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ECONOMY | 23-11-2020 15:51

Without environmental guarantees, EU-Mercosur trade deal faces uncertain future

Historic free-trade agreement between the European Union and the Mercosur regional bloc, announced more than a year ago after more than two decades of negotiations, stuck in limbo due to environmental concerns.

The long-trailed free-trade agreement between the European Union and the Mercosur regional bloc, announced more than a year ago after more than two decades of negotiations, is still shrouded by uncertainty due to the absence of binding mechanisms that offer environmental guarantees, especially in relation to the Amazon rainforest.

This agreement would potentially create a huge market of more than 750 million people, but EU leaders and the heads of several European governments consider its ratification in its current form to be unfeasible, leaving the door ajar to the possibility of a reopening of negotiations.

The documents related to the deal are currently going through a bureaucratic phase of legal reviews and precise translations before being transmitted to the European Council, which groups together the 27 EU leaders. The deal’s final text will then be submitted to each national parliament for ratification.

‘We will not submit it’

In October, the executive vice-president of the European Commission, former Latvian prime minister Valdis Dombrovskis, said that it would not be possible to ratify the existing agreement without clear and legally binding environmental commitments.

"In its current form, we will not submit it for ratification, and I believe that even if we do, we will not be successful," he said, without mincing his words.

In order to move forward, the EU needs the Mercosur nations to provide "significant results and commitments," said Dombrovskis, adding that it is necessary to define "durable solutions for the Amazon region.”

Criticism has already firmed up in several regions. The Austrian and Dutch parliaments (as well as the Walloon regional legislature in Belgium) have both ruled out ratifying the agreement in its current form, while Ireland, Luxembourg and France have also expressed strong reservations.

The ratification of the agreement requires a unanimity "which at the moment there is not," a diplomatic source in Brussels told AFP.

Re-opening talks?

The core of the issue to hand is the chapter of the agreement that refers to sustainable development, which does not feature settlement mechanisms for disputes. It also highlights the use of best practices, but only says their application is voluntary.

Several European nations therefore fear that an expansion of the potential market for Latin America's agricultural and meat products will in turn lead to a dramatic deforestation in the Amazon region, in order to meet an increase in production.

A recent report by the French government seeking to define its position concluded that an increase in the production of beef to serve the European market would represent an annual increase of 25 percent in the levels of deforestation in the Mercosur region, potentially affecting an area equivalent to the Netherlands.

The leaves a straight choice between two alternatives: reopen negotiations, limiting them to the issues that prevent ratification, or dividing the agreement into two – one commercial and the other political.

With uncertainty hanging over the deal, Uruguayan President Luis Lacalle Pou was explicit in identifying the problem back in September: "The obstacle today is the Amazon. It is an issue that worries Europe," he said at a press conference.

Uruguay expected significant progress to have been made on the deal during the latter half of this year while it holds the pro-tempore presidency of Mercosur, but results have been unsatisfactory. Argentina is due to take over the bloc’s leadership on December 16.

However, cracks in Mercosur are clearly evident, and this has made it more difficult for the quartet to hold a united position as a bloc.

 

Dissonant voices

One Latin American diplomat in Brussels highlighted that the leaders of the two Mercosur heavyweight nations, Argentina’s Alberto Fernández and Brazil’s Jair Bolsonaro, have still not yet had a bilateral meeting, despite the Peronist leader having been sworn-in almost one year ago. Bolsonaro did not even attend his peer’s inauguration. 

"It’s like Angela Merkel and Emmanuel Macron not speaking to each other," the same source told AFP.

Jorge Neme, international trade secretary at the Foreign Ministry in Buenos Aires, said in November that “we can discuss whether the agreement was well or badly negotiated, but it is a matter of State – the government and the Foreign Ministry have decided to respect the closing of the agreement."

A spokesman for the Paraguayan Foreign Ministry, meanwhile, told AFP that the environmental concerns were opportunistic. 

"It is because of those fires that occurred in our region," the spokesperson said, referring to huge fires in the Amazon region in the first half of this year.

Responding to a request from AFP, the Brazilian Foreign Ministry declined to comment.

Bolsonaro has maintained his position throughout the debate, questioning data on deforestation in the Amazon and going so far as to accuse environmental NGOs of promoting crimes in order to attract greater attention.

In turn, Brazil’s Vice-President Hamilton Mourao has said the criticism is a result of very powerful “lobbying by European farmers.”

The deal, for now, remains in limbo.

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by Aldo Gamboa & Bureaus, AFP

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