On 28 June 2019, the EU and Mercosur reached a political agreement towards a free trade agreement between the two regions, after 20 years of negotiations. In the ensuing period, the path to ratification has been fraught with internal and external challenges. The agreement was highly criticised for its potential environmental and social impacts.

Indeed, the EU-Mercosur agreement promotes trade flows of goods incompatible with the objectives set by the Paris Agreement, the European Green Deal, and the Farm to Fork Strategy. It poses significant risks for Mercosur countries, as it locks them into a role as agro-exporters, and worsens deforestation in the Amazon. Its implementation would also negatively affect EU countries, notably from a health perspective, as it would facilitate the entry of products produced using practices prohibited in the EU.

These obstacles prompt a critical examination of the viability and plausibility of ratifying the current agreement in its present state – from an environmental, social and democratic perspective, but also regarding the discrepancy in production standards between the two blocs, in the context of farmers’ protests across Europe.

The report, authored by Veblen Institute, CISDL, E3G, FTAO and IEEP, coordinated under the Green Trade Network, and commissioned by the Greens/EFA group in the European Parliament, explores 4 scenarios for a fair and sustainable partnership between the EU and the Mercosur region :

• Alternative 1. Renegotiation of the deal : with key elements to consider such as, making tariff preferences conditional on effective compliance with sustainability criteria for all the most sensitive products from a climate and biodiversity point of view, compliance with environmental and climate commitments as well as core ILO conventions as an essential element of the EU-Mercosur Agreement, specific and measurable commitments in the TSD chapter, etc.

• Alternative 2. A bilateral partnership on sustainability issues without access to market (high level of cooperation, low level of market integration)

• Alternative 3. Targeted cooperation and integration: a bilateral partnership on sustainability with targeted market access

• Alternative 4. Targeted Bilateral Strategic Partnership(s) (on critical raw materials)

The Report also contains policy recommendations for decision-makers and negotiators on both sides to build future relations between the EU and Mercosur :

1. Any agreement or political partnership with Mercosur countries (as a bloc or individually) should be compatible with the Paris agreement and the Kunming Montreal framework in compliance with international human rights law, ILO Standards, WTO law and Public International Law.

2. Future cooperation vehicles between the two blocs should be based on dynamic assessments of the impacts of any market access measures on both ecosystems and local communities. They should include tailored roadmaps for addressing key environmental and social issues, combined with review and adjustment clauses.

3. Any EU-Mercosur partnership should be supported by a financial package that facilitates compliance with EU market access requirements and contributes meaningfully and sustainably to the Mercosur region’s clean and circular economy transition, further linking the EU’s trade policy with specific programmes such as the Global Gateway.

4. The future partnership should provide a series of assistance measures to ensure sustainable management of resources and a fair allocation of value as well as to raise the capacity of local actors to comply with the EU’s environmental and labour regulations.

5. Parties should refrain from seeking to increase trade between the two blocs as a goal in itself, but primarily seek to improve commercial partnerships of products that are produced sustainably and are not easily available in the other bloc.

6. Market-opening provisions of such a partnership should focus on trade in sustainable products produced by companies abiding by the CSDDD and similar laws, favouring local and domestic products when possible. This shall also mean stopping the export of harmful substances that are banned in the EU (pesticides).

7. Any initiative for dialogue on standards should be aimed at increasing the level of protection for workers, consumers and the environment and not at facilitating trade (which may be an indirect benefit but should never be a condition for it).