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US assesses potential losses in agricultural exports to EU if the Mercosur deal is finally ratifies

MercoPress | 11 January 2021

US assesses potential losses in agricultural exports to EU if the Mercosur deal is finally ratifies

Analysis by the United States Department of Agriculture’s Foreign Agricultural Service (FAS / USDA) point out that the country has US$ 4 billion in agricultural exports that may be affected to some extent by the trade agreement between the European Union and Mercosur. The agreement has yet to be ratified by national parliaments.

One of the US products that can be harmed is ethanol, which makes up 28% of the EU’s ethanol imports according to the agency. Between 2015 and 2019, the US ethanol market share in the EU market was, on average, 22%, while Mercosur’s 7%.

With the agreement Mercosur enjoy a quota-free access for 570 million liters of ethanol for industrial use and 253 million liters of ethanol for other uses, including fuel. The FAS notes, however, that other countries also export ethanol to the European bloc, and it is not yet known which exporting countries will be most affected.

US meat exports, on the other hand, should not be much affected, because the United States also recently made a bilateral agreement with the EU that increased the quota of American meat exports to the European bloc. Under the bilateral agreement, the quota for American meat started in 2020, with 18,500 tons, and will grow progressively to 35,000 tons in 2026.

In addition, EU quotas for the United States and Mercosur differ by product, which reduces impacts on Americans, according to the US agency.

In the opening of the market that Mercosur will promote to EU agricultural products, the impact on American exports should be more dispersed among different items with added value, such as intermediate products (enzymes and gluten, for example), food preparations, dairy products, feed, and processed vegetables.

Although the US and the EU have similar products in the categories of ingredients – prepared and processed – that they export to the Mercosur countries, the American body sees difficulties in the countries of the Mercosur bloc in substituting products from one source for another, depending on the specificity of those goods.

The American Foreign Agricultural Service also considered that the agreement between the EU and Mercosur has set an important precedent in recognizing 350 geographical indications of European products, the biggest commercial arrangement ever made on the subject. The precautionary principle – against sanitary and human issues – is also seen by the USA as a victory for European diplomacy, which can be applied in other ongoing negotiations by the bloc.

 source: MercoPress