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Mercosur | Brussels, 8 July 2020

European Commission publishes draft Sustainability Impact Assessment for the Trade part of the EU-Mercosur Association Agreement

The Commission today published the draft version of the final assessment of the potential economic, social, environmental and human rights impact of the trade part of the association agreement between the European Union and Mercosur (Argentina, Brazil, Paraguay and Uruguay).

This independent report, prepared by the London School of Economics, is part of an engagement process with civil society that aims to contribute to a sound, evidence-based and transparent societal debate in view of the future approval and implementation of the agreement.

The analysis, as with all Sustainable Impacts Assessments, looks at hypothetical scenarios, both a conservative one and an ambitious one. While neither scenario is identical to the negotiated outcome, they do represent a fair reflection of the outcome in some key areas. For example, in the areas of sensitive agricultural products, what was agreed with Mercosur is very close to the conservative scenario.

According to the report, the agreement will have a positive impact on the economies of both the EU and the Mercosur countries, raising wages and contributing to a reduction in inequalities.

The analysis projects a very significant increase of EU exports to Mercosur countries, given the very high level of tariff and non-tariff barriers, which are currently in place.

Examples of predicted increases in EU exports to Mercosur for specific sectors:

  • Textiles and clothing: up to 400%.
  • Pharmaceutical and chemical products: up to 60%.
  • Machinery: up to 100%.
  • Vehicles and vehicle parts: up to 114%

At the same time, the impact on sensitive agri-food sectors in either the conservative or the ambitious scenario the EU would be limited.

The draft report published today also contains a deeper and more comprehensive analysis of the environmental and human rights impact.

Based on the modelling results, combined with data on the emissions intensity of different economic sectors in different countries, the environmental analysis predicts that the agreement will have no impact on global greenhouse gas emissions. This would be the case even without reflecting the possible positive impact on energy efficiency and technology.

The report shows that Brazil, Uruguay and Paraguay all have a cleaner energy mix than the EU. In 2014, renewables accounted for 73% of Brazil’s energy production, 91% for Uruguay and 100% for Paraguay.

As regards deforestation, the experience of the period from 2004 to 2012, when Brazil dramatically decreased the rate of deforestation while agricultural production was expanding, shows that agriculture and meat production are not an obstacle to the protection of forests, provided that sound policies are in place. Thus, the decrease of deforestation will ultimately depend on the adoption and effective enforcement of appropriate environmental policy measures, such as the ones that allowed the decrease of deforestation. In this regard, the report recommends a number of key measures that should be put in place by the Mercosur countries and highlights the importance of the commitment undertaken by Brazil under the trade and sustainable development (TSD) chapter to implement effectively its Paris Agreement pledges, including very substantial ones on deforestation (for example reforesting 12 million hectares by 2030, ending illegal logging, compensating any legal logging and strengthening the forest code).

The report includes a review of the expected impact on human rights and a number of important recommendations to strengthen the institutional framework for the protection of indigenous peoples.

The assessment does not include the current coronavirus pandemic in its modelling. It is clear however, that the agreement fits in the EU’s post-coronavirus recovery strategy. It will help the economic recovery in the EU and Mercosur and it will strengthen the resilience of transatlantic supply chains.

LSE Enterprises will present this draft final report at a civil society dialogue in Brussels on 22 July 2020 offering a possibility to all types of registered stakeholders to express their views in presence of EU negotiators for the EU-Mercosur agreement. The report will then be finalised and published taking account of exchanges with civil society and stakeholders consultations in the EU, Argentina and Brazil.

Read the report