A Trade Agreement with a Possible Twist: The EU-Mercosur Agreement

By Michalis Polygiannis, first-year law student at William & Mary Law School, and Jenik Radon, adjunct Professor at the School of International and Public Affairs, Columbia University (see full bios at the end of the article).

Some of the concepts and ideas, as well as statements, are an elaboration of an interview of Jenik Radon conducted by AC4, Earth Institute, at Columbia University.

The monumental European Union–Mercosur free trade agreement was announced in 2019 after twenty years, literally a generation, of negotiations. This trade agreement will create one of the largest free-trade zones in the world, decrease tariffs, and streamline customs procedures between EU states and the Mercosur countries of Argentina, Brazil, Paraguay, Venezuela, and Uruguay.[1] For the EU, this means an increase in exports of high-value products such as cars, machinery, and pharmaceuticals.[2] In contrast, for the Mercosur countries, it would mean more exports in commodity agricultural products, including meat, poultry and sugar, for which quantity is the name of the game, to the European single market.[3] However, despite the almost endless ongoing global discussions and negotiations for a transition to a low-carbon economy to mitigate climate change, trade and environment are like two ships passing in the night.  But President Macron of France is ready to change that and is willing to have a “collision” of these two spheres.

President Macron has recognized that a trade agreement needs to incorporate non-economic factors. To Macron, there is an undeniable link between climate resilience and economic development. He has led the fight by refusing the French parliamentary ratification of the proposed trade agreement unless there is also an agreement that Brazil will stop the deforestation of the Amazon forests, promote sustainable eco-development, and halt biodiversity harm. Macron is ready to insert non-economic conditions into the EU-Mercosur trade Agreement.  In fact, Macron has reiterated time and time again, that the draft agreement lacks a provision imposing discipline on the (weak) practices of the Mercosur countries in the fight against deforestation.[4] Effectively, Macron has positioned himself in favor of classifying the crime of “ecocide” in international law and to judge those who do not protect ecosystems like Brazil.

It should be noted that President Macron’s stance is one of championing a world we need, we want. Macron understands that to ensure long-term production and innovation, we need a solution towards sustainability in the environment. Macron recognizes that the Amazon forest plays a critical role in mitigating worldwide climate change and that the current accelerated deforestation of the Amazon pushes the environment toward an irreversible tipping point. Germany’s position also seems to align with President Macron’s statements, as Chancellor Angela Merkel of Germany, who is reputed to be a champion dealmaker, has also expressed considerable doubts over the deal in 2020.[5]  Legal experts and environmental groups have gone further in their criticism and have consistently emphasized that it gives no incentive to reduce greenhouse gas emissions.

Furthermore, one might imagine that many of the commitments in Chapter 14 of the Trade Agreement, a chapter on Trade and Sustainable Development (TSD), were written by novelists and not lawyers, as they use vague and ambiguous terms, making it impossible for the parties to be held accountable if they do not comply with those commitments.[6] Moreover, the forest provisions in the agreement narrowly, myopically, address illegal deforestation concerns, but do not address issues of soy, beef, or sugar cultivated on illegally deforested land.[7] This ignores the EU Deforestation and Forest Destruction Action Plan calling for the EU trade agreements to encourage deforestation-free agricultural supply chains.[8] The same clauses in the TSD chapter do not go beyond “feel good” language encouraging “corporate social responsibility and responsible business conduct.”[9] Finally, it seems that “if a state lowers its own legal, environmental protections,” this would violate the terms of the agreement “unless it can be shown that the goal of lowering the environmental protections was to encourage trade or investment.”[10] We can be sure that lawyers will become rich litigating that provision.

It should also be noted that a significant portion of the EU-Mercosur agreement is dedicated to liberalizing services that could, and probably would, have harmful effects on forests and forest communities.[11] It is therefore imperative that clear unambiguous standards must be introduced into the agreement. Compliance may be affected by significantly raising the penalty charges for corporations and by changing the legal rules to increase the probability of conviction of the corporate offenders, including management. Deterrence should be goal, which requires the imposition of personal responsibility and liability.

Additionally, further assurances are needed to guarantee that the Mercosur countries will comply with the agreement’s environmental commitments by inserting concrete mandatory benchmarks in the agreement. Several chapters of the agreement set out different enforcement mechanisms that could be implemented and applied to settle various disputes and enforce the protection of the environment.[12] For example, Chapter 4 analyzes “the kinds of sanctions that are permissible both within the context of the agreement and . . . under the World Trade Organization (WTO) rules.”[13] Corrective measures such as “sanctions in the form of increased tariffs” would be applied “when a grievance is found to be justified.”[14] But frankly that is only money and could be taken as a cost of doing business and the risk judged accordingly. More penalties with teeth are needed.

Moreover, it is open to debate whether trade sanctions are the most appropriate devices in triggering concrete corrective measures.[15] Corporations could, of course, object to inserting non-economic conditions based on the premise that this would create uncertainty and would therefore hinder and limit business planning and development, especially as they would claim that they cannot force compliance by governments, let alone be held responsible for their actions. Companies would, however, be incentivized by the insertion of such conditions to lobby the government of a country which was not living up to its climate change commitments in order to avoid the suspension of an agreement all together. In fact, the threat of automatic suspension could have a salutary effect.  It should not be forgotten that companies are expert lobbyists as they regularly lobby governments for their own benefit, especially lower taxes and less regulation, so, in short, companies could now become corporate citizens by advocating a government to comply with the environmental conditions.

