On 28 June, 2019, the South American trade bloc Mercosur (Argentina, Brazil, Paraguay and Uruguay) and the European Union announced that they had reached a political agreement for a trade deal. The agreement was hailed as an important landmark in one of the world’s longest-running trade negotiations, which began over 20 years ago. In establishing the foundations for a market for goods and services that comprises nearly a quarter of the globe’s gross domestic product, the deal will affect almost 800 million people living in Mercosur and EU countries. In terms of tariff reduction alone, the pact – which removes most tariffs between the two blocs – represents the single largest deal in the history of both Mercosur and the EU.
However, the agreement goes beyond tariff reductions for items such as European cars and South American beef and poultry; it also includes access to public procurement contracts, legal protection for special products such as regional food specialties, and greater freedom to provide services. At a political level, the agreement also sends a strong message that economies are still willing to open up via international cooperation despite the resurgence of strong nationalist discourses and consistent attacks on multilateralism, including from leaders from within the blocs.
The relevance of the Mercosur-EU agreement for climate change and climate action
The deal is likely to play a dual role in shaping future climate action for both the Mercosur and the EU. On the one hand, it is expected to substantially increase trade in products associated with adverse climate effects, such as agricultural exports. Cattle are already the biggest driver of deforestation in the Amazon, with 63% of deforested areas occupied by animal pastures. The boost to Brazilian exports may therefore enhance this impact, especially if the Brazilian government continues to loosen environmental protection laws.
On the other hand, the agreement also includes climate action clauses:
- First, the text covers several dimensions of sustainable development and climate change, including through direct references to the major international frameworks. In Article 6 of the chapter on Trade and Climate Change, the parties recognize the importance of pursuing the ultimate objective of the United Nations Convention on Climate Change (UNFCCC) in order to address the urgent threat of climate change. They agree to promote the positive contribution of trade to a pathway towards low greenhouse gas emissions and climate-resilient development, and to increase the ability to adapt to the adverse impacts of climate change in a manner that does not threaten food production. The agreement also encourages trade and investment in goods and services that contribute to climate change mitigation and adaptation efforts (Article 12). The parties commit to measures to control the production and consumption of Ozone Depleting Substances (ODS) and Hydrofluorocarbons (HFCs), as well as to address the illegal trade of substances regulated by the Montreal Protocol. Finally, the parties agree to promote corporate social responsibility, sustainable consumption and production initiatives consistent with SDG 12, including circular economy models aimed at increasing resource efficiency and reducing waste generation.
- Second, the agreement features built-in provisions for institutionalizing these efforts. In particular, Article 14 establishes a Sub-Committee on Trade and Sustainable Development meant to facilitate and monitor implementation and cooperation between the parties.
However, the agreement’s climate relevance is weakened by a language that grants the leeway to avoid concrete commitments. For example, in Article 6 countries agree to cooperate on trade-related environmental issues – such as reducing illegal trade in wildlife – bilaterally, regionally and in international fora, with particularly emphasis on the UNFCCC. However, this commitment is tempered by the phrase "as appropriate". Furthermore, climate change per se has been left out of the agreement’s dispute settlement provisions, further undermining the climate action dimension of the trade deal.
Can it bind Bolsonaro to the Paris Agreement?
The deal is not yet a fait accompli. On the South American side, populist nationalism has swept across the region and cast some doubt on the trade deal. The government of Brazil, in particular, has made public statements questioning climate change and attacking the legitimacy of the United Nations. On the other side of the Atlantic, some European actors are using trade as carrots and sticks to enforce higher standards. France’s Emmanuel Macron has stated that the deal with Mercosur should not go ahead if there is any wavering by President Jair Bolsonaro on Brazil's international environmental commitments. The deal also has to be ratified by the national parliaments of all Mercosur and EU member states, and be approved by the European Parliament and the EU Council. In the European Parliament, some European delegates have expressed reservations about the agreement – some of them related to Brazil’s current environmental policy. In parliament meeting in July 2019, Cecilia Malmström, the European Commissioner for Trade, asked: "How can we assure that … there is a firm commitment to the Paris Agreement?" In other words, the climate relevance of the Mercosur-EU agreement hinges not only on its content, but also on its role in leveraging action around the Paris accord.
A platform for climate diplomacy
The Mercosur-EU agreement can contribute to climate diplomacy by serving as a platform for implementation of the Paris Agreement and other climate change frameworks, as well as promoting sustainable development, but several challenges remain. Given that the deal itself does not offer strong compliance and accountability mechanisms, check and balances need to be assured by other interest groups/means. It is also up to civil society, the media and the private sector to monitor and ensure that these commitments are honoured. The flexibility granted to the parties for choosing the paths to enforce their sustainability commitments increases the risk of green-washing strategies to conceal business-as-usual. The EU and consumers must stand firm and strengthen their climate commitments with concrete measures. For instance, they can communicate that they will not accept beef or soy farmed on illegally cleared land, or promote international support for the conservation of forests, whether through the Amazon Fund or other cooperation efforts. On the South American side, states should engage in mutual monitoring, dialogues and cooperation towards sustainability at regional level. Furthermore, subnational governments, civil society and the private sector should join forces to help ensure that both international commitments to climate action and national-level measures to promote sustainable development are fulfilled.