The European Union-Mercosur Agreement is Not a Threat to EU Environmental Policy
María Belén Gracia is an international trade law and policy expert from Argentina, based in the Netherlands.
Image courtesy of Shutterstock
On October 7, 2020, the European Parliament adopted a Resolution on the implementation of the common commercial policy, stressing the importance of the conclusion of the EU-Mercosur Association Agreement (hereafter “the Agreement” or “EU-Mercosur FTA”) and its potential to deepen the EU’s “strategic partnership with Latin America, to create additional opportunities in [the EU’s] trade relations with those countries, and to help diversify supply chains for the European economy.” Reflecting growing environmental concerns that have spilled over into other trade accords, the parliamentary Resolution points out that “the agreement contains a binding chapter on sustainable development that must be applied, implemented and fully assessed, as well as specific commitments on labour rights and environmental protection, including the implementation of the Paris climate agreement and the relevant implementing rules.” However, the European Parliament stressed that the EU-Mercosur FTA “cannot be ratified as it stands” (emphasis added).
Therefore, while the European Parliament first welcomed the news for deepening economic and commercial relations between the two economic blocs, the EU’s climate agenda and the interests of some Member States seemed to overshadow the achievement. But opposition to the Agreement is premature, and could prove to be unfounded. In fact, this post argues that EU environmental objectives are better served with the EU-Mercosur FTA than without it, since it includes binding commitments regarding trade and sustainable development, it gives the Parties the tools to monitor compliance of these obligations, and it does not impair the EU’s right to regulate or its ability to enforce its environmental standards.
The Agreement includes binding provisions in the chapter on Trade and Sustainable Development
Recent opposition to the EU-Mercosur Agreement should come as no surprise for those that have been following the debates surrounding the deal. Some Member States (such as Ireland, Austria, Belgium, The Netherlands and France) have been vocal with their concerns about the impact of the Agreement on the environment, the EU’s environmental policies, and its lack of tools to tackle the deforestation of the Amazonas rainforest due to the alleged absence of binding commitments.
Nevertheless, the reader may wonder (as I certainly did), why the Agreement cannot be ratified “as it stands” if, as the European Parliament pointed out, it includes binding provisions related to the protection of the environment and addresses the urgent threat of climate change? The answer to this question involves many political concerns and interests, but from a technical point of view, the main issue seems to be the lack of an effective enforcement mechanism for the provisions regarding trade and sustainable development. But, as it will be argued below, those provisions are binding and the Agreement gives the Parties the tools to monitor their implementation.
To make sense of all this, it is worthwhile to take a look at what’s in the text of the Agreement itself. The Trade and Sustainable Development chapter (TSD chapter) of the EU-Mercosur FTA is based on the premise that trade and investment should promote sustainable development. Therefore, the Parties “recognize that the economic, social and environmental dimensions are interdependent and mutually reinforcing dimensions of sustainable development, and reaffirm their commitment to promoting the development of international trade in such a way as to contribute to the objective of sustainable development, for the welfare of present and future generations,” and prohibit the possibility to weaken the levels of protection afforded in domestic environmental or labour law with the intention to encourage trade or investment.
Furthermore, the Parties reaffirm their commitment to promote and effectively implement multilateral environmental agreements to which they are already party to, and commit themselves to regularly exchange information regarding the ratification of those agreements. The TSD chapter also includes provisions related to the protection of biological diversity and for the sustainable management of fisheries and aquaculture, as well as the sustainable management of forests (recognizing the role of trade in pursuing this objective), along with forest restoration for conservation and sustainable use. The Parties also commit to encourage trade in products from sustainably managed forests and to implement measures to combat illegal logging and related trade. Additionally, they agree to “exchange information on trade-related initiatives on sustainable forest management, forest governance and on the conservation of forest cover” and to cooperate and work together to achieve sustainable consumption and production initiatives, including, a “circular economy and other sustainable economic models aimed at increasing resource efficiency and reducing waste generation.”
Regarding climate change, the Parties highlight “the importance of pursuing the ultimate objective of the United Nations Framework Convention on Climate Change (UNFCCC) in order to address the urgent threat of climate change and the role of trade to this end,” and oblige themselves to effectively implement the UNFCCC and the Paris Agreement, promoting the “positive contribution of trade to a pathway towards low greenhouse gas emissions and climate-resilient development and to increasing the ability to adapt to the adverse impacts of climate change in a manner that does not threaten food production.”
