Business

Producers and Exporters Eagerly Await Ratification of EU-Mercosur Deal

The trade deal will eliminate tariffs on both Mercosur and E.U. exports and creates the world's largest bloc of olive oil consumers and producers.

Aug. 9, 2019
By Daniel Dawson

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Once rat­i­fied and fully imple­mented, the recently signed free trade agree­ment between the Mercosur and the European Union will create a common market of 780 mil­lion people.

Olive oil pro­duc­ers and exporters on both sides of the Atlantic are eagerly await­ing the ces­sa­tion of tar­iffs.

“The EU-Mercosur trade deal rep­re­sents good news for the olive oil sector,” Anna Cane, pres­i­dent of the Italian Association of the Olive Oil Industry (Assitol), told Olive Oil Times. “In 15 years our exports to Mercosur coun­tries will be com­pletely lib­er­al­ized.”

This mea­sure helps to make trade between Europe, Brazil, Argentina, Paraguay and Uruguay more con­ve­nient.- Anna Cane, pres­i­dent of Assitol

There is cur­rently a 10 per­cent tariff levied against most E.U. olive oils imported to the Mercosur, which is com­posed of Argentina, Brazil, Paraguay and Uruguay.

“Gradually tar­iffs on olive oil will reduce, until their defin­i­tive removal,” she said. “This mea­sure helps to make trade between Europe, Brazil, Argentina, Paraguay and Uruguay more con­ve­nient.”

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“There are great mar­kets, with many con­sumers inter­ested in Italian food prod­ucts,” she added.

See more: Olive Oil Trade News

While olive oil con­sump­tion remains largely stag­nant in coun­tries such as Italy and Spain, the appetite for olive oil is grow­ing steadily in the Mercosur, which is a deficit market for the prod­uct, accord­ing to Juan Vilar Hernández, an indus­try ana­lyst, strate­gic con­sul­tant and per­ma­nent pro­fes­sor at the University of Jaén.

“This is a deficit market for both olive oil and table olives, which have com­pletely abol­ished tar­iffs in the case of stable olive oil,” Vilar Hernández told Olive Oil Times. “Therefore, the [European] olive oil pro­cess­ing sector sig­nif­i­cantly improves its margin.”

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Nowhere is this deficit more evi­dent than in Brazil. Since the end of a dev­as­tat­ing finan­cial crisis in 2015, con­sump­tion and imports have risen steadily. According to data from the International Olive Council, Brazilians con­sumed 50,000 tons of olive oil in the 2015/16 crop year. By 2018/19, this figure had risen to 78,000 tons, a record high.

Brazil cur­rently has a very spe­cific trade deal with Portugal, which pro­vided nearly 60 per­cent of the country’s olive oil imports in 2018. Vilar Hernández reck­ons that as tar­iffs come down, Spanish pro­duc­ers will be able to enter the market more easily.

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“In this case, the abo­li­tion of the old tar­iffs… will help oil, espe­cially from Spain,” he said.

For Brazilian con­sumers, the deal comes as good news. The even­tual elim­i­na­tion of tar­iffs means that more high qual­ity extra virgin olive oil will enter the market and con­tinue to drive down prices.

However, Sandro Marques, author of the Guide to Brazilian Olive Oil and editor of Um Litro de Azeite, pre­dicts that the land­mark trade deal will hurt the country’s fledg­ling olive oil pro­duc­tion sector.

“Our pro­duc­ers are wor­ried about the deal but noth­ing con­crete can be said yet,” Marques told Olive Oil Times. “One of the biggest fears is that good qual­ity oil arrives at lower prices and Brazilian oil loses com­pet­i­tive­ness.”

Our pro­duc­tion is small but it’s still a hard task for pro­duc­ers to sell it, so good qual­ity imported oils could be a real prob­lem.- Sandro Marques, editor of Um Litro de Azeite

Ibraoliva, an orga­ni­za­tion that sup­ports olive grow­ers and oil pro­duc­ers in Brazil, is already scram­bling to figure out how the free trade deal will impact pro­duc­ers. Officials from the orga­ni­za­tion have sched­uled meet­ings with the Ministry of Agriculture to dis­cuss what may happen.

“Our pro­duc­tion is small but it’s still a hard task for pro­duc­ers to sell it, so good qual­ity imported oils could be a real prob­lem,” Marques said. “And it’s impor­tant to keep in mind that as more groves reach their matu­rity, our pro­duc­tion tends to increase.

However, the sense of fore­bod­ing among Brazilian pro­duc­ers is not shared by their neigh­bor to the south­west. Argentina is poised to be one of the biggest bene­fac­tors of the free trade deal.

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Tariffs on its exports to the European Union as well as quotas imposed on those exports will be dropped upon rat­i­fi­ca­tion. European olive oil imports are also unlikely to impact Argentina’s trade with its neigh­bors.

According to data from the International Trade Center, nearly 40 per­cent of Argentina’s olive oil exports went to Spain in 2018. The year before, on the back of a record-break­ing har­vest, more than 35 per­cent of exports were des­tined to E.U. coun­tries.

“Any agree­ment ben­e­fits both par­ties,” Frankie Gobbee to co-founder and direc­tor of the Argentina Olive Group, told Olive Oil Times. “This agree­ment, espe­cially because virgin olive oil, which is the one we pro­duce most in Argentina, can be exported to the European Community from year one.”

Previously, Argentina had an agree­ment with Spain that allowed them to export some olive oil to the coun­try duty-free in order to be blended and re-exported by Spain. Now Argentine exporters will have far easier access to other coun­tries. Of par­tic­u­lar inter­est are some north­ern European coun­tries, where con­sump­tion is increas­ing more quickly than in the Mediterranean basin.

“I believe that the agree­ment will facil­i­tate and improve the image of our coun­try as a pro­ducer of extra virgin in the counter-season, to improve the qual­ity of the Mediterranean oils at a time of the year when they do not have fresh extra virgin olive oil,” Gobbee said.

As Argentine pro­duc­ers eye the Spanish market, the same is hap­pen­ing on the other side of the Atlantic. Argentina has tra­di­tion­ally been a very pro­tec­tion­ist market, which will be newly opened up by the trade deal.

Rafael Pico Lapuente, the direc­tor of the Spanish Association of the Olive Oil Exporting Industry and Commerce (Asoliva), told Olive Oil Times that he does not expect much to change with the imple­men­ta­tion of the deal, except in the case of Argentina.

“Obviously any com­mer­cial agree­ment is for the ben­e­fit of all and there­fore of the inter­na­tional market,” he said. “Exports will increase but not notice­ably. They could increase some­what more in Argentina.”

Before the deal comes fully into force, it needs to be rat­i­fied in the European Parliament, 28 European cap­i­tals and four Mercosur cap­i­tals.

While there is oppo­si­tion to the deal in some E.U. coun­tries, it is still widely expected to pass muster, cre­at­ing a free market in which 54 per­cent of the world’s olive oil is con­sumed and 71 per­cent of it is pro­duced.