The new Partnership Agreement between the European Union and Mercosur and the sustainability agenda: perspectives on the European Deforestation-Free Regulation

By Paula Wojcikiewicz Almeida and Gabriel Ralile

On 6 December 2024, the leaders of Mercosur and the European Union (EU) announced the conclusion of negotiations on the Partnership Agreement that had been under discussion since 1999. The instrument is a major milestone in the rapprochement of two of the world's largest economic hubs and innovates by addressing different topics within three pillars: political dialogue; trade and economic affairs; and cooperation. In this context, the sustainability agenda is widely addressed by the instrument, with one of the main points being the protection of forests. 

Long awaited, the Agreement is viewed positively by several companies and representatives of both Parties. In Brazil, for example, it is hoped that national products will become more competitive in the EU as a result of tariff reductions, which is particularly beneficial for Brazilian agribusiness. There is also speculation about the possible attraction of investment to the country, generating jobs and income. 

However, the agreement has also been met with negative reactions, emphasising the possible intensification of competition between national and EU products, especially in the automotive and information and communication technology sectors, and the tightening of sanitary and phytosanitary rules. In addition, the instrument has been heavily criticised by some EU countries, especially France, which has led to a strategy of splitting the agreement in order to ‘speed up’ its processing. 

Given its three pillars, the Parties decided to separate the commercial scope from the rest of the instrument to make it easier to vote on the agreement in the EU legislature. This strategy was suggested by some EU members, such as Germany, since, originally as a single association agreement, it could only be approved if all member states agreed, which would be unlikely given the position of countries such as France. With this separation, the European Commission has exclusive competence to sign trade agreements, requiring only approval by a simple majority of the legislature and a qualified majority of governments to proceed. 

In terms of content, the trade pillar contains a list of issues that seek to bring both economies closer together, covering topics such as goods, rules of origin, trade facilitation and customs cooperation, technical barriers, sanitary and phytosanitary measures, trade defence, investments, intellectual property, government procurement, dispute settlement and sustainable development. With regard to the latter, special treatment is given to various issues on the environmental agenda, both bilateral and multilateral. 

For example, the chapter recognises the three pillars of sustainable development (social, economic and environmental) and reaffirms key multilateral instruments such as the Rio Declaration and the United Nations 2030 Agenda. It also ensures the right of each country to regulate environmental and labour aspects in their domestic legislation, emphasising the need to respect international agreements and the commitment that measures aimed at protecting the environment or working conditions should not constitute arbitrary or unjustified discrimination, nor a disguised restriction on trade. 

With particular regard to forest protection, the chapter emphasises the recognition of relevant international commitments and the duty to implement national measures, agreements, laws and regulations to prevent further deforestation and increase efforts to stabilise or increase forest cover from 2030 onwards. In this field, there is a possible influence of the environmental agenda brought by the EU, especially with the advent of the Green Pact. In this context, the role of the recent European Deforestation-Free Regulation (EUDR) stands out as it seeks to regulate the entry and circulation of products from seven types of commodities in the EU (coffee, cocoa, rubber, palm oil, soya, timber and cattle). 

The EUDR has generated widespread international repercussions given its expected impacts on international trade, especially for producing countries like Brazil, and its possible incompatibility with the regulatory framework established by the World Trade Organisation (WTO). In this sense, the new Partnership Agreement provides a means of fostering dialogue between the Mercosur and EU countries. 

It is interesting to note that, among the provisions, the Agreement establishes the need to create a list of products from Mercosur countries that contribute to the conservation, restoration, sustainable use and management of vulnerable forests and ecosystems. The products on this list, which will be reviewed periodically every three years, should receive preferential or additional access to the EU market, or other incentives to promote their trade, such as technical assistance and training. In addition, the Agreement recognises that sustainability measures that affect trade must be fully compatible with WTO obligations, adopting a cooperative approach to address challenges associated with compliance with sustainability measures. 

Thus, in addition to economic measures, the new instrument between Mercosur and the EU can contribute to the advancement of the sustainability agenda and even to the non-contentious implementation of norms such as the EUDR.