Are international trade deals good for Irish agriculture?
Ireland is an open economy, with a very long standing and proud tradition of food and beverages exports. Those have increased by a massive 67% since 2010, with 34% of the €14.3bn sold in 2020 going to the UK, 35% going to EU countries, and 31% to third countries. Access to global markets is crucial to Irish agribusiness, especially with the Brexit-related need to diversify Ireland’s markets. Trade deals which facilitate this are therefore especially important – provided of course they offer opportunities and minimise threats, a tricky proposition when trade deals, by nature, must deliver wins for both parties.
The EU Commission’s Joint Research Centre has just updated its 2016 assessment of the impact on EU agri-food trade of 12 Free Trade Agreements (FTAs) already concluded or in negotiations. So, how good will those deals be for Irish agriculture?
The EU Commission assessment
The 12 FTAs included that are already signed up are with Canada, Japan, Mercosur, Mexico and Vietnam, and are factored in on the basis of their actual outcome. Those that have yet to be concluded include Australia, Chile, Indonesia, Malaysia, New Zealand, the Philippines and Thailand. For those, the economic analysis is based on models with ambitious and conservative scenarios.
The ambitious scenario provides for 98.5% of products (custom lines) being traded tariff free, with a 50% tariff cut for sensitive products, while the conservative scenario sets out 97% tariff liberalisation, with a 25% cut to tariffs for sensitive products. Both scenarios are then compared to a 2030 “no change” baseline.
Puzzlingly, the economic analysis did not take account of the impact of COVID19, any post Brexit trade friction, or the implementation of the EU Green Deal.
The 2016 JRC assessment can be found here, with the update published last week here.
Positive for overall balance of EU trade, but variable on products
Last week, EU Commissioner for Agriculture Janusz Wojciechowski presented the results to the European Parliament’s Agricultural Committee as a positive story: the EU would gain more in increased export value than it would have to let in imports, regardless of the scenario considered.
The picture varies from product to product, as can be seen in the infographic below.
Source: JRC Cumulative economic impact of trade agreements on EU agriculture (2021 update)
To sum up, exports would grow by €4.7bn (conservative scenario) to €5.5bn (ambitious scenario) by 2030, favouring dairy, pork, beverages and tobacco and processed food. Imports would grow by between €3.7 and €4.7bn with processed food imports outpacing export increases.
On the positive side of the trade balance, especially for Ireland, exports of dairy products to the countries concerned by the 12 FTAs would potentially increase by €1.3bn – with a massive boost from exports to Japan, which could increase by €600m, but minimal additional dairy imports into the EU. EU pork exports would also increase by up to €990m, also with negligible additional imports in counterpart.
However, more worryingly for Irish farmers, €186m additional EU beef exports would cost additional beef imports worth up to €657m, with poultry not far behind at around €576m (for only €180m of additional exports).
No surprise that the main source of increased beef (€420m) and poultry (€290m) imports into the EU would be the Mercosur countries.
Trade deals impact EU production and prices
The JRC assessment makes it clear that beef, poultry and sheepmeat production value will contract, in a combination of reduced production and/or prices due to competition from imports.
Beef is recognised as a sensitive product for both the EU and some of the FTA partners, e.g. Japan – and the Tariff Rate Quotas approach (TRQs – a specific amount of product (quota) for which a reduced tariff applies) is deemed appropriate by the report to deal with sensitive products, and is a feature in both the Mercosur and CETA (Canada) trade deals.
Despite this, it is clear from the graph below that a value reduction of around 3% in EU beef production will ensue. The EU sheepmeat production value also stands to fall by 2% to 3.5%, and poultry by 2% or so.
On the more positive side, the value of the EU production of butter, cheese, skimmed milk powder and whey powder stand to increase relatively substantially (3% to 4% approximately). Pork seems set to benefit most, with EU production increasing in value by 4 to 6%.
Value of EU production by commodities and scenarios (2030)
Source: JRC Cumulative economic impact of trade agreements on EU agriculture (2021 update)
Some major omissions and limitations in the analysis
The report fails to bring the analysis down to individual EU Member State level. It is a fair bet, however that given Ireland’s production mix, the outcome would be positive for Irish dairy and pork, and negative for Irish beef, sheepmeat, and probably poultry.
Another major flaw is the assumption being made that Brexit will result in quota and tariff free trade, but without any provision for the entirely predictable non-tariff barriers delays and costs which have materialised.
COVID 19 was not provided for either – understandable enough when this global pandemic came out of the blue 12 months ago.
What is less forgivable is the decision that the implementation of the European Green Deal and other relevant factors to trade policy such as environmental and social sustainability “fall beyond the scope of the report”.
Bumpy road or level playing field?
The European Green Deal’s Farm to Fork Strategy specifically commits the EU to “promoting the global transition to sustainable agri-food systems”, ensuring that the EU trade policy contributes to obtaining “ambitious commitments” from thirds countries around standards on animal welfare, pesticides, anti-microbial resistance, and avoiding the “placing of products associated with deforestation or forest degradation on the EU market”. Surely, this is directly relevant to at least some of the 12 FTAs – Mercosur comes to mind.
Farmers would legitimately argue that there was insufficient effort to ensure in all 12 FTAs that standards of imports at least match those EU and Irish farmers have to respect. Now that the EU Green Deal’s Farm to Fork Strategy states that this must happen, the least farmers are entitled to expect is an assessment of how the 12 FTAs deliver – or don’t – in this area.
Back to the drawing board?
© Catherine Lascurettes, Cúl Dara Consultancy
