European Union Agreement X Mercosur: What mechanisms provided in the agreement to combat the environment Dumping?

Introduction

The themes to be addressed in this present essay are: the European Union and Mercosur agreement, the environment clauses in this agreement, the environment dumping and how much damage the international trades causes.

This essay has as a goal response this question: European Union Agreement X Mercosur: What mechanisms provided in the agreement to combat the environment Dumping?

I will analyze the Mercosur and European Union principal agreement, in special, its chapter 14, because this article, the agreement cannot be approved in all countries of European Union, because Brazil has not meet the environment program.

Mercosur and European Union agreement

The Mercosur and EU agreement has not ended as the final text is being finalized in close doors, but the European Commission provided the summarizes of the negotiating results on 28 of June 2019. The final text needs full political and international cooperation from all countries of these  two blocks that vote and ratify the agreement.

In Brazil, the conclusion of negotiations was celebrated by diplomatic (Graciela Rodrigues, 2020), but it is relevant to mention that it was not important for the Brazilian president, once Brazil was aligned with USA and both minimalize the multilateralism.

The agreement was negotiated for 20 years and, in general, proposes a tariff reduction close to zero, progressively and depending on each sector in up to 15 years.  However, it isn´t only a trade agreement, as it assigs among its chapters, items of the social order as the working conditions and also environment.

Furthermore, it is expected an increment of investments in Brazil, the biggest country in Mercosur (58,5% of the region manufacturing value added)[1], despite to be the ninth world economy. Besides, the block will benefit from exports of raw materials, but will be weakened in the industrial area in order to compare to European economies.

Still in environment question, since 2011, the EU has included in all its commercial agreement, one chapter that incentives and intensifies the investments in sustainable development (is said TSD (Trade and Sustainable Development)).

Breach of agreement

The environment question that has been already mentioned in the previous item, was exposing in chapter/article 14 of agreement[2] . The main points of  TSD: a)  The both parts of agreement will not lower the legal protection of environmental standard; b) They implement  the Paris Agreement, coopering on the trade-climate change interface; c)  They respect the multilateral environmental agreements, including the (CITES)[3]; d) They are adopted to combat the forest management and tackle illegal logging, sustainable agriculture, sustainable management of fisheries, and sustainable supply chains.

The critics of this chapter are the dispute settlement if one of part breaks the agreement from article/chapter 14:

“The chapter is subject to a specific dispute settlement procedure under which a complaint concerning non-compliance is first considered in formal government consultations. If the situation is not resolved then an independent panel of experts can be requested to examine the matter and make recommendations. The report and recommendations must be made public so that they can be followed up by stakeholders as well as by officials of the Parties.”[4]

This dispute settlement is different of the rest of agreement and isn´t specifically about this theme. Other important criticism about this chapter is its vague definition of the various items.

At the same time the agreement brings a timid but important environment clause, there is also a consequence of a deforestation increasement, because as rates get lower, import is expect to increase and it requires producers to expand production of agricultural commodities (Sergio Schlesinger, 2020). For example, the production is boosted by this agreement: a) eucalyptus for paper production; b) sugar cane for sugar and etanol; c) soya and maize, in grand part for eat for animals, which later it becomes meat.

 In addition, the second largest importer of agricultural products from Brazil is European Union, only getting behind China, and the tendency with the agreement it to import more agricultural products. These products help the emission of greenhouse gases.

In the same line, the SEEG (System for Estimating Greenhouse Gases) estimates that until 2018, Brazil fulfilled the Paris agreement in terms of emissions of greenhouse gases. However, in 2019, it was exceeded, and the Amazon deforestation was 34,4% increase[5]. In the first four months of 2020, the deforestation is 55% higher than the same period of 2019. This data is fundamental because it demonstrates the allegation of many countries in Europe for not ratify internally the agreement.

Based of these data, Europa Union countries as France and Austria, are skeptical about the ratification of the agreement as follows: Firstly it has various pressures from civil society and environmental groups; secondly it has farmer’s pressure for not ratifying the agreement as it may affect their income, once the low import rates for the Mercosur countries would bring more imports of raw materials and the weakening of this sector in Europe.

  This skeptical distrust in UE-Mercosur agreement of environmental policy could have been circumvented in a political way, with the commitment that Brazil would protect forest from deforestation. However, the relationship between Bolsonaro and Macron (who is openly of against to the agreement) was deteriorated by disastrous diplomatic events of the Brazilian politician as follows: Bolsonaro has canceled a meeting with the Foreign Minister to hold a live on his YouTube channel while he was having a haircut; besides the episode that the president made jokes on social networks with the first lady of France.

The sum of environmental and political factors, added to interests of those who lose out, are delaying the ratification of the agreement, already in the process of finalizing translations, but which threaten to be shelved for a posteriori.

Environmental Dumping

The other important point to consider in these questions, is how the EU- Mercosur agreement can help out in the ecological dumping conflict in Amazon.

The Article XX of GATT 1994 is the mechanism in International Trade Law for combat the deforestation and promote the environment. It is important, since lists a lot of justifications the States adopt or enforce by other contracting part, as for example, “necessary to protect human, animal or plant life or health”[6].

However, even with this GATT device, it is still insufficient to protect the environment, as it does not create a complex mechanism to combat environment dumping. Therefore, the EU and Mercosur agreement should be important to implement a new mechanism to avoid the environment/ecological dumping.

