EU presidency opposes trade agreement with Latin American countries over environmental issues

Negotiations on the trade agreement between Mercosur (Brazil, Argentina, Paraguay, and Uruguay) and the European Union (EU) are at a complete standstill. Following 20 years of talks, the announcement of a trade agreement in June 2019 was described as the first victory for the government of the Brazilian President Jair Bolsonaro who, together with the 27 countries of the European Union and the other three Mercosur members, signed a treaty. This economic group could impact around 780 million consumers and would have a combined Gross Domestic Product (GDP) of US$20 trillion.

The main point of the agreement is the reduction of import tariffs which could be as low as zero. In theory, this would mean cheaper products and economic growth on both sides of the Atlantic Ocean.

For Latin American agriculture, the gain would be massive. Currently, 18% of exports from the Mercosur countries are destined for Europe. With the agreement, European countries would become the main trading partner, eliminating taxes on 80% of commodities such as coffee, soy, and fruit.

Growing deforestation in Brazil

However, since 2019 Brazil has become a constant target of international criticism, especially in terms of the environmental management by the government of Jair Bolsonaro. In 2019 and 2020, Brazil broke previous records for the level of deforestation in the rainforest and suffered environmental tragedies in other areas with two consecutive years of outbreaks of fire in the Pantanal, the world’s largest tropical wetland.

See also: Deforestation of Brazilian Amazon rainforest hits record high

Shortly after the signing of the agreement, the South American country faced a wave of fires although the Brazilian President insisted on denying that this was an environmental disaster, even blaming non-governmental organizations for the flames. The fires coincided with the advance of deforestation which reached a record area of more than 10,000 km² in the first nine months of Bolsonaro’s government and has continued to grow for 14 consecutive months according to Deter, the government system that measures the pace of forest destruction in the country.

See also: World’s largest rainforest on fire

“The growing deforestation in Brazil was the main reason for France, in the figure of President Emmanuel Macron, to try to bar the agreement, while the Brazilian government did not demonstrate, in practice, the intention to reduce these rates in the environment”, explains Vinicius Vieira, a specialist in international relations.

France banishes Mercosur

When it took over the rotating presidency of the European Union, France gained an important position of influence to advance certain issues. The government of Emmanuel Macron has defined three main priorities for the French presidency of the EU, one of which is the creation of a carbon tax at the border on products imported into Europe due to their environmental impact.

The carbon tax could have a long-term impact on certain exports from Brazil to the EU. The plan is to apply taxation on imports from countries that have less strict environmental rules. The initial list is aimed at imports of steel, cement, aluminum, fertilizers, and electricity but will be subsequently expanded to other sectors. Taxation on imported products will increase depending on the carbon intensity of production.

In September 2021, during the World Nature Congress in Marseille, Macron already signaled that France was against the agreement with Mercosur “as it is being negotiated today”.

“Not because we don’t feel comfortable with our Mercosur friends, but because, by definition, this agreement, as it was conceived and designed, cannot be compatible with our climate and biodiversity agenda,” he said.

“In his cover letter, Macron makes no reference to Mercosur and the possible agreement that needs to be ratified. It is a clear sign that this agreement is in danger”, assesses Vieira.

The next steps

So that negotiations can be resumed, the next step will be the signing of a political declaration in which Brazil and the other countries in the agreement commit to public policies to reduce deforestation in the region. European parliamentarians want to insert an “annex” with targets for reducing burning and controlling the emission of polluting gases.

Having agreed the terms, this will be followed by the signing of the agreement, its ratification by the European Council, and then by the member states. In addition, the text will also be voted on in the European Parliament before it can take effect.

A similar procedure will take place on the Mercosur side — the agreement will need to be approved by the parliaments of the four countries in the bloc: Brazil, Argentina, Paraguay, and Uruguay.

Experts assess that it is very unlikely that the agreement will be ratified whilst Bolsonaro is in office.

“Bolsonaro has entered his last year in government and it is almost impossible for him to commit to new environmental goals, having to win an election in October,” predicts Vieira. “According to current polls, he will not be re-elected as the Brazilian President from 2022 onwards, so we will only have real progress in the negotiations of this agreement when a new president takes office and commits himself to the necessary advances to reduce deforestation in the Amazon,” says the specialist.