An analysis of proposed trade agreements between Europe and 12 regions of the world reveals their devastating cumulative impact on the beef sector, while the dairy and pig sectors would gain.
The European Commission presented the conclusions of a simulation of future trade agreements to the Council of European Agriculture Ministers in Brussels this Tuesday.
Commission officials used economic models to evaluate the effect of proposed trade agreements with the US (TTIP), the Mercosur bloc of South American countries and 10 other partners by 2025.
They looked into two scenarios:
- Conservative: full liberalisation of 97% of products and a 25% tariff cut for the others.
- Ambitious: full liberalisation of 98.5% of all products and a partial tariff cut of 50% for the others.
Beef and sheep
The study found that the “beef and sheep sector is the most affected sector in terms of trade flows, imports in particular”. A jump in beef imports into Europe, 80% of which would come from Mercosur, would not be met with corresponding export increases. Under the most ambitious scenario, beef imports from Mercosur into the EU would skyrocket by 300%.
The effect on European beef farmers would be devastating: “EU beef imports could increase by about 146,000t and 356,000t in the conservative and ambitious scenario, respectively,” the authors wrote. “The additional volume of EU beef imports creates a direct downward pressure on the EU producer prices. Moreover, the beef market is under additional pressure from the positive developments in dairy market induced by growing EU exports upon opening up the FTA partners’ markets.”
Beef prices would fall by 8% under the conservative scenario and 16% under the ambitious one. While consumers would eat more beef thanks to lower prices, production would still drop because of competition from cheap imports. “It is reasonable to assume that most of this production decrease will be even stronger in specialised beef production, while partly offset by an increase in production of meat originating from the expanding dairy herd,” the report adds.
Turkey is the only trading partner with whom an agreement would improve Europe’s beef and sheep trade balance.
Dairy
The balance of dairy trade could improve by up to €900m for Europe under the ambitious scenario, and over €800m under the conservative one. While Europe would import more dairy products from areas covered by new trade agreements, this would be more than compensated by a surge in cheese and skimmed milk powder exports to Turkey, Latin America and Japan.
Pig and poultry
While increasing trade liberalisation would benefit pig exports to Japan, the US, Canada, Mercosur and Australia, poultry imports from Mercosur would increase, leading to an overall neutral effect on the white meat sector.
Grain
The report found that the impact of trade deals on the grain sector would be limited because those markets are already largely liberalised. However, one of the caveats of the study is that it considers only tariff changes – not the effect of trade agreements on other trade barriers such as sanitary controls.
However, the ambitious scenario could lead to a slight rise in European grain exports and increased demand for feed in the pig and poultry sector, leading to a 3% rise in European prices, the study estimates.
While many sectors such as prepared foods are not covered by the study, it contains indications of positive impacts on beverages and other areas.
The European Commission pointed out that the models are simplified and based on assumptions; therefore, the study does not constitute a forecast.
Presenting the report, European Commissioner for Agriculture and Rural Development Phil Hogan said: “The effect of international trade agreements on agriculture and the European agri-food sector is broadly positive.” However, he added that “the study has emphasised in very potent terms that we have clear sensitivities in relation to beef and rice”. The Commission concluded that the study vindicated its approach of limiting import quotas for sensitive agricultural products when negotiating trade deals.
In an initial reaction, Copa President Martin Merrild said “This study confirms our views that the EU meat sector could be hit hard by some trade deals, unless conservative tariff rate quotes on imports are imposed, especially the one being negotiated with the EU Latin American Trade bloc Mercosur. We believe that a potential deal with Mercosur could hit the EU agriculture sector badly, especially beef”.
“Based on the methodology selected for this study, I believe that the Commission is underestimating the fragile state of the EU pork sector and beef sectors. A deeper analysis which differentiates between carcass cuts and different qualities would be needed in order to develop the right EU meat strategy and maintain the EU’s production potential”, he added.
Cogeca President Thomas Magnusson said “We call for a report to be developed which addresses the key Mediterranean products like wine, olive oil, fruit and vegetables. We believe that Mediterranean products like wine and olive oil can be better addressed in future relations with the Euromed area. Furthermore, the report fails to look at the effects of non-tariff barriers to trade. In the trade talks with the USA, for instance, we believe that there could be major gains if non-tariff barriers to trade and red tape are eliminated. For example, EU dairy producers are confronted with big obstacles when trying to market Grade A milk products in the US. We believe that the business trips organised by EU Agriculture Commissioner Hogan are very strategic in this respect and increase our trade potential. We are already starting to see the fruits of these missions.”.
Wrapping up, Mr Magnusson underlined the need to have a simple, stable and innovative Common Agricultural Policy (CAP) in the future that works for farmers so that the can EU remain competitive on world markets and produce more to feed a growing world population using less resources.
Farmers journal / argonews
