EU Farm Ministers will give their first reaction today to expected proposals from the Commission this week to establish a free trade zone between the EU and the South American trade bloc of Mercosur and Chile. The Minister for Agriculture, Mr Walsh, is expected to join French and German ministers in firing a shot across their bows, even before the details are tabled.
The Commission wants to open up the EU market to Argentinian, Brazilian and Paraguayan beef producers, whose vast industries are likely to be able to undercut Irish prices by up to half. With Ireland exporting 80 per cent of its beef production, the free access of potentially huge quantities of cheap beef to the EU market would give rise to major problems.
Mercosur, which includes vast beef producers Argentina, Brazil and Paraguay as well as Uruguay, with Chile as an associate member, has a combined population of 200 million and a GDP of over £800 billion. This makes it the fourth largest single market in the world after the EU, the US and Japan. The integration of its market since 1991, largely on the model of the EU, has proved a considerable success with its internal market due to be completed by 2006 (for Brazil and Argentina by 2001).
Agreements since then between the EU and Mercosur, seen as the power house of the democratisation of the continent, have substantially expanded political dialogue and paved the way for increased trade liberalisation and the likely eventual formalisation of a major political accord between the two regional blocs.
Currently the EU, which has seen its two-way trade expand by three-quarters since 1990 to £28 billion a year, enjoys a small trade surplus, with the EU exporting largely capital goods, cars and high technology products. Exports to Argentina and Brazil in the period have grown by 370 and 220 per cent respectively.
On the other side of the equation, half Mercosur's exports to the Union are agricultural products and foodstuffs, much of it - although not beef - already dutyfree. But its beef exports already account for 30 per cent of the EU's total meat imports.
Not surprisingly the Commission, which is expected to argue for a negotiating mandate that would remove tariffs on up to 90 per cent of traded goods, has exposed conflicts of interest among EU member-states.
France, very protective of its farm sector and the most protectionist of EU states, is leading the opposition. A paper circulated by the French warns of the dangers to agriculture and CAP and urges the Union not to engage in bilateral trade talks ahead of the next WTO round, expected to begin next year. A comprehensive deal, the paper argues, would inevitably favour Mercosur, while most agree that Mercosur is unlikely to sign an agreement that excludes substantial agricultural product sectors. Within the Commission the call of the farm commissioner, Mr Franz Fischler, for more detailed study of the implications has been backed by the two French commissioners, President Santer, the Irish commissioner, Mr Padraig Flynn, and the Finnish budget commissioner, Mr Erkki Liikanen.
The latter's opposition stems from fears of the financial consequences - Commission sources have been quoted as suggesting the deal could lead to pressure for between £4 billion and £12 billion in extra subsidies to EU farmers.