EU-Mercosur trade talks significant to livestock sector

The European Commission (EC) has announced its intention to resume bilateral trade negotiations with the Mercosur group of countries, which could have significant implications for UK agriculture, especially the livestock sectors.

The Mercosur group is a South American trade bloc comprising Argentina, Brazil, Paraguay, and Uruguay. Venezuela also joined the group in 2006. Negotiations between the EU and Mercosur began in 1999 but have been suspended since 2004 owing to significant differences in ambition between the two parties.

The EC's statement highlights the significant opportunities that exist in a deal for EU industrial goods and services, however, this masks the significant impact a deal could have on the agricultural sector, according to reports.

The EU is already a major net importer of agricultural goods from the Mercosur countries - imports amounted to EUR26 billion in 2007-08 with exports a mere EUR1 billion. Brazil represents 64% of EU-Mercosur imports.

Given the sheer competitiveness of South American producers - labour costs according to the EC are estimated at 16% of those in the EU - any agreement that reduces the duty or increases the tariff rate quota for farm goods from Mercosur is bound to have some impact on the EU market.

And given that the EU's original offer on 2004 for concessions (mostly in the form of TRQs - or low tariffs applied for a specified quantity of imports), it can be expected that Mercosur will seek further concessions as a price to pay for opening up trade in goods and services.

According to NFU, talks have been resumed due to the failure to make meaningful progress on the Doha Round of WTO talks; which means that many countries and trading blocs around the world are seeking to accelerate bilateral trade deals as a means of injecting trade stimulus into their economies at a time of feeble recovery, especially in the OECD countries.

The EU has perhaps been at the forefront of this, recently pushing through a free-trade agreement (FTA) with South Korea and initiating talks on a trade agreement with Canada and another with Colombia, Panama and Ecuador, NFU said.