Summarising Proust? How Europe’s trade and sustainability aims are diverging

The European Council’s recent Strategy Statement – setting out priorities for the next five years – said it all. Barely a word about the Green Deal or the existential threat of climate change. Plenty on immigration, defence and competitiveness; nothing on climate change, the biggest issue facing Europe and the planet, our biggest threat to national and global security. The Sound of Silence.

This article analyses the growing disconnect between the EU’s trade policy and its faltering climate and environmental aims. This is a massive subject on which a lot of books and PhDs will be written in years to come, and probably already are. It is a daunting subject, and in tackling it I cannot help but recall that great British Monty Python comedy sketch, where contenders in a TV quiz show are given 15 seconds to summarise the works of Marcel Proust. So here is your author’s attempt as it were to summarise A La Recherche du Temps Perdu in 15 seconds.

First Steps in Sustainability

A good starting point is to ask: when did the EU start to seriously try to mainstream sustainability into its trade policy? There is no one Eureka! moment. It was done progressively… but there were some milestones.

The first was the conclusion of the Uruguay Round in 1994 that created the WTO. The Marrakesh Agreement Preamble referred to members’ determination to – quote –  “ensure optimum use of the world’s resources in accordance with the objective of sustainable development, seeking both to protect and preserve the environment…” end quote. This was the first time that the notion of sustainable trade appears in the WTO. That Agreement of 1994 of course came some time after the 1987 Bruntland report to the UN which included the first agreed definition of Sustainable Development.

A second milestone was the aborted WTO Ministerial meeting in Seattle in 1999, where civil society disrupted and ultimately helped the (willing!) US hosts to sink the Ministerial, in protests over the WTO’s perceived dismissal of labour and human rights, environmental concerns, and developing country needs. A big disconnect in their eyes between trade policy and development policy, the environment or labour rights. Your author recalls being locked in Starbucks to escape the tear gas, with dockers trying to break the windows..

Whether the protestors in Seattle were correct or not, this did lead to a more conscious effort on the part of the EU, and some others, to demonstrate that they took sustainability issues seriously and should take account of them into trade policy. If not, then it would be impossible to launch a new WTO trade round due to growing public opposition.

A third milestone was the EU’s decision, around 2008, to abandon the negotiations of the WTO Doha Round, and instead focus on negotiating bilateral Free Trade Agreements. It is easier in bilateral agreements where the EU has more leverage to push non-trade goals like environment or human rights£.

So the second decade of the 21st century saw growing moves to introduce sustainability commitments in FTAs, starting with the Economic Partnership Agreements with African Regions which had been heavily criticised for being anti-development. It was not plain sailing though. Resistance continued for example as we saw in the opposition to both the CETA Agreement with Canada from 2015 onwards, and the civil society protests that accompanied and may have contributed to the collapse of the EU-US TTIP negotiations in 2016. Both phenomena led the EU to focus from thereon on sustainability in FTAs so as to quieten domestic opposition. This author was part of all these processes.

There was an explicit policy shift from 2016 onwards. Formal EU Communications on Trade moved from the insouciant concept of a “Global Europe” to the concept of “Trade for All” ie inclusiveness.

The Reluctant Gardener

One needs to realise at this point that the Commission had for two decades been reluctant on ideological grounds to use trade agreements to promote the range of non-trade goals. It believed, not without justification, that trade policy and FTAs cannot solve problems whose solution often lies elsewhere. Trade is neither a panacea nor the devil incarnate. FTAs can underwhelm. As a former Commissioner noted “One should render unto Caesar that which is Caesar’s”  and not try to fix all problems in trade agreements.

But pressure from the European public, national parliaments and civil society – which threatened to blow up the wholly benevolent CETA agreement with Canada and block future trade agreements – forced a change in position – towards a progressive increase in and sharpening of sustainable development commitments in FTAs.  This pressure also coincided with growing farmer discontent about the unsustainable production practices of third countries, which some farm lobbies claim gives third countries an unfair competitive advantage, spurring calls to level the playing field. The farmers’ protests in Brussels earlier this year were in part about this.

Greening The Trade Agenda

So the last seven years has seen the inclusion of increasingly far reaching and prescriptive Sustainable Development Chapters in FTAs, setting out the Parties’ commitments to: human rights, (including implementation of an agreed list of treaties), ratification of ILO conventions, environmental and climate treaties including their respective CoP 21 Paris targets for net zero, thereby turning an autonomous, voluntary target under the UN CCC to a binding obligation in a bilateral FTA.

More recently, and following the 2021 UN Food Systems Summit, the EU’s Agreements have included or proposed a chapter on making Food Systems more sustainable.

Taken together, these provision reflect a conscious effort by the EU to use trade policy and agreements to export its sustainability aims and internationalise the Green Deal so as to help accomplish the 2030 Sustainability Development Goals. The EU’s hope being that the prospect of better access to its single market of 450m consumers will incentivise other countries to meet its standards.  

The recently renewed Agreements with Chile and Mexico incorporate these various commitments. More granular commitments on sustainability, as well as a chapter on Food Systems are also being retrofitted into the Canada Agreement via a work programme.

