The ball is now in the pitch of the European Council - made up of member states - on ratifying or not the EU-Mercosur free trade agreement after the European Commission commenced the process necessary to approve the deal on Wednesday.
The agreement with the four South American countries of Argentina, Brazil, Paraguay and Uruguay will need the backing of just 15 member states, which represent 65% of the EU’s population, to be put before the European Parliament.
There, its approval by a simple majority of MEPs would see the trade deal take effect without the need to get the support of each national parliament of EU member states, due to the way the Commission structured its proposals.
Four separate but related proposals have been tabled that look to push forward both the deal with Mercosur - the largest EU trade deal ever proposed - and the updating of a trade deal struck with Mexico in 2000.
On Mercosur, matters strictly related to trade have been split from the political and investment commitments – as trade is an EU competence, national parliaments do not have a say in trade deals.
This proposal just requires member states and MEPs backing, where the wider political partnership agreement will have to go to national parliaments to get the green light before taking effect.
Emergency brake for beef
The Commission’s proposal details the processes around the safeguard tool pitched by the Commission as an emergency brake that could slow down any influx of South American goods that disturbs markets in “sensitive sectors”, such as beef.
It is proposed that Mercosur countries would have a reduced 7.5% tariff rate across 99,000t of beef exported to the EU, but with some of this quota being made up of frozen beef.
An investigation can be opened if one quarter of the impacted industry or sector (by EU output) requests one, but it remains unclear if it would be farming organisations which would submit the request or member states on behalf of their producers.
For example, a request from the Irish, French and Belgian beef sectors would be sufficient to see an investigation opened in the case of beef markets.
Investigations would yield a decision within 21 days under the proposals.
A 10% lower product’s price for imports or a 10% increase in imports over a one-year period would be the trigger an investigation into whether a suspension of the preferential tariff rate and a return to normal import duties would be warranted.
Hogan’s €1bn
The Commission has clarified that the €1bn agricultural market volatility fund secured in 2019 by the then-Commission for Agriculture Phil Hogan has been subsumed into the ‘unity safety net’ proposed for farmers in the next long-term EU budget.
It is proposed that the €1bn secured by Hogan will be subsumed into the revamped EU-wide agricultural reserve of €6.3bn over seven years, but this funding would also have to cater to other crises, such as disease and weather crises.
‘Good for dairy and spirits’ - Commission
The Commission maintains that the dairy and spirits sectors are among the sectors that stand to gain from the approval of the Mercosur deal.
Tariff rates for spirits would be cut from around 35% currently to 8%, with a similar import duty reduction proposed for dairy goods.
The agreement would also see EU geographical indicators, like Irish whiskey or Irish cream liqueurs, recognised for the first time in the four South American countries covered by the deal.
Brussels insists that the deal would be a positive move for the EU’s economy and industry amid trade conflict with China, Russia and the US.
It claims that the value of EU goods exported to the Mercosur countries will rise by approximately 40% - by €50bn.
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