EU-MERCOSUR Trade Deal In Peril

The ´largest trade agreement the EU has ever concluded´ (Jean Claude Juncker) is again in peril. While the EU-MERCOSUR deal was agreed by the end of June 2019, a growing number of EU Member States are wary about ratification of the deal. The free trade deal came under intensified scrutiny in summer because of the wild fires in the Brazilian Amazonas region in the context of land clearance and the initial refusal of the Bolsonaro government to acknowledge the issue.

 Brazil, together with Argentina, Paraguay and Uruguay is comprising MERCOSUR, the biggest trade bloc in Latin-America. The trade deal between the EU and MERCOSUR would apply to around 780 million people. According to the EU, the deal has been carefully negotiated and ´represents a clear commitment from both regions to rules based international trade and will give European companies an important head start into a market with an enormous economic potential. It will anchor important economic reforms and modernisation undergoing in Mercosur countries. The agreement upholds the highest standards of food safety and consumer protection, as well as the precautionary principle for food safety and environmental rules and contains specific commitments on labour rights and environmental protection, including the implementation of the Paris climate agreement and related enforcement rules.´

However, France, Ireland, Finland and Austria are very sceptical towards the deal due to the human rights situation and the slash-and-burn land clearance in Brazil. The ´specific commitments´on environmental protection recently came under intense criticism. Documents released by the government of the biggest EU Member State, Germany last friday suggest that there might be less environmental safeguards in the deal than parliament in Germany has been told. The debate is coming at an inconvenient time for the government who, unlike the governments of France, Ireland, Finland and Austria, stands behind the deal and tries to get it ratified in the coming weeks.

Already back at 18 September 2019, the Austrian parliament decided not to ratify the deal. The reasons were, according to media reports citing a member of the relevant committee, that the deal would be `bad for Austria´s agricultural sector, but in particular bad for the climate because of the deforestation which will be accelerated by the deal - as it would enable the export of more soja from Brazil to the EU.´

 The main issue is the lack of possibilities to sanction slash-and-burn land clearance in Brazil to enable soya cultivation. A spokesperson of the German ministry of the economy said in September still that the deal in fact features an ambitious chapter on sustainable development, including binding rules for the environment and the climate. Particularly those regulations were ´close to the heart´of the German government and during negotiations the government pushed to have them in the deal.

However, in late September the German government already backtracked on its claim and acknowledged that the deal does not contain possibilities for direct sanctions in case the Brazilian government would push further ahead with land clearances. Today it surfaced that even the claim that the German government pushed for sanctions during negotiations could be questioned, since the German government did not make any specific suggestions on possibilities of sanctions to the EU Commission. With growing question marks hanging over the deal, the likelihood of ratification diminishes and sentiment against the deal, if anything, seems to be growing.