Amazon fires mean EP must rethink Mercosur trade deal

By June of this year, deforestation in Brazil had increased by no less than 60 percent compared to June 2018.

What is happening right now could lead to what scientists refer to as large-scale forest dieback and in the worst-case scenario to the disappearance of the Amazon rainforest.

The ecosystem that maintains the rainforest is actually vanishing, and in the worst case, that could cause the entire region to be reduced to a savannah.

This would be disastrous for the global effort to fight climate change, because maintaining and even expanding our forests is essential to meeting the climate goals.

After all, deforestation generates 20 percent of greenhouse gas emissions.

Paradoxically enough, those who are currently setting the fires to clear land for agriculture and livestock will pay dearly for it, because agriculture in the region is dependent on the existence of the rainforest.

In 2017, a study by the European Commission revealed that the EU 'is clearly part of the deforestation problem', but also that it can be a part of the solution.

The European populace also wants there to be stricter laws to protect the forests of the planet.

A poll from May of last year in 25 member states demonstrates that 87 percent of Europeans consider such new legislation necessary and that 91 percent of Europeans are deeply concerned about the state of the forests.

Already in 2018, both the European parliament and seven member states called for an urgent plan of action to combat deforestation.

In late July, the European Commission finally laid the foundations for such an action plan against deforestation.

The new Commission, led by Ursula von der Leyen, will now urgently need to implement a number of measures that are designed to reinforce the existing laws from 2003, which are known as the Forest Law Enforcement, Governance and Trade Action Plan (FLEGT).

EU trade policy

European trade policy can become one of the key instruments for combatting deforestation.

An important cause of deforestation is farming and raising livestock, which therefore means the trade in and consumption of products from those sectors as well.

Between 1990 and 2008, for example, the EU was responsible for no less than one third of the consumption of the crops that had driven deforestation. The EU thus has an important responsibility.

There is no magic bullet for stopping deforestation, but both the European parliament and various NGOs have pointed out the great importance of what is known as mandatory due diligence, which needs to be required of companies if they engage in trade with, or invest in, activities associated with deforestation.

In the investment world, analyses of this type are referred to as ESG policy (Environmental, Social & Governance), and are already being voluntarily carried out by certain companies.

The analyses are related to environmental impact, energy consumption, climate change, waste production, depletion of natural resources, including water, social conditions such as child labour, slavery, labour conditions, health risks and, at the governance level, risk of bribery, tax evasion, corruption, etc.

Companies based in the EU as well as those providing goods and services in the EU, including financiers and investors, should be required to implement this type of mandatory analysis.

Such a system of mandatory due diligence already exists as part of the European Timber Regulation of 2013 that permits the import of legally harvested timber, but it should be expanded to all sectors.

Companies are only granted a licence to import products after they have carried out a comprehensive risk analysis. Of course, they not only need to identify the risks, but also demonstrate that they are taking measures to prevent environmental damage and violation of human rights.

At the same time, mandatory due diligence also needs to be linked with mandatory disclosure. European due diligence legislation not only levels the playing field for companies that are active in different member states, it will also help the EU to more easily attain the sustainable development goals and implement the Paris Climate Agreement.

Mercosur must change

Specifically with regard to the Amazon rainforest, the Mercosur trade agreement with Brazil, Argentina, Paraguay and Uruguay naturally comes into play.

Although this agreement has been finalised, it still needs to be ratified, by both the European parliament and by the parliaments of the member states.

This agreement represents significant leverage.

Simply rejecting it outright, as some have suggested, is probably not the best strategy, because the trade agreement contains a set of conditions which, for example, anchor the Paris climate accords in what is called the TSD chapter on trade and sustainable development.

Only, the agreements in that chapter are difficult to enforce.

It goes without saying that, in light of the gravity of the situation, Europe will need to renegotiate the Mercosur agreement. But there is also a second way forward, one that the EU has not ever structurally tried before, but which is customary in the United States, and that is drawing up pre-ratification conditions.

For the ratification of an agreement, the US Congress will, for example, impose an additional series of conditions before effectively proceeding with the ratification.

There is nothing preventing the European Pparliament from doing the same thing, and in fact, in the future, this should become an integral part of European trade policy.

Because pre-ratification conditionality gives the European parliament a powerful tool for finally turning trade policy into an instrument for attaining the United Nations sustainable development goals.

At the very least, the pre-ratification conditions will need to be able to force deforestation to come to a stop and, in addition, to guarantee investment in reforestation.

After all, international trade needs to be about much more than money and jobs. It has to guarantee a sustainable future for the entire planet.