Recently, there has been a renewed focus on concluding bilateral trade agreements globally. In the case of the EU there are two deals currently in the pipeline, the Transatlantic Trade and Investment Partnership (TTIP), and an agreement with Mercosur countries following Argentina recently electing a more business friendly president.
The Mercosur counties include six South American nations including Brazil, Argentina, Paraguay, Uruguay, Chile and Venezuela which traditionally are big consumers of beef and, as a region, are very active in the global beef market. When beef exports from this region are combined with that from the US, their share of global beef exports amounts to more than a quarter. However, as mentioned in a recent article there is limited potential for the US to send significantly larger volumes to the EU overnight should a deal on TTIP be reached. This is due to access being limited to cattle not treated with hormones and processors seeking more work to be done on the use of interventions sprays (a practice commonly used in the US where the carcase is sprayed with lactic acid to kill bacteria) which is prohibited in Europe.
In reality, it is an agreement with the Mercosur countries that is likely to have the greatest impact on the EU beef market. The attractiveness of the EU market in terms of price and the competitiveness of cattle in places like Brazil certainly poses a threat to EU producers. The recent election of Mauricio Macri as president of Argentina, an advocate for free markets, has helped bring this group back to the negotiating table with offers expected to be exchanged with the EU early in May.
Within the EU, the potential trade deal with Mercosur countries has met its strongest resistance from the Irish and French industries. The Irish Farmers Association has called for EU Commissioner for Agriculture Phil Hogan to directly intervene and prevent an exchange of trade offers. While according to the Irish Farmers Journal, French farm lobby groups may be facing an uphill battle in making their case, due to the country having significant trade interests in South America.
With regards to production in South America it seems that there is significant potential for growth. In recent times Brazil has encountered economic challenges and has seen beef production decline. Exports for 2015 were down almost 150,000 tonnes on the previous year. In the case of Argentina, the beef industry along with other agricultural sectors has been hindered by taxes placed on exports. This was to ensure sufficient supplies for the domestic population and resulted in exports falling from almost 440,000 tonnes in 2005 to approximately 131,000 tonnes in 2015. What this alludes to is that given the right conditions these two countries alone have the potential to export at least an additional 450,000 tonnes.
These concerns have been heightened by suggestions that a potential offer from the EU could include a tariff rate quota for South American beef. The driving factor behind the renewed interest in bilateral trade agreements from an EU perspective is that such deals can help counteract economic stagnation. In addition to this the EU Commission predicts 90 per cent of world demand to come from outside EU borders meaning there are significant growth potential opportunities available. However, with any trade deal there are winners and losers. Unfortunately EU beef producers may find themselves being classified as the latter in such a deal with the US or South Americans or at the minimum, find a more competitive environment in their traditional markets.