Govt hedging its bets on Mercosur

There are times when politicians and others must determine which way the wind is blowing before making critical decisions. It is all very well sticking to immutable principles, but if the result is likely to be contrary to what you hoped for, there is little point in holding out for the unachievable. Mercosur is a case in point. There may or may not be adequate opposition to the trade deal with the South Americans among EU Member States. Given the current turmoil in trade, driven mainly, though not exclusively, by President Trump’s tariffs, the EU must prioritise alternative and expanded opportunities with other countries and trade blocs. Germany sees the Mercosur countries as offering significant trade opportunities and the German economy badly needs to increase exports from its manufacturing sector. The country’s loss of competitiveness in recent years will not be solved by one trade agreement but it will be seen as a potential trigger for increased output and profit. The French farm lobby is still as a major force to be placated by French Governments. Nevertheless, with huge and deteriorating financial challenges, including unsustainable debt levels, the French president will be tempted to grasp at any straws available to improve France’s economic prospects. The Irish Government has been coy about its stance on Mercosur. It will, presumably seek further protective measures for Irish beef producers, allowing for the fact that there are considerable safeguards already in place to offset any precipitous price falls in European beef prices. The conundrum in that regard is a determination of the price base at which safeguarding measures would be triggered. Would it be based on last year’s prices or this year’s prices, or somewhere in between?
Right now, Irish and European beef prices are at historic highs and need to remain there to deliver sustainable incomes for producers. While a turnaround in cattle output is not expected in the immediate future, higher prices usually beget higher outputs eventually, whether that’s in the production of coffee beans or prime steaks. Producers react to the potential for profit, just as milk producers globally reacted to higher milk prices, resulting in the current price retreat for producers. The lead-in time for increasing beef output is slower but, with grain prices remaining low, it is reasonable to suggest that a reversal of current reduced output levels will materialise relatively quickly. The input/output margin for grain-fed beef means that heavier carcases have the potential to offset a proportion of the beef deficit currently being experienced. All this points towards an agreement finally being achieved between the European Union and the Mercosur countries comprising Brazil, Argentina, Paraguay, Uruguay and Bolivia. Recent engagements between China, India, Russia and others point towards the potential for new political and trade alignments being developed globally, which will only place further pressures on the European Union. Several of the Mercosur countries already have significant trade engagement, especially in meat products, with the Asia-Pacific region and European strategists will be conscious of the need to strengthen ties, political and economic, with the South Americans. It’s not all about trade. There are global power dynamics at play of which we in Ireland may not be fully aware. The difficulties for the EU in achieving coherent and cohesive policies in relation to Russian aggression as well as the Israel/Gaza conflict show how important the completion of the Mercosur trade deal is in boosting the EU’s status as a global trader. Any risk to Ireland’s cattle producers may be considered acceptable collateral damage in the greater scheme of things.