A long-awaited major trade deal between the EU and the Latin American countries of Mercosur may this week take a key step towards realisation with ministerial teams from both sides meeting in Brussels on Monday. They are expected to give negotiators a new, decisive political impulse to reach agreement in a matter of weeks.
Critical to any agreement, however, will be new offers on market access from both sides, with the EU – to Ireland’s dismay – likely this week to raise its offer on beef access for Mercosur from 70,000 tonnes a year to between 90,000 and 100,000 tonnes.
Commissioner for agriculture Phil Hogan is reported to be strongly resisting the higher figure, while trade commissioner Cecilia Malmström is said to be willing even to go beyond 100,000 tonnes. Mercosur is reported to be demanding some 200,000 tonnes.
The EU offer will only be made if the EU team is convinced that Mercosur will also make serious concessions in four key areas: better market access into Mercosur for cars and dairy products; the inclusion of maritime services; more favourable requirements on “rules of origin”; and access to public procurement at the sub-federal level.
The protection of food names like Rioja wine or Roquefort cheese is also high on the EU’s priority list.
Seventh-largest economy
Mercosur – which consists of Argentina, Brazil, Paraguay and Uruguay – is a region of 260 million consumers, including the world's seventh-largest economy and fifth-largest market outside the EU. It has an annual GDP of €2.2 trillion.
Ms Malmström, Sweden’s commissioner, has described the potential deal as having “three times the value” of the EU’s recent pact with Japan.
Mercosur is currently a somewhat closed market, with high tariffs and non-tariff barriers. Tariffs of 35 per cent apply to cars, 20-35 per cent to key machinery products and 18 per cent to soaps and beauty products.
In 2016, the EU exported goods there worth €42 billion and, in 2015, services worth €22 billion.
Trade relations between the EU and Mercosur are governed by an inter-regional framework co-operation agreement which came into force in 1999. The EU-Mercosur negotiations were relaunched in May 2010, paused in 2012 and resumed in 2016.
German and French car manufacturers are particularly interested in opening up the markets for their vehicles and are determined that a deal should go through.
"Can you believe that such a big, large agreement fails because of some beef?" an indignant Italian minister for the economy, Ivan Scalfarotto, reportedly recently asked Politico.
Although France shares beef producers’ concerns, it has been sending out signals that it is prepared to accept concessions. Ireland is unlikely to be able to stand alone.
Steep tariffs
The beef quota offer is causing considerable concern within the Irish farming community where there are fears that the new Brazilian beef access could coincide with possible imposition by the UK of steep tariffs against Irish beef after Brexit. European markets could face a glut of Irish and Brazilian beef, signalling sharp cuts in prices to farmers.
The commission, which negotiates on trade for the 28 member states, says it is determined to achieve “an ambitious, balanced and comprehensive agreement”– code for “no one sector will be allowed to stand in the way”.
European Commission sources expressed hope that the talks will move to “endgame” in the weeks ahead. Both sides see an imperative in the imminent closing of a window of opportunity when Brazil goes into election mode at the beginning of March.
