Country’s strategy focuses on reducing costs for national exporters to comply with Europe’s new environmental requirements
Tatiana Prazeres — Foto: Carol Carquejeiro/Valor
The Brazilian government believes Mercosur may present a formal response to the European Union’s (EU) side letter in July to advance the trade agreement between the two parties. One opportunity will be the summit between the EU and the Community of Latin American and Caribbean States (CELAC), scheduled for next month in Belgium.
The Brazilian strategy, which has yet to be agreed with the other Mercosur members (Argentina, Paraguay, and Uruguay), is to try to reduce the cost to national exporters of complying with the new European environmental requirements. This would be done without abandoning the possibility of challenging the new regulations at the World Trade Organization (WTO).
“In addition to discussing the aspects contained in the document they presented [in March], we also have our demands,” said Tatiana Prazeres, Secretary of Foreign Trade (Secex) of the Ministry of Development, Industry, Trade and Services (Mdic), in an interview to Valor on Friday.
On the same day, alongside French President Emmanuel Macron, President Luiz Inácio Lula da Silva made several criticisms of the EU’s position in the negotiations.
“I am desperate to reach an agreement, but the side letter that the EU has made may allow an agreement to be reached,” Mr. Lula said in Paris. “It is not possible that this side letter threatens our strategic partnership. How are we going to resolve this?”
A face-to-face meeting scheduled for this week in Buenos Aires between the EU’s chief negotiator Rupert Schlegelmilch and Mercosur members was canceled and will be held online.
“What the Europeans have done is to indicate that, after the political conclusion of the negotiations [in 2019], they needed additional commitments from Mercosur in the environmental field,” said the head of Secex.
For Ms. Prazeres, it is also “natural” that the Brazilian government, in addition to evaluating the EU’s new demands, “analyzes the package” under the interests of the Lula administration.
For Brazil, two factors need to be “revisited” in the negotiations: the government procurement policies and the balance of trade concessions between the two blocs.
In the case of procurement, the government considers it “an important instrument of public policy, and even more so of industrial policy,” including for small-sized companies. In terms of trade concessions, the Brazilian criticism is that “after the 2019 agreement, the EU adopted unilateral measures that affect our expectation of access to the European market.”
“Mercosur will reduce import taxes based [on the quid pro quo] that we will have access to the market of the European Union countries,” she said.
According to the Secex secretary, “this expectation may be partially frustrated” because “the legislation that has been adopted and that will continue to be adopted is based on the European view that it is necessary to restrict trade for environmental reasons.”
As an example, Ms. Prazeres cited the anti-deforestation law, which “could impede access to the European market for certain commodities” if they come from deforested areas after 2021. These include beef, coffee, cocoa, timber, and furniture. Another example is the application of a surcharge linked to the carbon footprint.
From then on, Brazil decided to “mirror the EU’s approach” and reopen discussions on government procurement and trade concessions. “The Europeans cannot give with one hand and take away with the other,” said Ms. Prazeres.
However, she recalls that “we are talking about an agreement between Mercosur and the EU, not between Brazil and the EU.” The current phase, according to her, is “the definition within the Brazilian government on the issue. So, we still have to coordinate with the other countries in the region.”
In any case, according to Ms. Prazeres, “the Mercosur members are in contact with us, they know the aspects that seem sensitive to us.”
More than meeting the requirements of the EU itself, what worries the private sector, she said, “is the cost of proving that they are complying with this legislation.”
“Whoever plants coffee in an area that has not been deforested will have to prove it,” they say. “We know that the Europeans are not going to change their minds; after all, the European Parliament passed this. What we believe is that there is a way to reduce compliance costs for Brazilian exporters.”
One possibility, in this case, would be the adoption of “mechanisms that recognize and value the systems that Brazil has for monitoring deforestation. We do believe that it is possible to reach a balanced agreement,” she said.
But Ms. Prazeres also points out that there are “other possible responses to the unilateral measures adopted by the Europeans,” adding that some of them are not “compatible with the rules” of the WTO.
A second priority of Secex in the Lula administration is that Brazil takes advantage of its one-year presidency of the G-20, starting next December 1st, to improve its stand in the discussions on trade and environmental sustainability.
According to her, the country needs to use “concrete results,” such as the deforestation reduction and a “cleaner” energy mix than that of other nations, to guide the debate and spread “the Brazilian brand and products abroad.”
“We are on the defensive on this agenda,” said Ms. Prazeres. “It doesn’t make sense that we can’t capitalize on our efforts.” Among the measures that can be adopted globally are common “parameters” for carbon taxes.
*Por Estevão Taiar, Lu Aiko Otta — Brasília
Source: Valor International