Spotlight on Brazil, trade and environment: Can the U.S. pressure Brazil without a trade deal?

7/3/2021 Spotlight on Brazil, trade and environment: Can the U.S. pressure Brazil without a trade deal? | 

 

Renata Amaral, Adjunct Professor at Washington College of Law and Founder of Women Inside Trade 

Brazil’s image on climate and environment issues is not in its best shape. Especially abroad. Concerns with Brazil’s environmental and climate policies are likely to affect the country’s interests in the realm of trade. Environmental concerns are among the top challenges for the ratification of the EU-Mercosur trade deal, and they also pose challenges in the advancement of negotiations with other important trade partners, including the United States (U.S.). President Biden has positioned environment and climate at the center of his foreign policy FOLLOW ECIPE     

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7/3/2021 Spotlight on Brazil, trade and environment: Can the U.S. pressure Brazil without a trade deal? | 

agenda, and his administration has repeatedly expressed concerns with Brazil’s policies, 

particularly regarding deforestation rates. 

The dynamics in Latin America viewed from the North: Mercosur and Brazil 

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Unlike Trump, President Biden has a significant history with, and a comprehensive understanding of, Latin America. He traveled to the region sixteen times as vice president under the Obama administration. Biden went to Brazil alone four times and reportedly maintained a good relationship with former president Rousseff. 

Overall, the main elements of the new administration’s agenda with Latin America are likely to remain the same, that is a continued focus on migration, rule of law, governance, counter narcotics, and the crisis in Venezuela. What is new is the concern surrounding the advancement of China in the region, increasing populism and the social and economic impact of the pandemic. The idea of reviving hemispheric trade talks should also be on the table at some point, although this is not a priority for Washington right now, and probably 

won’t be for many months. 

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It is worth noting that up to now, the current administration is prioritizing a bilateral approach to Latin America countries, including Mercosur countries. Indeed, just a couple of months ago, the Special Assistant to the President for the Western Hemisphere, Juan S. Gonzalez, visited Colombia, Argentina and Uruguay. Brazil was not included in the agenda. 

With regards to Brazil, besides the pandemic, the main topic in the agenda are environment and climate change-related topics. Biden and his Special Envoy for Climate, John Kerry, have expressed strong concerns related to how Brazil is dealing with the environment and climate, and have stated on several occasions that Brazil has a responsibility to lead by example. 

Climate and Environment: Biden’s top priorities and Brazil 

A few days after his inauguration, on January 27, President Biden issued an Executive Order entitled “Tackling the Climate Crisis at Home and Abroad”. Recognizing that the U.S. and the world face a profound climate crisis, Biden has put the subject at the center of the U.S. foreign policy and national security. 

Among the highest international environmental priorities, the Executive Order sets out a climate strategy for the Amazon, which serves as a central element of a U.S. strategy toward FOLLOW ECIPE     

South America. The Amazon has a pivotal role in any global solution to the climate crisis, 

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7/3/2021 Spotlight on Brazil, trade and environment: Can the U.S. pressure Brazil without a trade deal? | 

and although it is spread throughout the territory of nine countries, namely Brazil, Bolivia,  

Peru, Colombia, Ecuador, Venezuela, Guyana, Suriname, and French Guiana, 60% of the rainforest is in Brazil. And that is exactly the reason why Brazil plays such a relevant role in these discussions. 

In April 2021, as laid out in that same Executive Order, Biden hosted the first Leaders’ Climate Summit aimed at raising climate ambition and making a positive contribution to the 26th United Nations Climate Change Conference of the Parties (COP26). In his opening statement, Biden informed participants that the U.S. will halve its greenhouse gas emissions within this decade, noting that countries that take decisive action now will reap the economic benefits of a clean energy future. To enshrine this commitment, the U.S. submitted a new “nationally determined contribution” (NDC) under the Paris Agreement setting an economy-wide emissions target of a 50-52% reduction below 2005 levels in 2030. 

One of the most awaited commitments of the Summit were the ones presented by the President of Brazil. During the Leaders’ Summit, Brazil committed to achieve net zero by 2050, end illegal deforestation by 2030, and double funding for deforestation enforcement. 

