A trade agreement reached between the European Union and the South American ‘common market’ Mercosur is a challenge for the dairy sector. Mercedes Baraibar reports.
After 20 years of negotiations Mercosur (Argentina, Brazil, Paraguay and Uruguay) and the European Union have reached a broad trade agreement, creating one of the world’s biggest markets.
The agreement on trade is part of a much larger “Association Agreement” that is hoped to enhance political dialogue and increase co-operation areas beyond trade.
One of the most sensitive issues was market access for the dairy sector. At first, it was not under negotiations. But the European Union (EU) was very interested in Mercosur as a huge consumer, mainly Brazil.
Nothing is agreed until everything is negotiated. So in the final stages of negotiations (2016-2019), the dairy sector started to appear more frequently in the debate. It was one of the main items before a consensus was reached.
The deal impacts a combined population of more than 780 million people, and would save more than $4.5 billion worth of duties a year, according to European Commission President Jean-Claude Juncker, who declared it the largest trade agreement the EU has ever concluded.
“In the midst of international trade tensions, we are sending today a strong signal with our Mercosur partners that we stand for rules-based trade,” he said.
In Mercosur, Argentina and Uruguay are net exporters of dairy product, Paraguay is almost self-sufficient and Brazil is a net importer.
Mercosur will open its market to EU for 91% of bilateral trade. On the other hand, EU will open its market to Mercosur for 99.7% of bilateral trade.
The most relevant issues for the dairy sector are: market access for dairy products and geographical indications for the intellectual property of cheese names.
In Mercosur, Argentina and Uruguay are net exporters of dairy product, Paraguay is almost self-sufficient and Brazil is a net importer.
Mercosur is a custom union where there are no tariff duties on trade between any of the four countries, allowing free movement of goods, while a common external tariff from non-Mercosur countries is paid on dairy products.
Before this agreement, imports from non-Mercosur countries without any trade agreement with the bloc were subject to import tariffs – 28% for milk powder, 16% for cheese and 14% for UHT milk.
Mercosur and the EU agreed:
Milk powder: a quota for 10,000 tonnes over 10 years, starting at 28% and gradually being cut to 0% in 10 years.
Cheeses: a quota for 30,000t will be implemented over 10 years. Mozzarella was excluded from the agreement.
UHT milk: the tariff will also reach 0% in 10 years, but there is no quota. UHT exports from Mercosur to the EU will face no tariffs from the start.
Butter and yoghurt will have a fixed preference.
From a list of more than 300 geographical indications (GIs), 34 are cheeses. Most EU cheeses have very specific names that do not conflict with names used by Mercosur countries, but there is a minor list where there are conflicts: parmiggiano, reggiano, fontina, manchego and gruyere, for example.
For some cheeses, like the ones named, Mercosur countries can use the names if they have been produced in the last five years.
The final text of the trade agreement is now under technical revision. It will be under a legal revision. Lastly it will be ratified by each country’s parliament.
For Mercosur countries’ dairy sector – mainly Argentina and Uruguay, the main exporters to Brazil – this agreement is a huge challenge and producers face a big new competitor.
