Customer Logins

Obtain the data you need to make the most informed decisions by accessing our extensive portfolio of information, analytics, and expertise. Sign in to the product or service center of your choice.

Customer Logins

Austria reiterates EU trade deal veto over burning of Amazon in Brazil

16 March 2021 Cristina Brooks

Austria's governing coalition put another nail in the coffin of a European-South American free trade agreement last week, citing the climate impacts of the burning of the Amazon rainforest.

The coalition, comprising the left-wing Green party led by Chancellor Werner Kogler and the conservative Austrian People's Party (EPP) led by Sebastian Kurz, decided to retain the previous government's rejection of the deal, according to a letter to the head of the European Commission on 4 March.

The Austrian chancellor sent the letter to the current president of the Council of the EU, Portuguese Prime Minister António Costa, who wanted to conclude the Mercosur trade deal within his six-month term.

In the letter, Kogler warned that Austria would not stand for attempts to "bypass any resistance" by splitting the deal up or adding an annex to the agreement.

"The extensive fires in the Amazon region, in combination with an increase of intensive agro-industrial mode of agricultural production in Mercosur countries, will exacerbate global warming," he said.

The letter affirmed the country's existing stance. The EU Sub Committee of the Austrian Parliament's National Council had passed a motion to reject the deal last September.

Kogler implied that adding to industrial build-up through free trade conflicted with the EU's Paris Agreement goals, which are set to be put into law through the EU's Green Deal regulatory package this year. "We must seize this opportunity to use the Green Deal to advance international climate protection and give new impetus to the Paris Agreement. Signing the Mercosur trade agreement would thwart such progress," he said in the letter.

The trade agreement aims to remove barriers, including tariffs on car parts, machinery, chemicals, and pharmaceuticals, even though the EU is already Mercosur countries' biggest trading partner. The pact, initially discussed in 2000 and agreed in principle in 2019, seek to boost trade between the EU and Brazil, Argentina, Uruguay, and Paraguay, the four full member states of the Mercosur trade bloc.

Most of the Amazon rainforest lies in Brazil. The largest number of fires in Brazil are in the Amazon and Cerrado regions, according to an IHS Markit report on deforestation.

Brazil's environmental agencies have been dismantled by President Jair Bolsonaro, who has allowed farmers to light fires in the Amazon to convert rainforest into cattle pasture and soy farms, according to Greenpeace. Last year, dozens of international financial groups and European supermarkets threatened Brazil's companies with divestment and meat boycotts over the issue.

Industries in Austria hold opposing views on the trade deal. "The Mercosur agreement would offer additional opportunities for Austrian manufacturing firms, due to the reduction in tariff- and non-tariff barriers for their products. On the other side, liberalizations with respect to agricultural imports have been viewed as potentially being harmful for Austrian farmers," Harald Oberhofer, deputy head of the Institute for International Economics in Vienna, told IHS Markit.

The competitive threat to Austrian farmers is already on the rise with the departure from the EU of the UK, a major market for European agricultural goods. "As a result, competition within the common market will intensify and additional duty-free imports from third countries are viewed with skepticism," said Oberhofer.

On the other hand, a system to guarantee product origins known as Geographical Indications proposed in the draft deal would help preserve markets for the producers of Europe's high-quality, costly agricultural goods, the EC said in a fact sheet.

No resolution in sight

Austria's resolution is just one hurdle for a deal that must have the approval of the European Parliament before ratification by the national parliaments of all 27 EU member states. Perhaps the largest barrier Mercosur faces is from the EU Parliament itself, which threatened not to ratify Mercosur unless Paris Agreement-related rules are implemented in a text adopted on 7 October 2020.

The European Council President in 2019, Donald Tusk, said it was hard to imagine the trade deal passing while the Brazilian government allowed the destruction of "the green lungs of planet Earth."

While governments in Germany and former EU member the UK supported the deal, those in France, Ireland, and Luxembourg were concerned about deforestation. Ireland is set to publish a report that will outline its decision, addressing concerns about deforestation and threats to Ireland's beef industry.

French President Emmanuel Macron accused Brazil's Bolsanaro of lying about the destruction of the Amazon and lacking commitment to climate action. He has said he would not support the deal since 2019, according to a French government statement.

Not only the ruling Green Party and its coalition partner, but all Austrian parties represented in Parliament except for liberal party NAO oppose Mercosur, said Oberhofer. The center-left opposition party SPÖ supported the government's 2019 decision, citing environmental as well as consumer and human rights grounds. The latest move was underpinned by the left-wing Greens who gained power for the first time in January — with climate change climbing up the agenda, promising to produce 100% of electricity from renewable sources by 2030.

The Green Party in the European Parliament praised the Austrian government's decision while raising concerns over competition for eco-friendly European farmers in an 8 March statement. "This agreement will massively contribute to deforestation, the globalization of junk food, animal suffering, and the disappearance of farmers in Latin America and Europe. European farmers will have to compete with an intensive agricultural model in the Mercosur countries where many pesticides banned in the EU are allowed," said the European Parliament's Green Party Shadow Trade Rapporteur Yannick Jadot.

The climate risks of failing to tie up financial and climate policy are becoming a hot topic for discussion. The United Nations Environment Programme (UNEP) published a report last week which found states' COVID-19 financial recovery programs largely failed to back their stated climate goals.

Posted 16 March 2021 by Cristina Brooks, Senior Journalist, Climate & Sustainability, IHS Markit

Explore

Follow Us

Filter Sort