Trump’s tariffs make Mercosur deal a necessity
In a world where the social media posts of one man in Washington, DC can wipe trillions off global stock exchanges, where tariffs can be ordered or lifted on the back of a single phone call or a meeting at a golf course, now is the time to diversify our trade network, writes Fianna Fáil’s Barry Andrews MEP.
The United States will always be an incredibly important trade partner for Ireland and the EU, but it is important that we are no longer reliant on a country that has ripped up the rules of international trade twice in the last decade. TWe know that as a small island nation with limited natural resources, international trade is our lifeline. Nonetheless, for a part of the population, there has been, and always will be, a reason not to trade with others.
During the referendum to join the EEC in 1973, one of the main arguments of the ‘No’ campaign was that the EU’s Common Agricultural Policy would create “widespread unemployment, greater emigration and the destruction of the social fabric of Irish society”. That did not age well.
International trade, inward investment and a stable regulatory framework here in Ireland has turned us from the ‘sick man of Europe’ in the 1980s, into one of the best performing economies in the EU.
Free trade
The Programme for Government states that the Government will “support an ambitious EU trade agenda” and promote new free trade agreements. Yet it also commits the Government to opposing the only large-scale trade agreement currently available (the EU-Mercosur agreement) in its current form. I believe this is a mistake, focusing too narrowly on defending certain sectors at the cost of many other Irish exporters which stand to gain.
If the Mercosur Agreement comes into force, it will create a free trade area of nearly 800 million people and can help us offset the impact of Trump-imposed tariffs.
When the buzzword of the day is competitiveness, I cannot understand why anyone would be against creating the world’s largest free-trade zones (even if tariffs and quotas will still apply in many areas). The 2021 European Commission Trade and Jobs Report highlights that international trade and investment supports 1.3 million jobs in Ireland, with 67 per cent of these jobs in the services sector.
According to the Government’s Trade and Investment Strategy 2022-2026: “Ireland is a small open economy and relies on trade as a principal source of economic growth and improvement of living standards. It is a source of resilience that has allowed our small and adaptable economy to realise opportunities through international trade and multilateralism.”
It would be wrong to say that there are no losers in trade. The rust belt in the US, part of northern England, and northern France are all testament to where we have gone wrong in the past. This is not an inherent fault of international trade; it is a failure of their national governments’ redistribution and retraining policies. Wholesale industries left these areas as globalisation meant that cheaper labour was available elsewhere. The result has been increased poverty, higher levels of unemployment, and a clear pattern of voting for the political extremes.
The EU-Mercosur Agreement is not going to result in this. There are concerns from the agricultural sector that beef imports are going to displace Irish meat in export markets. However, the deal will mean increased imports corresponding to about 0.7 per cent of total European Union beef production. Quoting from the same Department of Trade report, an upper-end estimate of the impact on production is a 0.08 per cent reduction in output. This translates to a reduction of around €50 million in the beef sector, while at the same time the deal holds the potential to increase Irish manufacturing exports by €1.4 billion.
And yet, in correctly listening to these concerns, the European Commission has proposed a unity safety net fund of €6.3 billion in compensation for those farmers who are affected by the agreement, as well as a specific bilateral safeguard mechanism that can be initiated swiftly in the case of a dramatic rise in imports or drop in prices.
Global trade war
Ireland, and the EU as a whole, cannot continue to rely on the same factors that have supported growth for the last 30 years. The first shots in a global trade war have been fired, Chinese demand for European goods and services may start to cool, and the World Trade Organisation is crumbling (or has already crumbled depending on who you speak to).
Whether we like it or not, trade has become weaponised. Wars of the past were fought on battlefields; they are now often fought in boardrooms. The EU has recognised this and is pushing to reindustrialise Europe, by bringing manufacturing back in a number of key sectors. This is not necessarily a bad thing. Ireland can seize the opportunities presented. Paired with the right amount of trade, this is a recipe for a better functioning European single market, that has autonomy where it needs it, and a resilient and diversified trade network for those areas where it is not self-sufficient.
Ireland’s openness to trade, investment, people and ideas is a key national strength. With the new safeguards in place, we should be doing all we can to ensure that the EU-Mercosur Agreement is ratified as soon as possible.
For now, that is one good answer to President Trump’s late-night tweeting.