EU trade agreements should contain rules on trade and sustainable development that hold corporations and those individuals who direct them, the executives and managers, liable for environmental violations committed under their control. There is no reason why heads of organizations and corporations that participate in trade between the EU and the Mercosur countries should not be personally held liable if they do not comply with the specified conditions.[16] Corporations are still managed by persons who make decisions, judgements and take risks. Accordingly, there is no reason why they should be held to account.

Corporations should also be subject to binding rules both where they are based and where they operate, and the EU should require due diligence reporting and cradle to grave responsibility for corporate products and services.[17] Finally, EU member states “should create policies that provide transparency in all corporate and government activities that impact environmental . . . rights, including trade, tax, finance and investment regimes.”[18] One of the authors of this article, being an international corporate attorney, acknowledges the soundness of the aforementioned recommendations of Greenpeace.

To put this issue in context, India, for example, has pulled out of the China-backed trade agreement RCEP as negotiations had failed to address its core concerns and public interest issues. The Indian industry feared that reduced customs duties would result in a flood of imports, especially from China, with which it has a massive trade deficit. Prime Minister Narendra Modi stated that India’s decision was guided by the impact it would have on the livelihoods of millions of Indians, and those especially in vulnerable sections of the society.[19] In short, social concerns and impact need to be taken into account.

Trade agreements need to be integrated with other international agreements and should cease being seen, negotiated, and drafted as stand-alone silo agreements. Specifically, they should be prepared in a broader socio-political, economic, and environmental context. Environmental concerns are here to stay, and the future depends on the preparedness of leaders, like Macron, to be real leaders. The EU has already made numerous commitments to halt deforestation and respect human rights, but from now on, it should go one step further and also enter trade deals that will protect forests and the environment.

Since there is scientific evidence that an increase in trade has a negative correlation with the environment, it is paramount to understand that trade agreements and the specificity of their language have the potential to influence trade opportunities and the ecosystem.[20] Currently, there are inadequate environmental and social safeguards in place. But having climate change conditions in a trade agreement would have the added benefit of inspiring American and European youth to take an interest in trade agreements, as they would now have a vested stake in them. With the incorporation of such conditions, we would be letting today’s youth, who view climate change as an existential threat, know that we take their concerns on the impact of environmental degradation into account. Because, if we won’t take care of our environment, then who will? So, Macron should stand his ground and insist on no deforestation. Let the EU-Mercosur agreement with climate change and environmental conditions become a model for the world.

About the Authors

Michalis Polygiannis is a first-year student at William & Mary Law School. He graduated from the Elliott School of International Affairs at the George Washington University, where he double-majored in International Affairs (concentrating on Europe and Eurasia) and Russian Language and Literature. Before entering law school, Michalis completed his military service in the Cyprus military. Also, he worked at the European and International Treaties Department of the Ministry of the Foreign Affairs of Cyprus, the Embassy of Cyprus in Washington, DC, the Institute of World Politics, and the Washington Institute for Near East Policy.

Jenik Radon, adjunct Professor at the School of International and Public Affairs (SIPA), Columbia University, is an international lawyer who has lectured and worked in over 70 countries, and has advised public authorities and civil society around the world on sustainable natural resource development, investment agreements, governance and business and human rights. He has been awarded the Cross Terra Mariana and the Cross of Service by Estonia and the Order of Honor by the republic of Georgia for his work. 


[1] Anna Nadibaidze, The Uncertain Future of the EU-Mercosur Trade Agreement, Global Risk Insights (Dec. 2, 2020), https://globalriskinsights.com/2020/12/the-uncertain-future-of-the-eu-mercosur-trade-agreement/.

[2] Id.

[3] Id.

[4] Agence France Presse, France Says Opposes EU-Mercosur Trade Deal Over Deforestation Concerns, Barron’s (Sept. 18, 2020), https://www.barrons.com/news/france-says-opposes-eu-mercosur-trade-deal-over-deforestation-concerns-01600429204.

[5] Id.

[6] The EU-Mercosur Trade Agreement: What is it, and what could it mean for Forests and Human Rights?, Fern 1, 2 (June 2, 2020), https://www.fern.org/fileadmin/uploads/fern/Documents/2020/The_EU-Mercosur_Trade_Agreement_explainer.pdf [hereinafter The EU-Mercosur Trade Agreement Explainer].

[7] Id.

[8] Perrine Fournier & Saskia Ozinga, Forests and Forest People in EU Free Trade Agreements, Fern 1, 21-22 (Oct. 2018), https://www.fern.org/fileadmin/uploads/fern/Documents/2018/Fern-Forests-in-EU-FTAs-report.pdf.

[9] EU Mercosur Trade Agreement Explainer supra note 6, at 2.

[10] Id.

[11] Id at 5.

[12] Id.

[13] Id.

[14] Id.

[15] Daniel Mittler, How do we make corporations more accountable?, Greenpeace International (Jan. 31, 2019), https://www.greenpeace.org/international/story/14185/how-do-we-make-corporations-more-accountable/.

[16] Id.

[17] Id.

[18] Why did India opt out of RCEP, one of the world’s largest free Trade agreements? The Economic Times (Nov. 16, 2020), https://economictimes.indiatimes.com/news/economy/foreign-trade/why-did-india-opt-out-of-rcep-one-of-the-worlds-largest-free-trade-agreements/massive-free-trade-agreement/slideshow/79246185.cms.

[19] Id.

[20] The EU-Mercosur Trade Agreement Explainer supra note 6, at 3.

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