The European Union-Mercosur Association Agreement: Implications for the EU Livestock Sector

Abstract

Following 25 years of negotiations, the Mercosur countries and the European Commission reached a political agreement on a comprehensive association agreement in December 2024. However, its ratification is currently uncertain due to concerns of some European member states, among other issues, around possible negative impacts on their farm/livestock sectors. The main objective of this paper is to quantify these likely impacts. Our methodology elaborates on the general equilibrium framework used in previous sustainable impact assessments, where potential or illustrative agreements were analysed. We simulate both a full liberalisation scenario as well as a scenario simulating the more limited market-opening offers in sensitive sectors, notably tariff rate quotas in agriculture. This allows us to identify the protective impact of these more limited offers. We also provide results for the main European member states and conduct several robustness analyses. We find that, because the beef offer is limited to additional import quotas, the negative impacts on livestock income are heavily muted. We also find that the European livestock sector, and more generally the farm and food industries, benefit from the income growth induced by the other components of the agreement. Finally, we do not find stronger negative effects in countries currently opposed to ratification, in particular France, because their consumers prefer domestic foods.