The Dumping concept is defined in Article VI of GATT[1], but the environment/ecological Dumping is different, as it was not included it, it started in literature and still appears when not included in the product nor environmental prices as companies move to countries where the laws are more flexible (Thábata Biazzuz Veronese, 2009). These companies search local with lower costs for their operations, where Ambiental legislation happens to be weak. We must point out that some companies tend to make antithetical choices when putting economic advantages and low environmental impacts at the same table.

Based on economic aspects, for the underdeveloped country the environment Dumping at glance is beneficial, as it attracts several companies interests and brings industrial development to the region. At an environmental cost that affects not only the region, but the international trade itself, as previously explained.

Back to the point of the relation between Brazil and environment Dumping: during the Bolsonaro government, the environment policy seems to be destructive. If we take the May 2020 Government meeting, when Ricardo Salles, the minister, said “pass the herd” and sign the papers (a Brazilian slang that means “ a bad but conscious act in the middle of a riot”) in Amazon[1], it is clear that being uncovered by any press, he intended to take advantage of the pandemic, approving laws that might deforest Amazon even more. As Salles damaging ideas weren´t enough, it is hard to face all the illegal Brazilian timber trade that has been embarked to U.S and Europe throughout 2020 and 2021[9].

Thus, according to the facts above, Brazil´s and EU´s environmental laws, such as Regulation 995/2010 ( laying down the obligations of operators who place timber and timber products on the market) they cannot be sufficient to stop deforestation. That is why it is important to include Article 14 of the treaty in the E.U and Mercosur, as it is another legal device that can be used, in addition to the political pressure on Brazil to comply with the commitment to reduce deforestation. New regulations and monitoring measures are necessary to prevent illegal timber from being used in Europe.

Conclusion

In conclusion, the Mercosur and U.E agreement is not enough to solve the environment/ ecological dumping problems, neither the mechanisms of its Article 14 agreement is sufficient to stop the environment crimes.

However, these mechanisms, plus politics and social pressures it helps to change the government stance. A reflection to be made, despite the criticism of the mechanism of Article 14 of Mercosur and E.U agreement, although we cannot assure that there may be unrevealed interests, UE priories the Socio-environmental one, the result tends to be better than what it is, mainly but not only in Brazil, where deforested areas are used for agriculture right after illegal native timber extraction occurs to feed European and North American markets.

This agreement is essential for the increasement of trade between the two blocs. The taxes that over the years has approach 0, is essential for the interests of them. Focusing on  Mercosur, countries like Brazil and Argentina increase commodities exportation to Europe. On the other hand, in terms of selling technology, Mercosur stands far behind Europe. This quote “manufactured goods” versus “ raw material” takes us back to colonialism years, as it is perfectly clear to understand who benefits who.

Finally, this article demonstrated that only the inclusion of this provision of Article 14 may not be sufficient, as the agreement itself induces South American farmers to increase the planting areas. To avoid environmental dumping, and the protection of the forest, a strengthening of the mechanism proposed by Article 14 is necessary. There must be a clear policy, political willingness, and social pressures to make it happen, as the mere fact of the existence of this mechanism does not prevent dumping and/or illegal practices.

[1] “ The impact of the European Union- Mercosur agreement on Brazilian industry” text of Fernando Sarti and Mari Castillo

[2] EU-Mercosur trade agreement, The agreement in principle Brussels, 1 July 2019: disponible in < https://trade.ec.europa.eu/doclib/docs/2019/june/tradoc_157964.pdf>

[3] Convention on Illegal Trade in Endangered Species

[4] Article 14 of EU-Mercosur principle of Agreement

[5] According Sergio Schlesinger with datas of INPE, in this site< http://www.inpe.br/noticias/noticia.php?Cod_Noticia=5465>

[6] “Subject to the requirement that such measures are not applied in a manner which would constitute a means of arbitrary or unjustifiable discrimination between countries where the same conditions prevail, or a disguised restriction on international trade, nothing in this Agreement shall be construed to prevent the adoption or enforcement by any contracting party of measures (b) necessary to protect human, animal or plant life or health;” Article XX of GATT

[7] The contracting parties recognize that dumping, by which products of one country are introduced into the commerce of another country at less than the normal value of the products, is to be condemned if it causes or threatens material injury to an established industry in the territory of a contracting party or materially retards the establishment of a domestic industry. For the purposes of this Article, a product is to be considered as being introduced into the commerce of an importing country at less than its normal value, if the price of the product exported from one country to another (a) is less than the comparable price, in the ordinary course of trade, for the like product when destined for consumption in the exporting country, or, (b) in the absence of such domestic price, is less than either (i) the highest comparable price for the like product for export to any third country in the ordinary course of trade, or (ii) the cost of production of the product in the country of origin plus a reasonable addition for selling cost and profit.

[8] https://g1.globo.com/politica/noticia/2020/05/22/ministro-do-meio-ambiente-defende-passar-a-boiada-e-mudar-regramento-e-simplificar-normas.ghtml acess in 06/12/2021

[9]https://g1.globo.com/politica/noticia/2021/05/21/embaixada-dos-eua-informa-a-pf-sobre-aprensao-de-madeira-exportada-ilegalmente.ghtml    acess in 06/12/2021

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