After more than 20 years, negotiations over the EU-Mercosur trade agreement concluded Friday, December 6, 2024 in Montevideo, with European Commission president Ursula von der Leyen hailing the deal as ‘a win-win agreement which will bring meaningful benefits to consumers and businesses on both sides’.
This version of the deal – set to now be ratified by both sides – follows an initial agreement in principle reached in 2019, which had to be re-negotiated after sparking concerns across Europe’s farming, environmental and economic communities.
Among the highlights of the trade partnership are measurable commitments to tackle climate change and deforestation; upholding of the EU standards on food safety and animal health; and the removal of tariffs on EU exports, cutting red tape and saving businesses billions worth of duties per year.
So what are the big wins for European dairy producers – and what opportunities await for those wishing to explore the Mercosur markets?
EU-Mercosur FTA: What you need to know
Mercosur is comprised of Argentina, Brazil, Paraguay and Uruguay.
The bloc is highly self-sufficient in dairy: Uruguay (281%), Brazil (98%), Paraguay (103%), Argentina (132%) with consumption per capita ranging from 108kg to 230kg.
EU agri-food exports to Mercosur were worth €3.2 billion in 2023.
The bloc was the only remaining major trade partner with whom the EU hadn’t forged a preferential trade deal.
Besides gradually cutting tariffs and red tape for EU producers, the FTA is the largest ever deal made on GIs within a trade agreement, ensuring that EU producers have better market position and can sell their produce at price premiums.
Zero tariffs – in time
A key win for EU dairy producers is the removal of tariffs on cheese, milk powder and infant formula – though this will happen gradually, as the European Dairy Association’s Alexander Anton explained.
“The gradual in-quota reduction of the tariffs for cheeses will get us in 10 years to a zero tariff for a cheese volume of 30,000 tons (starting with 3,000 tons).
“For milk powders, we will go from 1,000 to 10,000 tons tariff-free at the end of the 10-year period.
“Such tariff-free quotas allow for a more sophisticated market access strategies, especially for our European cheese excellence.”
Alexander Anton, EDA
The trade agreement also ensures access for milk powder producers to another market at a time when YoY exports to the EU’s three major markets have tanked (-20 between January-August 2024 vs 2023, according to Eurostat) and China’s powder imports are forecast to continue declining in 2025.
“The milk powder markets are extremely price-sensitive and competitive,” Anton told us.
“Nevertheless, a zero-tariff [policy] will support our market position. Our SMP exports to the Mercosur countries are rather limited and do not exceed 1,000 tons per year so far. There is without any doubt room for improvement.”
Cheese exports from the EU are flat (+1%) for the same period, with gains in the US offset by a decrease in exports to Japan.
“For cheeses, the EU-Mercosur FTA will help us to get on a growth path on the basis of our average annual cheese exports of roundabout 3,000 tons and the tariff-free quotas will help us to implement more robust market access strategies here.”
“Besides the sales volumes and values, better market access to the Mercosur countries and its 280 million citizens is more than instrumental for the diversification of our export markets and hence, for the stabilization of markets in these times,” Anton added.
“This is a relevant added-value for dairies and their milk-supplying farmers.”
Crucial protections for GI products
Enshrining market protections for around 350 food and beverage products with Geographical Indications (GIs) is seen as one of the most important benefits of the FTA for the EU.
It means that Mercosur producers will be unable to market so-called imitation products and compete with, say, Italian-made Parmigiano Reggiano.
At the same time, EU producers will enjoy bolstered market position and benefit from selling EU-originating food and beverage products at price premiums within those markets.
Billions saved on food and beverage tariffs
Slashing tariffs would also create billions of euros’ worth of savings for other food producers – with makers of wine and spirits (currently facing tariffs of between 20-35%), soft drinks (20-35%), chocolate (20%) and baked goods (18%) all set to benefit from the removal of tariffs under the agreement.
Tendering for government contracts within Mercosur will also become easier for EU companies, who will be allowed to bid on equal terms with local suppliers.
As for Mercosur exporters to EU markets, access would be limited for imports of agri-food products – and particularly for beef, poultry or sugar, access will remain permanently limited through gradually-implemented quotas.
The trade agreement is now set to undergo legal review and translation over the next months, with a view to the future signing of the agreement.