EU plans to reduce the tariff on agricultural products from South American countries

The trade agreement between the European Union and the MERCOSUR countries, in particular the chapter on agriculture, has provoked protests from farmers in the EU who believe that South American agricultural products do not meet European standards. The agreement from 2019 was published on the website of the European Commission, but has not yet been adopted. It provides for the introduction of quotas for duty-free (or at low rates) import of certain types of agricultural products from MERCOSUR countries, in particular Argentina, Brazil, Paraguay and Uruguay.

The agreement will give EU farmers greater access to South American markets, allowing for increased exports of wine, cheese, milk powder and olive oil.

Most of the quotas included in the agreement will be phased in over six years. Consider their share of the EU market and the potential impact determined by the study of the Joint Research Center of the European Commission (JRC).

Beef

The European Union will allow the gradual import of 99,000 tons of beef with a duty of 7.5% over 5 years, of which 55% is fresh high-quality beef and 45% is frozen. This will be 1.2% of the total volume of beef consumption in the EU (8 million tons per year). Currently, the EU imports 200,000 tons of beef per year from MERCOSUR countries. This includes the Hilton quota, which allows Argentina and Brazil to supply the EU with up to 10,000 tonnes of beef and 29,500 tonnes of selected beef trimmings with a 20% duty that will be abolished by the agreement. According to JRC, the beef trade deficit with MERCOSUR countries will grow from €1 billion in 2023 to €1.4 billion in 2032.

Bird

The agreement will allow the EU to import duty-free 180,000 tons of poultry meat per year from MERCOSUR countries, which will amount to 1.4% of the total consumption of this product in the EU, which will reach 12.6 million tons in 2024. Currently, the main supplier of meat of poultry to the EU is Brazil (the world’s largest producer of these products), and Ukraine is in second place. French poultry farmers said that the additional 180,000 tons is a 20% increase in the total volume of quotas, which will increase the share of imports in the volume of consumption of these products in the EU to 10%. According to JRC, the poultry meat trade deficit with MERCOSUR countries will grow from €600 million in 2023 to €865 million in 2032.

Sugar

The agreement cancels the duty in Brazil on a quota of 180,000 tons of sugar for processing, and provides Paraguay with a duty-free quota of 10,000 tons. This will amount to 1% of sugar consumption in the EU, which will amount to 17.7 million tons in 2024 (with the production of 16.6 million t). According to the JRC, the sugar trade deficit with MERCOSUR countries will grow from €223 million in 2023 to €330 million in 2032.

Ethanol

MERCOSUR countries will be given two quotas with a total volume of 650,000 tons, which will be 15% of EU production. One quota for 450,000 tons will be duty-free for biochemical purposes, the second for 200,000 tons will have a reduced duty for all purposes, including fuel.

Corn

A quota for duty-free imports of 1 million tons of corn and sorghum from MERCOSUR countries will be phased in over 5 years, but it will not change the situation, as currently corn imports into the EU are also duty-free. It will be important in the event of a collapse in world prices, which would lead to the automatic introduction of duties on other types of imports. In the previous season, Brazil became the second supplier of corn to the EU after Ukraine, importing there 2.9 million tons.

Soy products

The agreement will reduce or eliminate tariffs in force in MERCOSUR countries on exports to the EU of soy products used in animal feed. Currently, MERCOSUR is the largest supplier of soybeans and soybean products to the EU.

Tags: ethanol, Argentina, corn, Brazil, EU, sugar, soybean, Beef cattle