Brazil's New Lula Government Is an Opportunity for a New Trade Model

Change is afoot in Latin America. The region—battered by COVID, inequality and environmental crisis—is seeing a second wave of progressive governments elected, most significantly with the recent victory of President Luiz Inácio Lula da Silva in Brazil. This is a unique opportunity for us to build a new trade model that puts people and the planet first. Stopping the harmful EU-Mercosur trade deal is a good place to start.

Now Brazil is back, the priority is people over profit

In his election victory speech Lula outlined some of the government’s priorities. The focus was on fighting hunger and poverty, while also repositioning Brazil as a major player in regional and international affairs. Lula committed to re-negotiating the EU-Mercosur trade deal. He stated, “Brazil is back. We are back to help build a peaceful world order based on dialogue and multilateralism.” This will give a much needed boost to global human rights, climate action and diplomacy that have been under threat from the rising far right.

Initiatives from Mexico, Argentina, Chile and Colombia indicate that the region as a whole is keen to discuss regional integration as well as the strategic economic and political foundations on which to base our relationship with the world.

Timing is everything. The world’s vulnerabilities have been laid bare by the COVID-19 pandemic and further heightened by the impact of the war in Europe. A war which is now taking place in key countries for the supply of energy and raw materials for the agro-industry. This alone should inspire an interrogation of international economic relations and the dominance of transnational corporations in determining trade and investment flows and national production patterns.

This is a unique opportunity for us to build a new trade model that puts people and the planet first. Stopping the harmful EU-Mercosur trade deal is a good place to start.

While some politicians are trying to use Lula’s election as a reason to accelerate the ratification of the deal, Friends of the Earth International and our allies around the world know that now is the time to prioritise social needs, such as access to medicines, healthy food and the environment. It is time to confront the obsolete, neo-colonial and neo-liberal trade model, driven by the supply and market demands of European companies.

The winners and losers in the harmful EU-Mercosur trade deal

The EU-Mercosur deal is a powerful symbol of the failed old trade model. In negotiation for over 20 years between Brazil, Argentina, Paraguay, and Uruguay—known collectively as Mercosur—and the European Union, the trade agreement is beset by disagreements from both regions. It contradicts many progressive governments’ policies and election mandates. It would restrict reindustrialisation policies, undermine public procurement and open up the free trade in harmful products, thereby accelerating deforestation, climate change and human rights violations.

The treaty liberalises trade tariffs, which will affect over 90% of the Mercosur goods portfolio. The London Schools of Economics sustainability impact assessment sees the beef, soya, derivatives, paper and beverages sectors as Mercosur’s economic winners and the vehicle, chemical, pharmaceutical and industrial sectors as the losers. Mercosur exports of ethanol from sugarcane production will also increase considerably. In Brazil the ethanol sector relies on huge concentrations of land, intensive agrochemicals and poor working conditions. This colonial legacy severely impacts the biomes and Indigenous Peoples of Mata Atlantica, Cerrado and Pantanal biomes. The trade deal also looks set to impact negatively on Uruguay’s dairy and beverage sectors.

Far from resolving environmental concerns, this agreement will herald further expansion of the agricultural and extractive sectors, such as the energy mining sector, with inevitable impacts on deforestation, land grabbing, biodiversity, water, and food quality.

It would also scupper the chance for Mercosur countries to develop public policies to value-added manufacturing and increase economic diversity, a particular problem for the newly elected Brazilian government. The EU has ruled out protection clauses for developing industrial sectors and the transfer of technology in investments. The agreement would open up state procurement, depriving countries of an important social and industrial promotion policy, thereby providing highly competitive EU companies with an extremely attractive market.

Far from resolving environmental concerns, this agreement will herald further expansion of the agricultural and extractive sectors, such as the energy mining sector, with inevitable impacts on deforestation, land grabbing, biodiversity, water, and food quality. This in turn results in increased violence against and displacement of the collective rights of communities. According to the report prepared by the Left in the European Parliament (GUE), trade with the European Union is directly linked to 120,000 hectares of deforestation in Mercosur countries. That is one soccer field of deforestation every three minutes.

The EU-Mercosur deal expands the private protection of intellectual property—increasing the protection provided for by WTO obligations. This will likely push up the cost of medicines while undermining technology transfer. The corporate-friendly text on the patenting of seeds and plant varieties reduces farmers’ rights to seeds and undermines food sovereignty.

A new trade model based on democracy and justice

Lula has repeatedly committed to reopening EU-Mercosur negotiations and is urging cohesion within the Mercosur block, in the face of threats by Uruguay to go their own way on trade policy. On the EU's side some are racing to conclude the agreement as quickly as possible, while other governments want the deal stalled. Yet the new Brazilian government's victory must set the scene for an in-depth evaluation of the treaty’s impacts, not just a whitewashing of some of its more delicate elements. The new balance of power within Mercosur underscores the need for profound changes, even in elements that form the backbone of the agreement, such as the space for industrial policy in the region. Lula is calling for renegotiation because the treaty does not respect Brazil's development needs.

The EU’s proposal to improve the deal through a new protocol or environmental annex and other false solutions does not address the core unsustainability of the agreement. An example of a real solution would be to end the export of European pesticide agro-toxins (produced mainly by BASF and Bayer-Monsanto). Ironically these pesticides - a key part of the agribusiness global chain - are banned from use in Europe, but are exported for use in Mercosur countries' agricultural sectors, the produce of which is then exported to the EU.

New progressive governments provide an opportunity for the Mercosur region to broadly discuss some of the treaty's components that may have more harmful impacts on our development from a social and environmental justice perspective. It also provides us with the opportunity to discuss the trade models needed today for the region’s peoples and countries.