The Mercosur trade deal between the European Union and Latin American countries cannot be approved in its current form, Taoiseach Leo Varadkar told reporters at a summit of EU leaders in Brussels on Thursday that was besieged by farmers’ protests.
The deal has been in negotiations for two decades, and supporters had hoped the agreement with Brazil, Argentina, Uruguay and Paraguay could be concluded after new environmental protections were sought. However, it has been fiercely opposed by many European farming organisations as they fear it will expose them to low-cost competition from countries where they say environmental rules are much looser.
What is the Mercosur deal?
It is a trade agreement which finally got across the line in June 2019 that was due to scale-up huge volumes of trade between the EU and countries in South America. What was most controversial was 99,000 tonnes of South American beef was to be allowed into the European market every year.
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Taking 20 years to hammer out between the EU and the Mercosur countries of Brazil, Argentina, Uruguay and Paraguay, it was instantly hailed as “a landmark in global policymaking and a coup for their exporting companies”.
However, the deal led to accusations of selling-out from the Irish beef sector, while the Government was not as jubilant as other member states.
It was immediately obvious that the deal, which needs member-state endorsement and European Parliament backing, would be tricky to get over the line due to climate and agricultural issues. But the scale of the overall deal turned heads on the basis of creating a potential market of close to 800 million people for goods and services comprising almost a quarter of the world’s gross domestic product.
In terms of tariff reduction it was the largest deal the EU had ever struck: duties on EU exports to Mercosur were expected to be cut by €4 billion a year. And its scope went far beyond lifting tariffs. It included access to public procurement contracts, protection for regional food specialities and greater freedom to provide services.
It was also clear, however, it would have huge impact on prices at a time when beef farmers in Ireland were already to the pin of their collars – a situation which has worsened since. Copa Cogeca, which represents EU farmers, said “agriculture has been the trade-off chapter to facilitate gains in other sectors”.
But in agribusiness terms alone the deal was about more than beef. The South American bloc was due to get access to EU markets in eight years with its beef, poultry, sugar and ethanol. Brazilians expected tariffs on orange juice, instant coffee and fruits would be zeroed. The agreement would ultimately remove duties on 91 per cent of goods that EU companies export to Mercosur.
Beef issues aside there were tangible opportunities for Irish companies in prospect. The Irish Farmers’ Association, however, was unequivocal in its condemnation of “a backroom deal with big business and kowtows to the likes of Mercedes and BMW in their drive to get cars into South America”.
The deal went beyond a cosy pact to help a beleaguered car industry. Considered big wins for Europe were the slashing of duties on cars and car parts, chemicals, machinery and textiles, and improved market access for EU wine and cheese.
So how did the path to approval of Mercosur become so difficult?
Cut to July 2023 when EU, Latin American and Caribbean leaders met in Brussels for a summit in a bid to forge stronger ties. Brazilian president Luiz Inacio Lula da Silva said both sides intended to conclude the trade deal “this year”.
Lula has previously dismissed the EU’s requests for additional environmental safeguards as heavy-handed overreach. “The conclusion of the Mercosur European Union agreement is a priority that we have, and it should be based on mutual trust and not in threats,” he told the summit.
Ireland, along with France and the Netherlands, however, called for tougher environmental protections to be included as they faced pressure from their large domestic beef and dairy sectors over concerns they could be undercut from abroad.
Safeguards were needed to ensure a trade deal with the Mercosur countries did not cause methane-producing industries like beef and dairy to simply “transfer” out of Europe, Taoiseach Leo Varadkar said.
If anything concerns with those EU member states had heightened since the 2019 breakthrough, and have hardened further going into 2024 when the European Commission renewed its push for adoption.
This week the commission insisted talks were continuing after a French official claimed president Emmanuel Macron had convinced the bloc’s executive to bury the deal. Macron has been incensed at the scale of deforestation of the Amazon rainforest, most of which has been to facilitate cattle production. “The discussions continue, and the EU continues to pursue its goal of reaching an agreement that respects... sensitivities, particularly in the agricultural sector,” the EU executive’s lead spokesperson told reporters.
The remarks were an attempt to dispel claims made by an Élysée official that Macron, a fierce opponent of the deal, had personally convinced commission chief Ursula von der Leyen to order negotiators to halt talks.
Varadkar rowed in on Thursday by declaring: “We can’t have a situation whereby we impose environmental regulations for farmers, and allow imports from countries that don’t have those same regulations.”
He was arriving at a summit of leaders besieged by farmer protests. France has been hard-hit by farmer demonstrations in recent weeks which have blocked roads and attempted to impose a “siege” on Paris with tractors in protest at environmental rules, increasing costs despite improved prices, and competition from cheaper imports. Farmers from EU countries joined in, while the IFA began protests on Thursday in solidarity with its European counterparts.
How vulnerable are Irish farmers?
Unquestionably Ireland’s beef farmers would be put under the cosh by this deal. Factor in Brexit (despite some new international markets being secured since), climate impacts from farming and a shift to plant-based diets, and it reinforces the need for farmers and Irish agri-food businesses to redirect their approach in a fundamental way.
Current reliance on beef could not be clearer. Ireland is the fifth largest beef exporter in the world and the largest in Europe. Some 90 per cent of Irish beef is exported – a €3 billion-plus business in annual revenues.
The prospect of an Argentinian steak selling in a French supermarket at 50 per cent less than the Irish equivalent is real. Complying with demanding traceability, food safety, animal welfare and environmental standards greatly adds to production costs in the EU.
It remains to be seen if Mercosur will be subject to such requirements backed by rigorous enforcement. What’s more, the carbon footprint of South American beef is high and will be added to by flying large quantities of beef to Europe.
Is the EU turning a blind eye?
Beef production has become a major driver of tropical deforestation; responsible for as much as 65 per cent of rainforest destruction this century as trees are cleared for pastureland. The IFA repeatedly said the deal was “turning a blind eye” to double standards and environmental degradation in Brazil.
The EU insisted there are clear guarantees for South American countries to their commitments under the Paris climate agreement and on food safety while safeguarding the rights of indigenous people. Past sins in the form of fraud in the Brazilian beef sector provide little comfort to EU farmers at a time when their incomes are so squeezed.
France has repeatedly called for a reopening of the 2019 deal to include social and environmental clauses, but the EU executive has opposed it. There are strong indications the political ramifications of farmers’ uprisings could further entrench France’s opposition – a scenario that would give the Government some cover in blocking the deal as framed.
“At the moment the commission considers that the conditions to conclude negotiations with Mercosur are not met,” the commission admitted; an indicator negotiations continue to be plagued with difficulties.
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