The European Union’s (EU) ambassador to Brazil, Ignacio Ybañez, reiterated the bloc’s position that a trade deal with South American trade bloc Mercosur can only be signed when Brazil makes clear commitments towards curbing deforestation.
This has effectively left negotiations deadlocked, given that deforestation in Brazil’s Amazon rainforest hit a 12-year high according to the national space research agency Inpe, with fire-setting and other destructive practices contributing to a 9.5% increase in land lost from the previous year. It is estimated that between 2000 and 2018, 8% of the Amazon, an area the size of Spain, has been destroyed. This process has only been accelerated under the current Brazilian president, Jair Bolsonaro.
Given these developments, the EU envoy to Brazil said, “Right now there are no conditions to do that, but we are working to obtain clear commitments by Brazil that will restore trust.” Ybañez did, however, welcome Brazil’s decision to establish an Amazon Council, which will be chaired by Vice President Hamilton Mourão. The Bolsonaro administration has also pledged to implement measures to trace “wood taken illegally from the rainforest”. The EU diplomat said of these efforts: “Mourão recognized that Brazil has a problem and has to find a solution to deal with deforestation, illegal logging and illegal mining in the Amazon.”
Recently, Uruguayan foreign minister Francisco Bustillo embarked on a trip to Europe where he attempted to advance the dialogue on the EU-Mercosur trade deal. He met with authorities in Spain, France, Brussels, and Holland, and also participated in a virtual summit with EU foreign ministers on November 30. Uruguay currently chairs Mercosur, though it will hand over the reins to Argentina this month.
Before leaving, Bustillo said, “Mercosur and the European Union must concentrate all efforts in rounding up some of the issues still pending, but given the significance of the accord and thinking in the international credibility of both blocks, it is pressing to have it approved by member countries. However, Uruguay is most respectful of the domestic debates regarding the deal, but again time is pressing.”
The Uruguayan foreign minister’s trip was preceded by a meeting between Argentinian President Alberto Fernández and his Uruguayan counterpart Luis Lacalle Pou earlier in November, where the pair discussed the path forward for the stalled multilateral trade deal.
Both the 27-member European bloc and the five members of Mercosur are hopeful of concluding a deal, as it would represent the world’s largest free-trade zone, although the newly-signed RCEP deal may put it in second place now. Nevertheless, an EU-Mercosur trade deal would create a single market comprised of 760 million people, remove tariffs on 90% of goods traded between the two blocs, and increase import quotas on several agricultural commodities.
Much of the grievances from the European side are centred around Brazil. President Jair Bolsonaro is accused of giving free rein to illegal loggers, ranchers and land speculators, and of reducing environmental regulations to allow for more commercial mining and farming in order to grow the economy.
During the campaign trail in 2018, Bolsonaro described environmental regulations as an “obstacle to economic growth”, and promised to reduce some of these laws to allow for commercial exploitation. Since entering office, Brazilian authorities have issued fewer fines and warnings to offenders; at the same time, there is far less seizure and destruction of illegal equipment in protected areas. In fact, during the first six months of 2019, enforcement actions were found to have fallen by 20% compared to the same period in 2018, when Bolsonaro was not yet in power. The government is also trying to pass a law that would allow farmers who had illegally seized land in protected areas to gain legal status.
Against this backdrop, German Chancellor Angela Merkel voiced her “considerable doubts” over whether to proceed with the trade deal. Recently, France, too, threatened to withdraw from the EU-Mercosur deal if Brazil did not curb fire-setting and deforestation in the Amazon. Austria, Holland, Ireland, Luxembourg, and Belgium have already said that they will not ratify the deal so long as the current situation continues. Likewise, the European Commissioner for Trade, Valdis Dombrovskis, said, “A growing number of country states and interested parties underline the significance of sustainable development in Mercosur countries, supporting the Paris Agreement and stopping deforesting, especially in Brazil.”
In fact, the French government recently released a report which suggests that, if the agreement were to be signed with the situation as it stands, then an EU-Mercosur trade agreement would “accelerate deforestation by at least 25% annually” and “destroy 36,000 km2 of forest per year”.
Alongside countries, several European businesses are also threatening to divest from Brazil, which throws the economic viability of such a deal into further doubt. In June, a group of 29 companies, the vast majority of which are European, sent a joint letter to Brazilian ambassadors in their respective countries in which they threaten to divest from beef producers, grains traders, and government bonds if the Brazilian government does not adequately commit to tackling deforestation in the Amazon rainforest. The companies, which include Legal & General Investment Management Ltd, Sumitomo Mitsui Trust Asset Management, and NN Investment Partners, hold a combined total of over $3.75 trillion in assets.
Bolsonaro, for his part, has rejected criticism of his environmental policies. At the recent BRICS Summit in November, he said that many of the countries who call out his administration for failing to protect the Amazon are benefiting from damage to this fragile and invaluable ecosystem. Thus, he promised that his government would soon publicly name the countries who import wood that has been illegally extracted from the Amazon.
However, the failure to reach an agreement cannot be attributed solely to Europe’s environmental concerns. Equally, farmers’ unions and unions and lobbies are worried about not being able to compete with their South American agricultural counterparts, particularly with products such as meat and cane sugar.
Hence, given these discrepancies, it is unlikely that a EU-Mercosur deal will be signed in the near future.
EU-Mercosur Trade Deal Negotiations Remain Deadlocked Over Environmental Concerns
European Union members are unwilling to ratify a trade agreement with Mercosur unless Brazil commits to curbing deforestation and implementing policies fostering environmental sustainability.
December 9, 2020
IMAGE SOURCE: EUROPEAN UNIONEU Ambassador to Brazil Ignacio Ybañez