The Government will be seeking an Irish answer to the particularly Irish dilemma of the Mercosur trade deal in the weeks ahead. It should be interesting to watch.
The idea of a State that makes its living from trade opposing such a deal with all the opportunities it would bring is bizarre, particularly given the backdrop of the trade upheavals caused by US president Donald Trump.
For the moment, that is where we are. But senior Ministers will already be quietly looking for ways to wriggle off the hook they created when they promised Irish opposition to Mercosur in another one of the “regret at leisure” commitments in the programme for government, alongside the one promising to reconsider the hospitality VAT issue.
Taoiseach Micheál Martin and Tánaiste Simon Harris said when the European Commission published its proposals for the deal this week that the Republic was against the agreement. This is because of the risk to the beef sector via competition from Latin American product on the European Union market.
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Minister for Agriculture Martin Heydon is to be sent out to see if the potential “coalition of the willing” to oppose the deal in the EU will be enough to block it. Whatever about waiting to see how the ball breaks, the idea of the State whipping up opposition is not even remotely clever.
Heydon would want to watch his back, too. Martin and Harris were careful to leave a way out. The “prudent and responsible thing” was to examine the detail and the safeguards being put in place to protect farmers, according to Harris. The potential escape routes are being left open. The Republic will hold out for as large a share as possible of the compensation package for farmers and then – if the deal looks like going through – fold.
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Senior Ministers are already stretching credibility to breaking point. Having indicated our current opposition to the deal, the Taoiseach rocked up at an event held by Ibec, the business lobby group, on Thursday evening and pointed out in his speech that trade is vital for us and “is the only credible way for us to provide the jobs and investment our people rely on”. He added, remarkably given the context: “In spite of this, there are many in our political sphere who remain viscerally opposed to trade and who celebrate every action that delays new trade agreements.”
Then, just to hammer the point home, the Taoiseach said: “I want to make it very clear that my Government will always be pro-trade ... Where new trade agreements are available and are balanced, then it is in Ireland’s interest to ratify them as quickly as possible.”
Now, no doubt the Government will use the argument that Mercosur is not balanced and, in particular, disadvantages beef farmers. Ministers have also mentioned environmental concerns, though these haven’t stopped them from supporting an EU trade agreement with Donald “drill, baby, drill” Trump.
It is, of course, the particular power of the farming and beef lobbies that is the key political factor. Even Ibec, the champion of commerce, has not come out in favour of the deal, with Meat Industry Ireland, one of its constituent bodies, strongly opposed. Official Ireland, it seems, is in a bind, favouring free trade, but only if it doesn’t upset anybody. Only Chambers Ireland, the body representing the Chambers of Commerce, has come out in support of Mercosur.
The reality is that Trump’s economic nationalism has changed the game. The EU – and this State – need new trade partners and new political alliances. Europe needs to spread its bets, and the Republic, with its particular reliance on United States trade and investment, has a big stake in this succeeding.
The beef sector can make its case, arguing it has to adhere to tougher environmental and food standards than its new competitors – though, as ever, it does so in apocryphal terms. The amount of beef entering under the deal will be limited, only about 1.5 per cent of European Union beef production on EU estimates, and there will be safeguards and compensation.
Also, we might remember that the Irish Farmers’ Association argued that “beef will be the big loser” on foot of the Comprehensive Economic and Trade Agreement between the EU and Canada, which came into force provisionally in 2017. In fact, Canadian beef has not flooded into the European Union. Meanwhile, Irish beef exports to Canada have risen from practically zero in 2016 to more than €22 million last year – a nice new market.
We will have to see how the Mercosur debate plays out. Politics in France, which has led the opposition, is in flux. Initial indications are that Italy may back the deal. Two big countries would need to go against it, along with some smaller ones like the Republic, if the deal is to fail the qualified majority test to pass its central trade terms.
Our vote is unlikely to be decisive. So do we cynically vote against and hope it passes? Or “reluctantly” fall into line when it becomes obvious that it will pass? Or claim a “ victory” when we secure a certain amount of the promised compensation for farmers?
The Mercosur economies – Brazil, Argentina, Paraguay and Uruguay – are relatively closed to trade historically, and a consultancy report commissioned by the previous government in 2021 points to the “first mover” advantage EU exporters would have over other countries were the deal to pass. For the State, there are export opportunities in chemicals and pharma, electronics, electrical equipment, processed food and spirits, particularly whiskey and services.
It is part of a story of the EU trying to diversify, building on current trade deals and aiming for new ones – with India also in the pipeline. This is important economically. But it is also important politically, in an era when the European Union is saying to the US that it wants to be the free trade champion as Trump turns the country inward. Against this backdrop, it is simply not credible for one of the EU states that benefits most from free trade to vote against Mercosur.
The best-case scenario is that the State secures a decent share of the compensation package for farmers and supports the deal. The worst case is embarrassment and a burning of political capital in the EU at a time when our stock of this precious commodity has already run down significantly.
