The EU-Mercosur deal was agreed in principle on 28 June last after nearly 20 years of negotiations.
Irish exporters are currently subject to trade tariffs, barriers and restrictions when exporting to Mercosur. This Agreement will see a significant reduction, or elimination of tariffs and barriers to trade that will allow a cross flow of trading and investment between Ireland and the rest of the EU, and the Mercosur region. The EU-Mercosur Agreement will make exports from Ireland more attractive and potentially increase the demand for Irish products.
My Department commissioned, under open tender, Copenhagen Economics, an independent trade and economics consultancy, to undertake a report on the combined impacts of a selection of recently concluded and prospective EU Free Trade Agreements (FTAs) for Ireland. The report was to identify the opportunities and challenges for Ireland from Free Trade Agreements and to develop recommendations to maximise gains and mitigate the challenges that can arise.
The analysis was to take a portfolio approach and cover a total of seven recently agreed or prospective EU FTAs:
- two of which are already implemented - South Korea and, provisionally, CETA with Canada
- two are more recently concluded - Japan and Mexico, and
- three prospective - Mercosur, Australia and New Zealand, albeit political agreement has so recently been reached on Mercosur.
In order to fully assess the combined impact of the seven FTAs on the Irish economy, the study utilises an internationally recognised Computable General Equilibrium (CGE) model of global trade, one which has been employed in several impact assessments of prospective FTAs by the European Commission. It was also employed in the assessment of the impact of Brexit on the Irish economy undertaken by Copenhagen Economics for my Department in 2017.
The CGE model quantifies the expected macroeconomic and sectoral impacts of the FTAs on the Irish economy in 2030. This is done by comparing two future states of the Irish economy: one without the FTAs in 2030 and an ambitious scenario, where all seven FTAs are in place and fully implemented in 2030. A key input to the model is the expected reduction in trade costs between the EU and each partner country. This includes both tariffs and non-tariff barriers or NTBs (regulatory barriers to trade and services barriers). The study models for the impacts of FTAs and different Brexit scenarios. For sensitivity analysis, the study also models for a more modest scenario where the FTAs are not all fully implemented by 2030.
In addition to the model simulations, interviews were conducted with a broad range of stakeholders. Insights from all sources are combined to qualify conclusions and to formulate policy recommendations.
The primary research for the report has been completed and indicated opportunities for export growth in relation to Pharmaceuticals, Chemicals, Business Services, ICT and other manufacturing and challenges in respect the beef sector.
However, we now have specific details rather than earlier best estimates of the terms of the Mercosur Agreement. Accordingly, as the Deputy will be aware, the Government has committed to a full economic and environmental sustainability assessment on the EU-Mercosur deal on the basis of the more detailed information which was announced as part of the recent political agreement. This study will be commissioned shortly by my Department in conjunction with the Department of Agriculture, Food and the Marine.