In an effort to revive the EU-Mercosur trade deal, the European Commission is preparing an additional instrument to enhance its sustainability provisions. A recent leak of this fails to meet the criteria outlined in the Commission’s own Trade and Sustainable Development (TSD) review. The EU must step up its climate diplomacy: support commitments on deforestation with new climate finance; offer capacity building on the EU’s autonomous trade measures; and use the upcoming EU-Latin American and Caribbean summit to make further commitments.
Negotiations for the EU-Mercosur trade agreement concluded in 2019. However, the deal is still pending political agreement.
In the context of renewed efforts to finalise the deal, the European Commission is preparing a “joint instrument”, an additional interpretation of the Mercosur deal aiming to enhance its sustainability provisions, a draft of which was leaked in March.
The proposal comes after the Commission revised its Trade and Sustainable Development (TSD) criteria for its upcoming trade agreements in mid-2022, through the TSD review, ahead of its latest drive to finalise more trade deals.
The EU-Mercosur deal has long received pushback from environmental campaigners due to concerns it will drive increased deforestation in important rainforest countries, notably Brazil.
Campaigners have criticised the leaked text. In our latest E3G analysis, we find that the Commission has failed to even meet its own tests, as set out in the TSD review, let alone alleviate the long-standing concerns of campaigners.
Assessing the EU-Mercosur sustainability instrument
In our recent report ‘How EU trade deals can increase climate action’, we summarise the EU’s TSD review and explain how it has significantly enhanced the EU’s aspirations on climate and trade.
The TSD review moves away from viewing trade mainly as a defesnsive risk to the EU’s climate transition. Instead, it understands how trade deals can proactively increase climate action, both at home and with partner countries.
Assessed against the Commission’s benchmarks in the TSD review, the EU-Mercosur sustainability instrument has made some progress to achieve the EU’s updated goals. However, it also falls short in several key areas:
|Defensive TSD approaches||Proactive TSD approaches|
|Instrument-specific activities||Goals mainly achieved.|
Non-regression text (Article 2 update); positively links to maintaining levels of climate ambition in NDCs (Article 6 update); adds responding to the Global Stocktake, submission of Adaptation Communications and Long Term Strategies to the UNFCCC.
|Goals partially achieved.|
Commitment to halt and reverse forest loss by 2030 with a 50% interim target for 2025 (Article 8 update), builds on commitments to the Glasgow Declaration on Forests and Land Use.
|Instrument-adjacent activities||Goals not achieved.|
No commitment to enhanced dialogue and capacity building on compliance with the EU Carbon Border Adjustment Mechanism, Deforestation Regulation, and Due Diligence Directive.
|Goals not achieved.|
No new European climate finance; lack of country-specific climate cooperation roadmaps; no technology assistance or capacity building; no climate-aligned export credits, or sustainable investment facilitation, etc.
- Positively, the leaked text says it will mitigate a “race to the bottom” in environmental standards and ensure both parties “effectively implement” the Paris Agreement, including a positive commitment to maintaining levels of ambition in Nationally Determined Contributions (NDCs).
- However, it makes no reference to enhanced dialogue and capacity building on compliance with the EU’s Carbon Border Adjustment Mechanism (CBAM), its Deforestation Regulation, or its Due Diligence Directive. These are priority related EU activities and as such are glaring omissions.
- The text reiterates the two sides’ goal “to halt and reverse forest loss and land degradation by 2030” in the context of the Glasgow Leaders’ Declaration on Forests and Land Use. It adds “an interim target of reduction of deforestation of at least 50% from current levels by 2025”.
- However, the EU falls significantly short of supporting these commitments with any new proactive proposals, including additional offers of European climate finance, export finance, or connections to the EU’s Global Gateway.
The EU’s goals are also not supported by an enhanced delivery mechanism – despite the TSD review specifically calling for the development of partnerships with roadmaps, tailor-made to the political economy of partner countries – nor is there any mention of other key areas of climate cooperation such as on clean technologies, industrial decarbonisation, sustainable finance, or critical minerals.
More progress is needed
The Mercosur deal has long been opposed by environmental and trade justice campaigners, due to concerns about increased deforestation and land degradation in Amazon countries, as well as concerns about entrenching economic inequalities and extractivism.
While the political context has changed for the EU, with Russia’s illegal war in Ukraine sparking an increased desire for trade diversification, the concerns of civil society around the Mercosur deal justifiably remain.
The EU needs to do more to respond to these concerns.
In July, the EU will meet with the Community of Latin American and Caribbean States. Ahead of this summit, the EU should prepare new announcements, including climate finance, export finance, clean technology assistance and capacity building, if it is to even match the criteria set in its own TSD review, let alone win support for the Mercosur deal from policymakers in the European Parliament and certain Member States.
E3G will be coming forward with further assessments of upcoming EU FTAs this year, based on our analytical framework. Please subscribe to our newsletter to keep up to date. For the full E3G analysis of the Mercosur sustainability instrument for policymakers please contact firstname.lastname@example.org.