Mercosur

Mercosur refers to the substantial South American trading bloc of Argentina, Brazil, Paraguay and Uruguay.   The European Union-Mercosur free trade agreement was reached agreement in principle in 2019 (talks began in 1999!) and, if ratified, will be phased in over 15 years – though there is still a long way to go and assent required from national governments before the deal would be finally passed.

Trade between the two blocs is fairly similar in scale, with Mercosur largely exporting agricultural products to the EU, and importing cars, pharmaceuticals and services.  The premise of the Mercosur agreement is to make trade easier, i.e. having fewer barriers for commodity agricultural produce coming into the EU in return for better access to the South American markets for manufacturing and service sectors (the deal is expected to save EU exporters around €4bn in tariff costs – though relatively little of that will directly benefit agriculture).  Some of the agricultural products involved in the deal aren’t in direct competition with EU producers, for instance coffee, but many are, notably beef and poultry, indeed one of the reasons the deal took so long to get to this point was the opposition by EU farmers, for whom South America is a serious competitor.

If ratified, the Mercosur agreement will reduce the tariff on 99,000 tonnes of beef (Carcase Weight Equivalent – weight before deducting skin, blood, waste etc) to 7.5%, phased in over 6 years.  No tariff will be applied to up to 180,000 tonnes (CWE) of poultry meat.  Eggs, sugar and ethanol are also included.  EU producers will get tariff free access for some products such as cheese, milk powders and other dairy products.  The volumes of reduced tariff or tariff-free imports don’t appear large in the grand scheme – for instance 99,000 tonnes of beef represents 1 – 2% of EU production, however of concern to farmers is that the basic premise of successful negotiation is similarly valued benefit on each side, and  if exporters of EU goods (largely in manufacturing sector) will benefit by the €4bn, there must be a similar value going back to Mercosur – and this will largely come from an agricultural commodity market, and in particular beef producers, who are already under pressure.