independent

Thursday 24 April 2014

Agri-Business: Why EU trade deals are causing jitters

Karel De Gucht, the European Union Trade Commissioner

Agri-business interests are getting nervous about the EU's apparent intention to strike trade deals left, right and centre.

Less than six months ago, the EU's trade negotiators signed off on a bilateral deal with Canada, said to be worth €26bn to the two regions.

Agriculture is only a fraction of that. Instead, these deals are mostly about, and ultimately driven by, other business interests such as the financial sector, pharmaceutical, and construction.

Next on the bilateral hit-list is the US, where a deal would be worth multiples of the Canadian equivalent. Progress has been surprisingly rapid, largely because both sides are happy to use the Canadian deal as a blue-print for dealing with the always sensitive agricultural issues.

Meanwhile, negotiations are also progressing on a trade deal with Japan, presumably along similar lines to the ones that have been struck with South Korea and Singapore in recent years.

Just how much impact all this high level bartering is going to have on Ireland's agri-food industry remains to be seen.

If you talk to the farm lobbyists, it will be anything but good.

The Canadian deal saw them secure access for an additional 35,000t of beef and 75,000t of pork into the high priced European markets.

And there is no doubt that much of this will be targeted at Britain, which is Ireland's single most important export market.

Not only does it account for half of our €2bn beef exports, but it is also the highest price market in Europe.

The same supermarkets that currently have multi-million euro deals with Irish beef barons such as Larry Goodman will be big targets for Canadians who rear beef on such a scale that it can be produced cheaper than even our grass-fed animals.

The flip-side for Ireland is supposed to be the dairy sector, where we are one of the most competitive globally.

But it's likely that the opportunities will be limited in Canada, since what they are interested in is more fancy French cheeses than our commodity powders and butter.

However, the Irish agriculture sector has grown up a lot over the last decade. From a point in the 1970s, 1980s and 1990s where European agriculture was aimlessly pumping out grain, beef and milk that created all kinds of expensive surpluses, it has now removed the production incentives and re-focused on matching itself to market requirements.

Yes, EU beef is still protected by tariffs that are often as high as 100pc, and the removal of these for large scale producers in North America will pose a big challenge to farmers and businesses pumping meat in commodity form.

But the Irish agri sector is in the process of reinventing itself as a premium producer, complete with carbon audits for every farm, grass-fed adverts and companies investing huge amounts in R&D.

The two-way street that is inherent in any of these trade deals will open up a huge North American market. Ireland is likely to be better positioned than almost any other European country to leverage its Irish connections.

And if anything, it might be prudent to start opening up markets for Irish produce on the other side of the Atlantic to hedge ourselves against an inevitable onslaught from even cheaper competition.

While the EU's Trade Commissioner De Gucht is plying deals from Tokyo to New York, the Commission's president, Manuel Barroso, is angling to have one last go at securing a trade deal with Brazil before he finishes his term this October.

Of any deal, this is the one that Irish producers should fear most. Compared to Japan and the US, there will be slim pickings in Brazil for shamrock-branded, premium-priced steaks from Ballyhaunis.

But Mr Barroso knows that the world's number one commodity exporter is keen to disentangle itself from the uneasy Mercosur trade agreement it has with Argentina.

Previous attempts at a deal with the South American giant have always fallen flat, but with the EU's trade negotiation team now on a roll, anything's possible.

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