One of the main arguments of the Agreement’s opponents is related to the lack of an effective enforcement mechanism for the TSD commitments because, in the event of a dispute, the TSD chapter provides for consultations, exchange of information and cooperation, but it is not subject to the state-to-state dispute settlement mechanism of the Agreement. This is also the case of the EU-Singapore FTA, already in force, and the EU-Canada FTA (CETA), which is being provisionally applied. In fact, the TSD chapter of the EU Singapore FTA and CETA’s Trade and Environment chapter include the same mechanisms seen in the EU-Mercosur TSD chapter.
Furthermore, in line with those FTAs, the EU-Mercosur TSD chapter also allows the Parties to establish a Panel of Experts when no mutually satisfactory resolution can be reached through consultations. After the Panel issues its report, the Parties will have to discuss appropriate measures to be implemented, taking into account the Panel’s recommendations. The Party complained against has an obligation to inform its civil society and the other Party of its decisions on any actions or measures to be implemented. Additionally, the Sub-Committee created by the TSD chapter is responsible for monitoring the implementation of the chapter, as well as the Panel’s reports and recommendations.
In addition to this, the chapter also provides for regular review, “for the purpose of enhancing the achievement of [its]objectives,” and calls on the Parties to discuss its effective implementation.
Overall, the EU-Mercosur FTA includes comprehensive and ambitious environmental provisions that reflect the key concerns of EU Member States on environmental issues and climate change. Furthermore, it's worth considering that there are no previous commitments between the two blocs regarding this issue and that this is the first of Mercosur’s FTAs which includes a TSD chapter.
The EU’s right to regulate still prevails
Opposition to the ratification of the Agreement from the European Parliament and some EU Member States seems to ignore the fact that it recognises the Parties’ right to regulate and to apply environmental standards (as established in Article 2). Furthermore, as described in Article 10, the Agreement allows the Parties to adopt measures based on the precautionary principle in cases where scientific evidence or information is insufficient or inconclusive, or there is a risk of serious environmental degradation, or to occupational health and safety in their territory. Therefore, the EU’s environmental standards are not compromised by the Agreement and the Commission maintains the right to enforce EU regulations on products imported from Mercosur countries.
With that said, it is still important to keep the limitations of trade agreements in mind, and to recognize the power of market forces that support EU environmental goals. As Anu Bradford points out in her book The Brussels Effect, the capacity of the EU to extend its stringent regulations to other markets depends greatly on “market-driven harmonization,” which implies that the enterprises who want to sell their products in the EU market are the main actors who advocate for the adoption of the EU’s standards in their countries of origin, with the aim to reduce their production and sale costs. This means that even without a trade agreement, businesses will voluntarily adopt regulatory standards to meet the requirements of their key export markets. As Bradford argues, “market-driven harmonization” towards the EU’s internal market regulations have proven to be a more effective tool than “treaty-driven harmonization,” since it involves lower contracting and enforcement costs.
In September of this year, European Commission President von der Leyen stated that as part of the European Green Deal, the EU would aim to achieve, at the very least, a 55% reduction for carbon emissions by 2030, an ambition that will certainly impact the EU’s trade policy. But as the discussion above has shown, trade agreements supplement these goals, but are by no means the only pathway for businesses to meet high environmental standards.
The future is better with the EU-Mercosur Agreement
Taking all this into account, the arguments against ratification of the EU-Mercosur Agreement due to environmental concerns are insufficient to justify the claim that the Agreement “cannot be ratified as it stands.” Likewise, opposition to provisional application also seems unfounded as such application will allow the Parties to evaluate how the TSD commitments are implemented.
This does not mean that those concerns are not valid, but, from an environmental perspective, the current scenario still seems better than to have an Agreement without a TSD chapter that has binding provisions on environmental and climate change issues. Although statements made by Brazil’s President regarding the country’s environmental obligations may raise legitimate concerns, the Agreement provides the tools to help facilitate a dialogue to help resolve these issues.
The fact that the TSD chapter allows for consultations and the establishment of a Panel of Experts still gives the Parties the right to raise concerns with one another and push for compliance. The Agreement thus gives an institutional platform for EU Member States to monitor implementation of environmental commitments, ensure a role for civil society in that oversight, and demand compliance with these obligations. The Agreement also provides both Parties with the tools to demand cooperation and exchange of information.
Time will tell how this chapter works in practice, but the fact that the two sides came to agreement on these issues provides a strong basis for building on a cooperative approach to address these shared concerns together.
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