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The European Commission’s proposed free trade deal with the Mercosur countries is not the biggest, or the most immediate, threat to the beef industry.
The extra allocation of quota at the preferential tariff of 7.5%, which is to be 99,000t, is for the whole EU and is just one-third of Irish exports to the United Kingdom alone.
The extra allocation of 99,000t amounts to no more than 1.2% of total European demand. Any quota increase means more unwelcome competition for Irish exports and is bad news, but there is a need for perspective.
There is scope for modification and the impact of a hard Brexit four months from now could be far more damaging
The deal will not be finalised for another two years and would not come fully into operation for five or six further years. There is scope for modification and the impact of a hard Brexit four months from now could be far more damaging.
There is already pressure to contain livestock farming in Europe in pursuit of lower emissions targets, Brexit or no Brexit, with talk of production restraints at domestic level in many countries including Ireland.
Brexit on the horizon
The Irish beef sector could have contracted sharply because of Brexit, and long before the Mercosur deal is even finalised, never mind the more distant date when new supplies from South America hit the shelves in European supermarkets. The only outcome from the UK government’s chaotic approach to Brexit, avoiding widespread disruption to Ireland’s external trade four months from now, would be acceptance of the exit deal already negotiated by Theresa May’s government, which delivers a two-year transition period in which the UK market remains fully accessible. That, or yet another extension.
There is a third possibility. Some UK advocates of a no-deal Brexit have been urging that the UK would simply admit vital supplies from EU exporters after crash-out day, even though EU countries could not legally reciprocate.
There would be full third-country controls at Calais, Rotterdam and Irish ports, since protection of the single market will be prioritised, while Irish beef could freely enter the UK market without tariffs or inspections – ‘just wave the lorries through’ they say.
But there would be no exports from the UK into the EU and it is inconceivable that any such one-sided regime would last. The UK economy would contract, jobs would be lost, the logistics industry could not cope with one-way flows and the pound sterling would crash.
Any attempt to operate a blind-eye regime could not last for any length of time and there would be frenzied negotiations to bring it to an end
In the panic that would ensue there would be immediate calls for the blind-eye to be made available to imports from outside Europe, including food products. Any attempt to operate a blind-eye regime could not last for any length of time and there would be frenzied negotiations to bring it to an end.
For now, all we know is that both candidates for the Theresa May succession, Jeremy Hunt and Boris Johnson, have expressed indifference to the risk of a no-deal crash-out, appearing to compete as to which aspirant is most relaxed at the prospect.
It would be reassuring to believe that there is a grand plan in place to ensure an orderly departure of the UK from the single market and customs union
No-deal preparations in London have been stood down according to press reports and there have been more announcements of senior officials planning to retire.
It would be reassuring to believe that there is a grand plan in place to ensure an orderly departure of the UK from the single market and customs union when the clock ticks down at the end of October. There is only one such plan, the transition period contained in Mrs May’s agreement, which both candidates reject.
Environmental tensions
Mercosur is a South American bloc consisting of Argentina, Brazil, Paraguay and Uruguay which negotiates as a unit. The region accounts for most of South America’s economy and is a major agricultural producer.
Countries outside Europe, when they come to negotiate trade deals with the EU, are always interested in better access for their food exports, for the simple reason that Europe is such a key market.
The Mercosur deal is not set in stone. The new Brazilian government has a right-wing populist flavour and has already been relaxing environmental and pesticide regulations.
Deforestation in Brazil, by far the largest component in Mercosur, has played a large role in the expansion of its agriculture and the president, Jair Bolsonaro, is favourably disposed to a continuation.
European policy towards agricultural imports from outside Europe could change a lot in the years ahead
There will be conditionality about environmental policy from the EU side as the deal comes to be implemented. At a recent meeting, a group of European energy economists (at eaere.org) urged that “To safeguard competitiveness, a border carbon adjustment system could be considered in a multilateral context.”
European policy towards agricultural imports from outside Europe could change a lot in the years ahead.
There could be indiscriminate controls on domestic output, there could be disincentives at the consumer end, but also new barriers to imports from countries with weak environmental policies. The Mercosur deal could turn out to be the lesser threat when the dust settles.
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