European Union: Lula criticizes environmental requirement in agreement – 06/12/2023 – Market

During a joint statement with the president of the European Commission, Ursula von der Leyen, president Luiz Inácio Lula da Silva (PT) criticized the extra environmental requirement that Europeans want in the agreement with Mercosur and said that the premise of the negotiations should not be “distrust and sanction”.

The two met this Monday (12) for about an hour at the Planalto Palace.

“I explained to President Von der Leyen Brazil’s concerns with the additional instrument to the agreement presented by the European Union in March of this year, which expands the country’s obligations and makes them subject to sanctions in case of non-compliance. The premise that must exist between partners strategic goals is mutual trust and not mistrust and sanctions,” said Lula.

“At the same time, the European Union approved its own laws with extraterritorial effects and that modify the balance of the agreement. These initiatives represent potential restrictions on agricultural and industrial exports from Brazil”, he added.

The petista was referring to the rule approved by the European Parliament in April that prohibits the sale on the continent of products derived from deforestation in forests.

There is a list of primary products in the law: cattle, wood, soybeans, coffee, cocoa, rubber and oil palm. Any other product that is fed (in the case of soy, for example) or derived from these commodities are also covered in the text, such as leather, chocolate, furniture, charcoal, printed paper products and palm oil derivatives.

In an interview at the end of April, Lula had already said that the current proposal was impossible to accept.

The Europeans sought to establish tougher sustainable requirements, which they presented earlier this year. The agreement has sustainability standards that are non-binding (ie mandatory), which is why the blocs are negotiating the additional term, called a “side letter”, which makes these environmental commitments a requirement.

This is one of the main impasses for the ratification of the agreement. While Europe wants to ensure that the export of commodities with environmental problems is seen as a violation, members of the Brazilian government consider the conditions too strict.

Lula has also been saying publicly that the mechanism referring to government purchases needs to be reviewed, which need to be reserved for small and medium-sized producers in the countries. Behind the scenes, members of the government claim that this is a genuine demand, but one that has recently gained momentum with the Europeans’ insistence on the additional environmental protocol.

Von der Leyen, in turn, said in his speech that he wants to end the agreement as soon as possible, “at the latest by the end of the year”, without going into the details of the bloc’s new demands.

She also said she was waiting “with impatience” for an official return from Brazil regarding the requirements, as she considered it an opportunity to hear what the country has to propose.

“We sent you a letter as an additional instrument and we are waiting impatiently for your response. Because of our openness to listen to you, to know where we have to take a step towards each other and we hope that by the end of the year we will conclude the Union agreement Europe-Mercosur”, he said.

The president of the European Commission spoke again about the agreement hours later, during an event organized by the National Confederation of Industry. German policy stated that the two blocs are very close to the finish line to finalize the agreement, but that there are still many obstacles that harm the flow of trade and the relationship between the parties.

“The European Union and Mercosur are already very close trade partners. But there are still many obstacles that limit the flow of trade and the potential of this relationship. We have been discussing a trade agreement for two decades, it is the biggest and most ambitious agreement of trade that both blocs have already negotiated”, said Von der Leyen.

“And now, finally, we are close to the finish line. The time has come to cross it”, he added.

The president of the European Commission stated that her visit to Brazil would be based on three pillars for the relaunch of the partnership with the country. The first is sustainable growth, the second is the human dimension of the digital revolution, and the last is increased trade.

Von der Leyen also stated that the European Union has the objective of importing 10 million tons of renewable hydrogen, every year, under the so-called European Green Deal. She said it is possible to build a transatlantic clean hydrogen market.

Shortly before the speech by the European, the president of the CNI, Robson Andrade, defended the conclusion of the free trade agreement, but in the way it was closed in 2019, without the reopening of negotiations.

“As in any negotiation, there are challenges to be resolved. That is why it is necessary for both parties to seek a pragmatic and flexible approach,” he stated.

The commercial partnership has been at an impasse for years. Signed in 2019, in the first year of the Jair Bolsonaro (PL) government, the text has not yet been ratified by the two blocs.

Officially negotiated since 1999, the resolution comes up against new environmental constraints requested by the Europeans, as well as divergences from the Brazilian government on damages to the reindustrialization of the country.

Lula has already promised to conclude the agreement in 2023, but said that the current terms are impossible to be accepted, defending a renegotiation of the text.

According to MEPs involved in the process, the EU chose to freeze the procedure after signing in 2019 due to a “Bolsonaro effect”. According to parliamentarians, it would be politically unfeasible to approve a trade agreement involving Brazil at a time when the country’s environmental image was tarnished internationally.

The PT’s arrival at the Presidency reopened the possibility of definition – and the EU wants to take advantage of this window before the European Parliament elections, which take place in 2024.

In an interview with Sheet before the meeting in Brasilia, Von der Leyen reinforced confidence in Lula’s environmental discourse, but not without issuing signs of the risk of setbacks.

“The European Union strongly supports President Lula’s environmental and climate agenda”, said the president of the European Commission. “I can only encourage all institutional actors in Brazil to work together to protect the Amazon, as well as the indigenous communities that live there.”

The Mercosur-European Union agreement is seen as important for the bloc to get rid of its trade dependence on China. In addition, the conclusion of the commercial treaty with Mercosur could give a geopolitical and economic respite to an EU that is increasingly isolated between the dominance of the US and China.

Together, Mercosur and the European Union account for about 25% of the world’s GDP (Gross Domestic Product), covering a population of 750 million people.

However, because it is an agreement that was on the table for two decades, there is a perception that aspects that are important today are not properly addressed in the text.

France is one of the main opponents of the deal as it stands. The country defends, among other things, the inclusion of what would be “mirror clauses”, that is, products can only enter the EU if they follow the same conditions that the bloc imposes internally.

This is a particularly delicate point for Brazilian agriculture. Not only because of the issue of deforestation but, above all, because of pesticides.

During the Bolsonaro government, hundreds of pesticides were authorized. Many of them are not allowed in other countries.

At the same time, the European agricultural sector —which has a lot of political strength— fears that more South American products will enter the local market. In addition to protectionist interests, there is the claim that production standards are less rigid and, therefore, goods cost less.

This Monday. the president of the European Commission also announced the transfer of 20 million euros from the bloc to the Amazon Fund, as part of an amount of 10 billion euros in investments in Latin America and the Caribbean.

In recent weeks, the Brazilian government gave in to Congress and accepted the emptying of the Environment and Indigenous Peoples folders and saw the Chamber of Deputies, chaired by Arthur Lira (PP-AL), approve the bill that establishes the time frame for the demarcation of indigenous lands —the text still needs to go through the Senate, and the Federal Supreme Court is discussing the issue on another front.

In this context, Von der Leyen maintains that indigenous people “play a central role in the preservation and sustainable use of the forest and in developing Brazil’s potential as a green superpower.” The environmental debate permeates the discussions of the EU-Mercosur agreement, which is being held today. Lula said he wanted to seal the pact this year, and the president of the executive branch of the European bloc reinforces her commitment.

Collaborated with Thiago Bethônico