Environment becomes trade issue in EU-Mercosur

Do international trade agreements help or hinder preservation of the environment and mitigation of global warming gases?

Do they give the upper hand to countries with weaker labour, health and environmental policies?

A proposed trade agreement between the European Union and the Mercosur bloc of South American countries will be a test case for these questions.

The proposed agreement, two decades in the making, covers a wide range of sectors, from autos to pharmaceuticals to services to agriculture.

Over the next three years, it will be presented for ratification among the member country parliaments and if fully accepted will begin a 15-year period of scaling in.

European farmers are generally against the deal because they fear they will face unfair competition from countries that don’t have the same regulatory framework regarding the environment, health and safety.

European meat producers are particularly worried, given that Brazil and Argentina are beef powerhouses.

Canadian farmers should also take note, given that Canada and the EU have their own trade agreement, which gives over the next six years improved, duty-free access for almost 65,000 tonnes of Canadian beef and 80,000 tonnes of pork.

If Mercosur countries also get improved access, it will mean more competition for Canada in the European market.

European producers who fear being submerged under a wave of foreign meat had their arguments supported last week when data from Brazil’s space agency showed the amount of land deforested in the country in June increased by almost 90 percent compared to the same month last year.

In the most recent 12 months, deforestation reached 4,565 sq. kilometres, up 15 percent compared to the previous 12 months.

That is about 80 percent of the size of Prince Edward Island.

A key driver in Brazil’s deforestation is the expansion of its beef industry.

Environmentalists blame new Brazilian president Jair Bolsonaro, who has rolled back environmental regulations, cut the money available to enforce regulations and advocated for increased development in the Amazon. During his election campaign he threatened to pull Brazil out of the Paris Climate Accord but has since stepped back from that.

A column entitled, “We must not barter the Amazon rain forest for burgers and steaks,” by Jonathan Watts, a writer with The Guardian media outlet, neatly sums up the fears about the EU-Mercosur trade deal and its environmental impact.

But advocates of the deal note that it specifically binds the partners to meeting their commitments under the Paris Agreement on Climate Change, as well as those made under the Convention on Biological Diversity. They also commit to fundamental labour standards.

Under the Paris accord, Brazil is committed to delivering 29.7 million acres of reforestation in the Amazon, the giant tropical forest that helps regulate the earth’s climate.

The agreement has enforcement clauses if a party is not playing by the rules. If the environmental situation is not resolved, an independent panel of experts can be asked to examine the matter and draw up a report with recommendations.

“Trade policy has become a tool for climate policy,” European Commission president Jean-Claude Juncker said in a statement.

However, critics note that the sustainable development provisions are not part of the sanctions protocols that apply to breeches of the trade policy side of the agreement and are therefore toothless.

It is hard to say whether the environmental aspect of the deal is only window dressing. Some European leaders appear to be taking a strong stand. French President Emmanuel Macron said he would not sign the deal if Brazil leaves the Paris Climate Accord.

Canadian producers can attest that it is not easy meeting European standards — the same rules that South American producers will face.

For example, to export to Europe, Canadian cattle must be certified by a veterinarian as being raised without additional hormones. Also Canadian cattle are processed in plants that use a carcass wash that Europe has not approved.

Canada is building up the infrastructure needed to meet all the regulations but it is time consuming.

There is no guarantee the EU-Mercosur pact will be ratified, given the opposition from environmentalists and farmers.

But the pursuit of the perfect deal might be the enemy of a good deal.

Including environmental clauses in trade deals could be one more way to limit the destructive tendencies of business and trade.

About the author

Market Watch by D'Arce McMillan's recent articles

Comments

Markets at a glance

Copyright © 2019. All market data is provided by Barchart Market Data Solutions. Information is provided 'as is' and solely for informational purposes, not for trading purposes or advice. To see all exchange delays and terms of use, please see disclaimer.

explore

Stories from our other publications