BRASILIA (Reuters) – With the EU-Mercosur free trade deal delayed for years by European environmental concerns, a Stanford professor has proposed a way to overcome a deforestation hurdle: make tariff reduction contingent on conservation progress.
After two decades of talks, the European Union and the South American bloc, that comprises Brazil, Argentina, Uruguay, Paraguay and Bolivia, reached agreement in principle in 2019 on a free trade deal, but it was not signed due to concerns over environmental safeguards.
New European legislation on preventing the entry of products from deforested areas was seen as protectionist by Brazil and the EU agreed to put off implementation until the end of next year.
Bard Harstad, professor of political economy at the Stanford Graduate School of Business, believes that linking the tariff-reduction timetable to deforestation levels would benefit both blocs.
“Mercosur countries could see tariffs lowered faster if their deforestation levels drop every year, and more conservation will allay EU concerns,” Harstad said.
This would be an incentive to strengthen conservation, because an increase in deforestation could put the tariff timetable back to zero, with higher tariffs and worse terms of trade, he said.
Harstad said the EU-Mercosur trade deal, if ratified in its current form, would lead to a larger market and expanded agricultural output with associated deforestation in Brazil’s Amazon rainforest.
And yet, if the trade deal is not ratified, Mercosur might export more to other countries with weaker or no environmental safeguards, he said.
“With minor modifications, the trade deal can be used as a carrot that motivates tropical forest conservation instead of deforestation,” he added.
The European Commission declined to comment on Harstad’s proposal, saying it is committed to concluding the negotiations.
“The EU focus remains on ensuring that the agreement delivers on the EU’s sustainability goals, while respecting the EU’s sensitivities in the agricultural sector,” a commission spokesperson said.
Diplomats involved in the negotiations said the proposal was unrealistic and doubted it could be acceptable to Mercosur countries that would argue that the burden of environmental protection would fall almost exclusively on them.
“It would crash on takeoff. Implementation would be hell. How do you establish a workable relation between more conservation measures and more tariff cuts?” said one diplomat by telephone.
(Reporting by Anthony Boadle; Editing by Marguerita Choy)