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A few days after the Summit, John Kerry affirmed in an interview that U.S. will follow closely the measures taken by the Brazilian government to fulfil promises with concrete results. Kerry also mentioned that the U.S. expects to see a significant decrease on deforestation before the end of this year. 

As expected, since the change in the administration, the U.S. is and will keep pushing Brazil in international forums on its environmental policies. And the U.S. is not alone to pressure. The trade agreement between the European Union and Mercosur has been facing critiques in its ratification process due to deforestation in the region, among other environment and climate-related concerns. 

Pressure from other international actors: EU-Mercosur 

The EU-Mercosur deal needs the approval of all EU countries, the four Latin American states (Argentina, Brazil, Uruguay, and Paraguay), and the European Parliament. However, one of the arguments for the non-ratification from the side of some EU member States is that the EU’s trade policy aims to fully enforce sustainable development clauses and give them teeth. 

It is interesting to note that, (i) while the main complaints are directed at Brazil and (ii) there is indeed room for criticism on the current Brazilian policies on climate and environment, FOLLOW ECIPE     

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the EU-Mercosur trade deal includes the most advanced sustainable development provisions.  

That means that an effective implementation of the agreement would force Brazil (and the other Mercosur countries) to observe sustainable development provisions. Moreover, the agreement contains enforceable commitments on environmental protection through a dedicated dispute settlement mechanism that includes an active role for civil society organizations and a trigger mechanism to launch formal government consultations in case of non-respect of any of the provisions. 

As argued on June 28, 2021 on a statement signed by a coalition of 13 European business associations, representing different European sectors, the EU-Mercosur association agreement – the largest and most ambitious trade agreement ever negotiated by both sides – contains sustainable development provisions that will foster partnership, help mitigate climate change and bind both sides to effectively implement the Paris Agreement. 

Trade Deals and Environment agenda: Can the U.S. pressure Brazil? 

The U.S. and Brazil have longstanding robust political and economic relations. As the two 

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largest democracies and economies in the Western Hemisphere, both countries have a partnership that is rooted in a shared commitment to expand economic growth and prosperity; promote international peace, security, and respect for human rights; and strengthen defense and security cooperation. 

In October 2020, Brazil and the U.S. signed a Protocol relating to Trade Rules and Transparency. This Protocol updates the 2011 Agreement on Trade and Economic Cooperation (ATEC) with three new annexes comprising provisions on Customs Administration and Trade Facilitation, Good Regulatory Practices, and Anticorruption. As outlined in the joint statement, the ATEC allows both countries to engage on a wide range of issues related to trade and investment. 

The Protocol signed by the former President Trump and President Bolsonaro was viewed in Brazil as the first step to an expanded and broad trade deal. But then the administration changed, and with it, policy priorities, resulting in a large and ongoing adjustments to the bilateral relationship. 

Considering the well-known climate and environment priorities of the current U.S. administration, it is natural to wonder whether Biden will condition the negotiations of an eventual expanded trade deal with Brazil based on the country’s environment and climate FOLLOW ECIPE     

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7/3/2021 Spotlight on Brazil, trade and environment: Can the U.S. pressure Brazil without a trade deal? | 

policies. The answer is probably yes. And it is likely that the U.S. would be successful in  

pressuring Brazil in that regard. The problem is that the U.S. is not aiming to engage in any new trade negotiations, and even if it was, it is very unlikely that the country would be a priority – despite the fact that Brazil is the second largest economy of the region and the destination of huge sums of American foreign direct investment. 

And without a trade deal, can Biden successfully pressure Brazil on the climate and environment agenda? The answer is also yes, and there are signs that – at least in the discourse – Brazil is listening. In fact, after the commitments announced at the Leaders’ Summit, Brazil needs to present a plan to achieve the goals of emissions neutrality by 2050. With that commitment publicly made, the government will in the coming months have to negotiate policy actions together with the private sector, academia, NGOs and all stakeholders involved in shaping the environment. 

Last but not least, it is important to mention that the recent fall of the now former controversial environment minister in Brazil, Ricardo Salles, could potentially push Brazil to make new and positive contributions at the Summit. Moreover, Salles’s downfall can also improve the bilateral relations between Brazil and its trading partners that are concerned with the country’s climate and environmental policies.