What’s going on with the EU-Mercosur agreement?

The EU-Mercosur agreement is a trade deal that, after 20 years of negotiation, was reached in 2019 between the EU and the ‘Mercosur’ countries of Argentina, Brazil, Paraguay and Uruguay.

The EU-Mercosur deal is one of the biggest trade deals in the world, and the largest in the EU with respect to the population concerned – 780 million people. It’s also one of the largest in terms of volume of trade, covering more than 40 billion euros of imports and exports.

But the deal has been widely criticised by civil society and EU member states over its failure to include robust sustainability guarantees. Some countries, like France, have said they will not ratify the deal without stronger environmental protection.

The way that the deal was negotiated raises several important governance issues that ClientEarth lawyers have addressed in a new briefing. Here, we lay out what these issues are, and why they must be rectified if the EU is to live up to its global commitments to sustainable trade.

Failure to conduct a timely sustainability impact assessment

One of the biggest failings is that the deal was negotiated without conducting a timely sustainability impact assessment – a process that works out how to mitigate adverse human rights, environmental, and social impacts related to the agreement. It is supposed to be finalised before any trade negotiations conclude, but the final assessment was only recently published – two years late.

So last year, we took action against the Commission over its failure to ensure the agreement would not lead to social, economic, environmental degradation and human rights violations.

ClientEarth and organisations Fern, Veblen Institute, La Fondation Nicolas Hulot pour la Nature et l'Homme and International Federation for Human Rights filed a complaint to the European Ombudsman. We warned that the Commission did not properly consider the deal’s potential impact on issues such as the deforestation of the Amazon rainforest, and the use of dangerous pesticides in farming.

In March, the Ombudsman found that the Commission’s failure to conduct a timely sustainability impact assessment before concluding the deal constituted ‘maladministration’. This is a clear rebuke of the Commission’s negotiation process.

Why the sustainability impact assessment matters

From the beginning of negotiations, serious concerns were raised over its environmental impacts. These include increases in deforestation and carbon emissions, erosion of biodiversity, and challenges for the protection of the rights of local communities and Indigenous Peoples.

The sustainability impact assessment is an important tool to make sure the Commission’s policy choices are based on scientific evidence, and that resulting trade agreements respect human rights and high economic, social and environmental standards. This is supposed to be a core instrument of EU trade policy, as it is key to ensuring transparency and appropriate involvement of all stakeholders in negotiations.

But when the Mercosur deal was agreed upon, only the first out of three phases of the sustainability impact assessment was conducted. This undermines the case that environmental and social concerns have been sufficiently addressed in the text of the deal.

Furthermore, the lack of transparency in EU-Mercosur negotiations has limited opportunities for civil society and parliaments at both EU and national level to engage in meaningful discussions. The failure to complete the assessment in time and thus integrate these concerns further challenges any notion that public input was valued in the negotiation process.

While the Commission’s final sustainability assessment is generally positive on the potential effects of the agreement, other studies are less optimistic. For example, a study commissioned by the French Government confirms the deal is likely to lead to more deforestation in the Mercosur countries, particularly in Brazil, linked to the increase in beef exports to the EU generated by the deal.

Pre-ratification commitment is too little, too late

A number of EU states and members of the European Parliament have indicated they will not support the deal as it stands, due to climate and deforestation concerns.

As a response to this, the Commission is seeking pre-ratification commitments from Mercosur countries on climate and deforestation. It hopes this extra step will be enough to move the deal forward, as it has been clear it will not reopen the text to further negotiation.

Little is known so far about the legal nature and content of this additional instrument.

What we need to see is real improvement in the Trade and Sustainable Development chapter of the agreement – which is where sustainability commitments are supposed to feature.

The deal must include meaningful commitments to develop, adopt and implement more clearly defined measures and policies for the objectives of environmental protection. Strong and effective monitoring and enforcement mechanisms, including the possibility of sanctions in case of non-compliance, are necessary so that Trade and Sustainable Development chapters are not window-dressing.

More broadly, environmental considerations should also be integrated into the entire agreement.

Otherwise, this will be a missed opportunity for the EU to use its negotiating power to obtain solid guarantees that meet the environmental, health and, more generally, societal expectations of its citizens.

What comes next?

The EU-Mercosur trade deal is part of a wider agreement that provides a broad framework for intensified cooperation between the EU and Mercosur countries. Besides the trade part, the agreement includes a political and cooperation pillar.

Due to its specific nature, the deal should be voted on unanimously by the European Council, and should be approved by the European Parliament with ratification by the parliaments of the 27 member states. But the Commission is trying to use a workaround.

There have been media reports that the Commission is discussing whether to split the trade part of the EU-Mercosur agreement from the political part, to allow a vote from EU institutions only, which only needs a majority to approve it, and without ratification by the member states.

The whole process of scrutiny of the EU-Mercosur deal was based on the common understanding that the member states would have a veto either in the Council or through the ratification at national level. If the EU shortcuts this process, it will undermine the entire negotiation procedure.

The governance issues that are raised regarding the EU-Mercosur deal show the need for the EU to change the way it conducts its trade policy, otherwise its legal obligation to “foster sustainable development” and integrate environmental protection will largely remain lip-service.

For the EU to live up to its commitment to the European Green Deal, it must address the missed opportunities of these negotiations before its final ratification, and should ensure that environmental protection is at the very heart of all current and future EU trade negotiations.