The implementation of the trade agreement with Mercosur is one of the key tests of how the European Union functions. It may even be one of the factors that ultimately determines the Union’s survival.
Is a trade agreement with Mercosur countries—and potentially further agreements of this kind—needed by European economies? Yes. Will its implementation be unfavourable for EU farmers? For some, yes; others may benefit. All of them, however, are covered by a system of relatively robust safeguards. The final outcome of the agreement will depend on the effectiveness of European institutions in enforcing the rules that the Union has promised to uphold for its citizens—including farmers.
Mercosur countries form a vast market: together with the EU, they account for 700 million people and generate 20% of global GDP. Until now, this area has been protected by high tariff barriers. Their reduction is expected to benefit the European Union. According to calculations presented by the European Commission’s Directorate-General for Trade, the EU’s GDP will increase by €77 billion from 2040 onwards as a result of signing the free trade agreement with Mercosur. For a growth-hungry European economy under pressure from Chinese production and U.S. trade policies, this is certainly not a negligible amount—and this point is largely undisputed.
Doubts arise when the discussion turns to the agri-food sector and farmers. Mercosur countries are powerful—indeed, among the world’s leading—agricultural producers. They generate far more food than they need domestically. They produce almost twice as much sugar, cereals and oilseeds, and around 40% more meat, vegetables and fruit than they consume themselves. Production takes place on a massive scale, without the constraints imposed by the European Union on its own producers.
It is therefore hardly surprising that signing a free trade agreement with these countries—amid talk of millions of tonnes of grain or tens of thousands of tonnes of meat being liberalised—raises concerns among farmers operating on what they perceive as the “weaker” side of the market. Forecasting the concrete effects of the agreement, however, requires a detailed analysis of current trade and production conditions.
One of the agricultural market segments most frequently discussed is beef production. It is therefore worth taking a closer look at the market situation in this area in the context of EU–Mercosur relations.
The agreement provides for the introduction of a tariff rate quota (TRQ) of 99,000 tonnes of beef. This is not a duty-free quota—the applicable tariff will be 7.5%. The quota is divided into fresh or chilled beef (54,450 tonnes) and frozen beef (44,550 tonnes). These products serve different purposes and compete in different target markets. Fresh or chilled beef is a premium product, used in restaurants or sold in retail. Frozen beef is intended for further processing and does not compete directly with EU-origin fresh beef.
The EU–Mercosur agreement also does not mean that entirely new volumes of beef equal to the quota will suddenly enter the EU market, as Mercosur beef is already present in the Union. It is estimated that in 2024 the EU imported approximately 105,000 tonnes of fresh beef and 68,000 tonnes of frozen beef. Of this, imports under existing reduced-tariff quotas amounted to 60,000 tonnes of fresh beef and 64,000 tonnes of frozen beef. This means that in 2024 around 45,000 tonnes of fresh beef and 4,000 tonnes of frozen beef were imported at full, very high tariff rates.
The expected effect of the agreement is therefore that as much of the fully tariffed meat as possible will be covered by the new quota. As a result, the additional volume entering the market due to the agreement would amount to around 9–10,000 tonnes of fresh beef and approximately 40,000 tonnes of frozen beef.
In public discourse, fresh beef is often presented as the main problem for EU producers. In reality, the much larger volume concerns frozen beef imports. To assess the scale of change related to fresh beef, it is worth noting that Poland’s fresh beef exports amounted to around 330,000 tonnes in 2024. The additional volume would therefore correspond to only about 3% of Poland’s exports. This may have some impact on market prices, but it will by no means be decisive.
What, then, will be the broader impact of the agreement? The aforementioned analysis by the Directorate-General for Trade estimates the effects across different segments of the agricultural market. Once the agreement is fully implemented, the reduction in the value of agricultural production is expected to amount to approximately €2.5 billion. Spread across all farms in the EU, this would translate into an average of around €500 per farm per year. If only farms larger than 10 hectares are considered (with smaller ones treated as non-market farms), the figure would be around €2,000. It should be noted that these approximate amounts refer to revenue, not profit.
Given the potential losses and the scepticism among a large segment of society towards the Mercosur agreement, a number of safeguard mechanisms have been built into the deal to protect farmers’ interests. For sensitive products, quotas will increase gradually over several years. Goods entering the EU from Mercosur will have to comply with EU production standards, including rules on the use of antibiotics and pesticides and animal welfare. If there is suspicion that these standards are not being met, the EU will be obliged to suspend imports of the products in question until the issue is resolved.
Anti-dumping proceedings against Mercosur countries are to be initiated if their export volumes to the EU increase by more than 5%, or if there is a year-on-year price drop in sensitive products such as beef, poultry, rice, honey, eggs, garlic, ethanol and sugar. The list of sensitive products is to be reviewed every three months. Proceedings may also be launched even if these thresholds are not exceeded, provided that market conditions for a given product deteriorate significantly—for example, in the case of a prolonged price decline in Member States. The European Commission will be required to complete an anti-dumping investigation within three months, and within two months for sensitive products.
In addition, temporary preventive measures for sensitive products are to be introduced within a maximum of 14 days from the start of an investigation. A €45 billion fund, earmarked to support farmers affected by the agreement and included in the EU budget for 2028–2034, may be activated as early as 2028. Although this amount comes from a budget that was already intended for agriculture, earlier access should strengthen farmers’ sense of stability.
The structure of global trade also protects the EU from a sharp increase in Mercosur exports. Agricultural raw materials from these countries are primarily exported to China and other Asian markets. Brazil or Argentina are unlikely to abandon these destinations, while Asian customers—due to low levels of food self-sufficiency—will remain highly interested in uninterrupted supplies.
Will EU institutions be able to effectively monitor and enforce the agreement? Brussels has sufficient resources to do so properly, although in the public perception its actions to date have not always been a model of effectiveness and efficiency.
The implementation of the Mercosur agreement is one of the most important tests for the functioning of the European Union. It may even be one of the issues that determine the Union’s very survival. European stakeholders who are currently sceptical must be convinced that their interests are being properly safeguarded and that they will benefit from the agreement’s positive effects on the EU economy as a whole. Ultimately, operating in a wealthier economic environment will be beneficial for everyone.
Grzegorz Kozieja
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The author is a member of the Polish Economic Society and Director of the Food & Agro Analysis and Sectoral Specialisation Department at BNP Paribas Bank Polska.
Source: CEO.com.pl
