Ireland’s pharmaceutical industry will be the biggest winner and the beef industry the biggest loser from the EU's Mercosur trade deal, a sustainable impact assessment (SIA) report from the London School of Economics (LSE) has found. The European Ombudsman has opened an enquiry into why the impact report was not completed before the deal was finalised in June 2019 following a complaint that this breached the EU's own rules.

What the report says

The report considers the impact of the deal from both a conservative or ambitious deal perspective. In the ambitious deal scenario, there is virtually completely free trade, with a quota restriction of 99,000t and 7.5% tariff for beef imports to the EU. LSE estimates that this would increase EU imports of South American beef by 64% or 128,000t carcase weight equivalent (CWE).

The report also notes that the EU is Mercosur’s main export market for high-quality chilled beef (steak cuts), accounting for 44% of total export volume of chilled beef. The average value of EU imports from Mercosur is put at €5.64/kg CWE compared with an average of €3.80/kg CWE for EU production. This is a particular concern to Irish and EU farmers because steak cuts are a small portion of the beef carcase but are the most valuable. Any increase in steak meat imports to the EU will disproportionately devalue EU carcases.

Winners

The Irish and EU dairy sector, which has negligible trade with South American countries at present, is predicted to be a big winner under an ambitious deal scenario. Cheese and infant formula are the EU'smain exports. Machinery exporters will also benefit from the deal with EU exports forecast to increase by 78%.

Ireland’s biggest winner

The biggest winner from an Irish perspective undr such a deal is forecast to be the pharmaceutical sector where the Mercosur market has grown from being 16% of EU pharmaceutical exports in 2000 to 24% in 2019, with an annual value of €10.8bn. This is forecast to increase by up to 60% in the ambitious deal scenario where tariffs that currently exceed 10% for nine of the top twenty EU products exported to Mercosur, are removed.

The European Chemical Industry Council (CEFIC) put the value of Ireland’s total chemical and pharmaceutical exports at €73bn in 2018 – 60% of the country’s overall exports – and contributed €2bn in corporation tax. The sector has 30,000 direct employees with a similar number employed in providing support services to the sector, according to CEFIC.

Beef will pay for Mercosur deal

The Irish beef sector employs more people in farming and processing, spread across the country and all of the wealth generated from rearing the calf to exporting the finished product is retained in local economies. However, the reality is that the EU/Mercosur trade deal is demonstrated to benefit the EU economy in all other sectors, so beef farmers are likely to be faced with having to compete with a further 128,000t CWE of high value beef imports from South America, where production costs are dramatically lower.

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