Trade Agreement Between EU and Mercosur

By Sybille de La Hamaide
PARIS (Reuters) – A trade agreement between the European Union and Mercosur countries, which includes a significant section on agriculture, has triggered protests from EU farmers who argue farm imports from South America do not meet European standards.

The agreement, dating from 2019 and published on the Commission website, has yet to be adopted. It includes the establishment of import quotas of certain agricultural products from Mercosur countries, including Argentina, Brazil, Paraguay, and Uruguay, either duty-free or at reduced levy.

The agreement would also give EU farmers increased access to South American markets which could boost exports of products such as wine, cheese, milk powder, and olive oil.

Main EU Import Quotas

Below are the main EU import quotas included in the agreement, most of which are to be phased in over six years, along with their share of the EU market and potential impact based on a study by the European Commission's joint research center (JRC).

BEEF

Under the agreement, the EU will allow 99,000 metric tons of beef, including 55% of "fresh", high-quality beef, and 45% of "frozen" beef, to be phased in over five years, with a 7.5% duty. This represents 1.2% of overall EU beef consumption of 8 million tons per year.

The EU currently imports about 200,000 tons of beef every year from Mercosur countries. This total includes the Hilton quota allowing Brazil and Argentina to each export up to 10,000 tonnes of beef. The current 20% duty on that quota is set to be removed. The beef trade deficit with Mercosur countries would rise to 1.4 billion euros by 2032 from 1.0 billion in 2023, according to the JRC.

POULTRY

The free trade agreement would allow duty-free imports of 180,000 tons of poultry meat per year from Mercosur countries. This represents 1.4% of overall EU poultry consumption of 12.6 million tons forecast in 2024.

The four Mercosur countries together are the EU's leading suppliers of chicken meat. The additional 180,000 tons represent a 20% increase in total quota volumes, bringing the share of imports in EU poultry consumption to 10%, according to French poultry producers. The poultry trade deficit with Mercosur countries would rise to about 865 million euros by 2032 from 600 million in 2023, based on JRC's findings.

SUGAR

Under the agreement, Brazil will see the tariff removed on the existing quota for 180,000 tons of sugar for refining. Paraguay would be granted a new duty-free quota of 10,000 tons. The amounts cover a volume accounting for 1% of EU sugar consumption, expected at 17.7 million tons in 2024.

The sugar trade deficit with Mercosur countries would rise to about 330 million euros by 2032 from 223 million in 2023, said the JRC.

ETHANOL

Mercosur countries would be granted two different tariff-rate quotas for a total of 650,000 tons. The first quota, of 450,000 tons, would be duty-free for biochemical uses while the second, of 200,000 tons, would be at a reduced levy for all uses, including fuel. This total represents approximately 15% of EU production.

MAIZE

A quota of 1,000,000 tons of duty-free maize and sorghum imports from Mercosur countries would be phased in over five years. This quota would not change the current situation, as maize imports are already duty-free. Brazil is the second-largest maize supplier to the EU after Ukraine, with 2.9 million tonnes imported in the last season.

SOYBEAN PRODUCTS

The agreement will also reduce or eliminate duties that Mercosur countries impose on exports to the EU of soybean products for animal feed. Mercosur is currently the largest soybean and soybean product supplier to the EU.