The EU free trade agreement (FTA) with the Mercosur countries (Argentina, Brazil, Uruguay, and Paraguay) was announced last year and the final details were released on June 28 this year but the European Commission and the Spanish government have not yet clarified what it means to the Spanish citrus industry.

The Brazilian Ministry of Agriculture has reported that tariffs on Brazilian concentrated orange juice will gradually disappear in 10 years and those on NFC juice will be gone in seven years.

Tariffs on imports of fresh oranges and mandarins will also be eliminated, but the final dates have not yet been announced.

Ibiapaba Netto, director of CitrusBR, the Brazilian orange juice exporters' association told IHS Food & Agricultural Commodities: "The orange juice negotiations were concluded in 2016 and final negotiation last year.

"CitrusBR has played a decisive role in this project, providing subsidies to the Brazilian government to justify this tariff reduction.

"The agreement, when it starts to take effect, will have an immediate 50% reduction in taxes applied to Brazilian juice. After that, over 10 years, the duty will drop to zero.

"This agreement was built over almost 20 years of negotiation, and in our view, it will represent a significant advance when implemented. For the text to become active, approval will be required by the member states of the EU and the four members of Mercosur, all in their respective parliaments."

The FTA has had a rough passage. This year, the Dutch parliament voted against it. Last year, though, it succeeded in agreeing mutual recognition for recognised geographical indications on products on both sides.

Spanish reaction

Inmaculada Sanfeliu, president of Spain's Citrus Management Committee, commented on the citrus issue: "We are especially concerned about the ratification of the treaty with Mercosur because it will impact the European fresh market in two ways: it will improve the competitive position of South American oranges and mandarins in Europe, which is our first and main market, and, more seriously, massive shipments of Brazilian juices at zero tariffs will question the viability of our processing industry.

"The much cheaper competition from the juices produced by only three large multinationals - Cutrale, Citrosuco and Louis Dreyfus Company (LDC) - will complicate or even prevent us from adding value to 650,000-900,000 tonnes of oranges and 250,000-300,000 tonnes of clementines and mandarins that are currently being used to make juices."

Spain produced around 3.7 million tonnes of fresh oranges in the 2018/19 season, plus 2.4 mln tonnes of tangerines and clementines and 1.4 mln tonnes of lemons. Last year, it exported about 192,000 tonnes of NFC orange juice, almost all to Europe (Brazilian exports to the EU were about 918,000 tonnes). Spanish FCOJ exports were negligible at under 10,000 tonnes (579,000 tonnes).

This article was published by S&P Global Commodity Insights and not by S&P Global Ratings, which is a separately managed division of S&P Global.