

However, if we contemplate the transformation that has occurred in the relative position of the USA in farmgate and manufacturing beef prices over the past two years, we can begin to see an opportunity that might just work for Europe and Irish farmers.

US farmgate cattle prices were €3.44/kg in March 2013 when Irish prices were €4.05. Fast-forward to March 2015 and we find US prices have jumped €2/kg to €5.34/kg, while Irish prices are €4.02/kg. Reasons are well documented: lowest herd since 1951, drought and a weak euro.

Turning to the high-quality manufacturing beef trade, 95vl imported beef prices were €3.92/kg in Sept 2013; today they are €4.81. By comparison, the average Irish price is approximately €3.60/kg.

With all this, we can begin to understand why Irish factories are screaming for access to the US market for this product that is a struggle to sell in the UK or Europe.

In these circumstances we can see a different picture emerge. If US beef is coming into Europe on the same terms as our own production, ie hormone-free, and industry sources have advised that there will be little enthusiasm in the US for producing this EU-spec beef, possibilities emerge. If we can get a period of access to the US for manufacturing beef at the present or similar price differential, then there is immediate added value to the carcase for Irish farmers.

If the negotiators play their hand well and Commissioner Malmström doesn’t wriggle out of the commitments she made in Dublin on Friday, then all is not lost.