What Is the Real Impact of the Mercosur-EU Agreement on Argentine Soybean Exports?

The Mercosur-European Union (EU) agreement is expected to have a significant impact on Argentina’s soybean complex, whose derived products accounted for 49% of local exports to the European market between 2018 and 2023.

This is the outlook for the free trade agreement negotiated over 25 years, which opens access to a market of 700 million people.

Research conducted by Guido D’Angelo and Patricia Bergeron from the Rosario Board of Trade (BCR) highlights that one of the most crucial aspects of the soybean complex lies in the gradual reduction of export tariffs, which will be implemented if the agreement comes into force.

Approximately 17 million hectares in Argentina are cultivated each season, producing between 40 and 50 million tons of soybeans annually, depending on weather conditions. Argentina is the third-largest global soybean producer, behind Brazil and the United States.

Under the agreement, the main export products of the soybean complex will have export tariffs capped at 18% by the first day of the fifth year after the deal takes effect. This applies to soybean meal and pellets, biodiesel, soybean oil, soybean grains, and others.

Subsequently, these export tariffs are expected to decrease incrementally, with linear annual reductions of 1 percentage point from the first day of the seventh year until the tenth year, reaching a minimum of 14%.

“In all cases, we are discussing maximum tariff levels; nothing prevents setting export tariffs below these thresholds throughout the reduction schedule,” the researchers clarified.

On the other hand, the Mercosur-EU agreement aims to lower import tariffs so that Argentine soybean meal can enter the European market more competitively, significantly improving access conditions for Argentine products in the European bloc with specific tariff reduction schemes by product.

“The primary product Argentina exports to the European Union is soybean meal, which accounts for about two-thirds of the soybean complex exports to the EU. In addition to being the world’s largest soybean meal importer, the EU is the top export destination for this key Argentine trade product, purchasing about 28% of Argentina’s exported volume,” explained BCR analysts.

However, the import tariff for this product in the EU is already zero, and it will remain so under the agreement. Moreover, some lower-volume exports, which currently face tariffs of 5.1%, will see progressive reductions until they are completely eliminated within four years.

Argentine soybean oil exports to the EU are subject to varying tariff levels depending on the type and use of the oil. The Mercosur-EU agreement proposes a gradual reduction of these tariffs. For instance, crude oil intended for industrial use will see its tariff drop from the current 3.2% to 0% as soon as the agreement takes effect.

Additionally, crude oil for other uses, which currently carries a tariff of 6.4%, and refined oil for industrial use, with a tariff of 5.1%, will experience gradual reductions. Refined oil for non-industrial uses, which faces a tariff of 9.6%, will see reductions over five years, eventually reaching 0%.

Biodiesel, another key Argentine export to the EU, will have its tariff gradually reduced from the current 6.5% to 0% over 11 years, with an approximate annual reduction of 0.6%.

Source: Forbes

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