EU-India trade deal, good; Mercosur bad

Let’s scrutinise the EU-India trade deal, which offers Europe access to an Indian population of 1.5 billion citizens, many of them increasingly middle-class, more consumption-focussed, and with rising discretionary spending power. It is, first and foremost, a boon for Ireland’s whiskey and spirits sector generally, based on more beneficial access to what is a huge and growing market. Indian whiskey consumption is the highest in the world. The deal provides for immediate tariff relief with the current 150 per cent tariff halved immediately. There is also a long-term tariff reduction, with tariffs to fall by a further 40 per cent over the next seven years. In addition, and importantly, geographical indication (GI) conditions have been included in the agreement to combat any imitator brand challenges. Additionally the EU-India deal mirrors key aspects of the UK-India deal signed up last year and creates a level playing field for Irish whiskey producers north and south.

A trade counterbalance

It is hoped that the new deal can also soften, to some extent, the imposition of the new 15 per cent tariff by the Trump administration on exports of whiskey and other spirits from Ireland to its single biggest market in the US. So what’s not to admire and like about the trade agreement negotiated between the Europe and India? Not only is there greater access to a growing market, there is protection of EU and Irish production standards and product integrity.
Mercosur, as we know, positions Irish and EU food production and markets as the 'giveaways' in a broad trade deal. This reflects the relentless narrative around EU trade policy for the last 20 years. Since the early 2000s, the broad EU-wide support for globalisation has manifested itself in an insistence that natural economic evolution (NEE) means the EU economy is constantly increasing jobs and value-added in ‘new smart industries’ and equally constantly diminishing production jobs and value-added in the more ‘traditional’ food and agricultural sectors.

An uncomfortable economic reality

We now know, as highlighted in the report, The Future of European Competitiveness – the Draghi report – published in September 2024 by former EU Commissioner, Mario Draghi, that the EU innovation and job creation aspects predicted in the NEE myth have not been delivered on. The Draghi report suggests that the EU faces ‘slow agony without radical reforms’ citing ‘sluggish growth, high energy costs, and a technology deficit’ that has the EU lagging behind the US and China.

Exposing an economic myth

I would respectfully suggest that the second part of this economic myth – a systematic shrinking in EU and Irish agricultural output – is similarly neither natural nor inevitable. While clearly accepting that there are generational challenges around farming and agriculture/rural migration to towns and other occupations, a significant part of the decline in EU output has been self-fulfilling.
Specifically, and intentionally, broad EU trade policy in this century has been based on sacrificing agriculture as a giveaway in trade deals, which has led to a decline in agricultural output across the EU, with Ireland having been the notable exception, up to the dramatic decline in the beef herd in recent years. Meanwhile, as highlighted in the Draghi report, the quid pro quo on innovation, smart economy, new jobs and NEE, generally, have not been delivered.
This ‘defensive trade position on food and agriculture’ as it is described in Directorate-General for Trade (DG Trade) circles, has been combined with  the imposition of high and increasingly higher regulatory costs on EU and Irish food producers.
There is a constant narrative from DG Agri (Agriculture and Rural Development) and DG Sante (Health and Food Safety, formerly DG Sanco) that EU consumers demand higher food safety/food production standards and in recent times are demanding specific carbon footprint measurements, which have, in reality, imposed non-recoverable, higher production costs and thus delivered a fall off in agricultural production.
The shrinking of EU output reflects not only higher production costs imposed through regulation, but also a fundamental disconnect in the marketplace. In reality, these costs have been difficult or impossible to recover across EU food retail markets and, due to World Trade Organization rules and weak EU negotiation, they have not been imposed on imported products, as illustrated in the Mercosur and other trade deals.

Agriculture adds value 

So, to be very clear, Irish and EU agriculture are not naturally uncompetitive, nor are they naturally in decline. Even more specifically, it is not in any way a drag on Ireland’s smart economy growth. The two elements of natural decline versus natural growth in the Irish and EU economy are not binary as we in Ireland showed with the growth in agricultural output post quota abolition from 2015 to 2020.
Moreover, despite all of the claims made for the economies of scale deriving from the 500 million population in the EU single market, EU smart economy sectors like IT and pharma are not naturally innovative and expanding, according to Mario Draghi. Economic reality is more subtle than car bumper sticker economic theories.
What all of this means I would suggest is that, specifically for trade deals and for internal EU market cost recovery, a stronger link must be developed between the currently disconnected parties in DG Trade, DG Agri and DG Sante, and the myth of natural decline versus natural growth should be banished in favour of the acceptance of real time economic realities.
Domestically, in Ireland, I would also suggest a greater connection is required between our Department of Enterprise, Trade and Employment (which tends to lead in dismissing agri-related opposition to certain trade deals as being old fashioned and myopic), our Department of Agriculture, Food and the Marine, and our Department of Climate, Energy and the Environment.