The agreement with Mercosur is getting closer: a blow for EU cattle farmers?

The agreement with Mercosur is getting closer: a blow for EU cattle farmers?

Johanna Michel, AGRICULTURAL HEUTE*

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If the EU and South America continue negotiations on the Mercosur deal and trade is eventually facilitated, European cattle farmers are likely to be the losers. There London School of Economics and Political Science quantified the impact in a sustainability study.

Negotiations on the Mercosur agreement might soon continue between the EU and South America. For European cattle farmers, the agreement carries risks. An impact study carried out in London provides figures.

The change of government in Brazil is causing new hopes within the European Union concerning a trade agreement with the four South American countries of Mercosur, Argentina, Brazil, Paraguay and Uruguay. European Commission President Ursula von der Leyen, MEP Manfred Weber and Mr. Bernd Lange, President of the European Parliament’s Committee on Budgets, recently spoke out in favor of continuing the negotiations.

The European Commission expects the agreement with Mercosur to have geostrategic and economic advantages. Thus, the consequences of the Covid pandemic and the war in Ukraine might be better mitigated and the change towards more sustainability might be accelerated. But rarely are there only benefits for everyone involved. EU cattle farmers, in particular, might lose out. A sustainability assessment conducted by the London School of Economics and Political Science in December 2020 sheds light on the effects of the planned agreement. One of the strengths is cattle breeding in Europe and the Mercosur countries.

Predicted fall in beef production in the EU following the agreement with Mercosur

In their sustainability study, the scientists looked at the consequences of a conservative deal and an ambitious deal with Mercosur. The conservative scenario assumes the elimination of customs duties for Mercosur countries for 80% of agricultural products. The EU reduces tariffs by 15 percent for beef. For other agricultural products analyzed in the survey (other meat, sugar, rice, cereals, milk), the EU also reduces customs tariffs by 15 percent.

In the ambitious scenario, it is assumed that the customs duties of the Mercosur countries will be completely abolished. For beef, sugar and rice, the EU is reducing tariffs by 30 percent. For cereals and milk, EU customs duties are completely abolished; in the conservative analysis, tariffs are reduced by 15 percent.

The sustainability assessment showed that beef imports into the EU would increase by around 30 percent in the conservative scenario and by around 64 percent in the ambitious scenario. In the EU, beef production would then decline by 0.7 percent and 1.2 percent respectively.

Mercosur countries would benefit from the good quality of their beef

The authors of the analysis point out that the EU applies peak tariffs to beef which are several times higher than the average tariffs applied to other products. But since beef from South America is associated with high quality, Mercosur countries still manage to export large quantities of it, while exporting is no longer attractive for other exporters due to tariffs. customs.

The price of a kilo of beef from the Mercosur countries is also on average significantly higher than the price per kilo in the EU. An important difference in quality results from the breeds of cattle or the use of the animals: in the EU, a large part of the beef comes from dairy production (cows, heifers, calves), while in South America, meat breeds play a much larger role. [Ma note : les pays du Mercosur exporte aussi beaucoup de morceaux nobles, au prix élevé.]

South America is number 1 in European beef imports

The Mercosur countries have always been among the main suppliers of beef to the EU. Until a decade ago, 73 percent of European beef imports came from Mercosur countries, but this proportion has since fallen slightly. Beef also accounts for regarding 3 percent of all EU imports from Mercosur countries.

While beef consumption is rising in Mercosur countries, it is falling in Europe.

The beef supply – including processed products – is very varied. Russia, China and Egypt are other important destinations for South American beef exports. In some cases, exports to these countries are even greater than exports to the EU.

More milk would leave Europe for South America

European milk exports to Argentina, Brazil, Paraguay and Uruguay would increase by 91 percent and 121 percent respectively. In addition, according to the authors, cheese exports might increase. Conversely, Mercosur countries would deliver 18 percent more milk to the EU in the conservative scenario and 165 percent in the ambitious scenario. The starting quantities are however small in this case. To further increase milk exports from South America, more suppliers would need to improve hygiene conditions and animal welfare, among other things.

In addition, the London researchers predict lower consumer prices thanks to the Mercosur agreement. The EU should consider quotas and partial liberalization for certain agricultural products.

The EU wants trade rather than independence

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EU Trade Commissioner Valdis Dombrovskis.

EU Trade Commissioner Valdis Dombrovskis highlighted in a speech on Monday (23 January) the challenges currently facing the EU, such as the transition to a net zero economy or the growing importance of China. With regard to its competitiveness, the EU faces the question of whether to remain outward-looking or to become more inward-looking. In this context, the European Union must not forget why it is attractive as an economic and investment site.

From the Latvian Trade Commissioner’s perspective, the EU derives its competitive and political strength from its position as a trading superpower. Economic strength is obtained through trade. Trade in turn leads to a win-win situation for partners and efficiency. According to Dombrovskis, isolation from the world would, on the other hand, lead to a loss of competitiveness and resilience. This is why bilateral trade agreements must be accelerated. In addition to the discussions with the Mercosur countries, the negotiations with India, Indonesia, Australia and Mexico are also part of it.

With equipment fromAgE

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* Johanna Michel has been working since 2020 as a cross-media editor at AGRICULTURAL TODAY. An employee specializing in media and information services, she first worked in the administration of the Bundestag German and followed, in parallel, studies of agronomy at the Humboldt University of Berlin. Within the Operations and Markets Department, she is particularly interested in the implementation of agricultural policy decisions due to her knowledge of legislation.

Source : Mercosur agreement is approaching: a blow to cattle farmers in the EU? | agrarheute.com