In the controversial EU-Mercosur Agreement, which is blamed for risking Amazon deforestation to produce more beef, soy and sugar, the sustainability commitments are also binding but not subject to dispute settlement or the imposition of trade sanctions if Mercosur fail to comply. The only recourse in such a situation is to cancel the whole agreement – a nuclear option which is hardly possible to envisage.

This is not enough for civil society, some EU governments or the European Parliament. The Commission has been tasked to negotiate with Mercosur an “Additional Protocol” to be tacked on to the Agreement. This Additional Protocol does not reopen the Sustainability Chapter or indeed the market access concessions, but provides precision on how that Chapter should be implemented – for example in terms of detailed work programmes for forest protection, ensuring adequate government funding for environmental actions, systematic consultation with civil society and so on. Whether this will be sufficient to satisfy the European Parliament and sceptical Member States like France remains to be seen. It will be difficult to find a balance between satisfying European climate ambitions and acceptability to the sceptical Mercosur side. And a new, possibly less trade-friendly European Parliament after the summer may not be convinced that it is other than greenwashing. The Institutions will look at this Agreement and the Additional Protocol only following the new Parliament and the new Commission, so not before early 2025.

The apotheosis of Sustainability in a Free Trade Agreement is the recently signed EU-New Zealand FTA, now entering into force. In addition to standard chapters on sanitary and phytosanitary measures it has provisions on cooperation on animal welfare, and a chapter on Sustainable Food Systems. This sets out sharing best practices to promote organic and regenerative agriculture, sustainable pesticide use, measures to reduce the environmental impact of food production and processing, transport, retail and consumption; the promotion of healthy and nutritious diets, reduction of food loss and waste in line with SDG 17.3, and reducing the carbon footprint of consumption.

The Chapter is hedged around with caveats such as ‘consistent with national laws’ or making it clear that the Parties are not required to change their regulations to fulfil these cooperation goals.

Most important, the EU-New Zealand FTA has an ambitious and legally binding Chapter on Trade and Sustainable Development, setting out the Parties’ commitments to implement a range of international conventions, to exchange information and best practices, and to cooperate and not lower standards so as to gain a competitive trade advantage. The Chapter encompasses human rights, gender equality, indigenous rights, environment and climate commitments (including implementing respective Nationally Determined Contributions under Paris), promotion of environmental goods and services including use of emissions trading schemes (NZ was the first to apply ETS to the livestock sector), reduction of fossil fuel subsidies, implementing the Convention on Biological Diversity and CITES, forest conservation and management, sustainable management of fisheries, and Corporate Social Responsibility including labelling schemes.

Unsurprisingly this Agreement has been claimed as the gold standard for sustainable FTAs and the template for future agreements. Even the curmudgeonly European Parliament Committee on Agriculture welcomed it because it effectively exports European standards to New Zealand and ensures a level playing field between New Zealand and European producers. The concept of the “clause miroir” is fulfilled!

Wishful Thinking

But can these high level standards be applied to future agreements under negotiation. Is it indeed a ratchet, the benchmark for Mercosur, for India, for Indonesia, for Thailand, even for Australia?

I would argue that it is not. The EU’s trading partners will object to the level of ambition and to the binding nature of such commitments, for a range of reasons.

First of all, some developing country partners may worry that they simply cannot meet these high standards, and will not want ultimately to face trade sanctions for inability to comply. Indonesia on sustainable palm oil production for example. They are also watching closely the current tense discussions between the EU and Vietnam over Vietnam’s alleged non-compliance with human rights and labour rights in the framework of that bilateral FTA. This is particularly true of India, Indonesia and Thailand.

Secondly some partners simply may disagree in substance with certain of the EU’s proposed standards. They may not share the EU’s views on gender equality or animal welfare or a host of other obligations. They may have reached a different calculus on the relative importance of certain environment or labour commitments compared to poverty reduction. Some weeks ago in an interview for the Financial Times India’s trade minister Piyush Goyal argued that environmental issues should not be imported into trade policies, for example in the framework of the WTO. He applies the same logic to FTAs.

Thirdly some partners may object in principle to what they regard as excessive intrusion into national sovereignty. Many countries historically object to the attempts by the north’ to export their values to the global south’. This is particularly sensitive for India for whom the EU  agenda is easily painted as an intrusion into India’s sovereignty and autonomy, raising not only the spectre of green protectionism, but of regulatory imperialism. With elections in a few months’ time India will wish to avoid a debate on “sustainability with neocolonial undertones”.

And lastly some countries – India and Australia again come to mind – may find that the commitments are on balance too onerous in comparison to the modest trade concessions offered in return. In the case of Australia, negotiations with whom collapsed last autumn, Australia seems to have concluded that the EU offer on beef (around 30’000 tons) and sugar (20’000 tons) in each case well under 1 percent of European consumption, did not compensate for the cost of ensuring sustainable beef production on open pastures, stringent animal welfare requirements, or sustainable sugar cane production certified by some costly international scheme.

Green Deal Means No Deal?

This opposition creates the risk that FTA negotiations will not be concluded. EU partners will simply walk away, as Australia did. The EU thus not only fails to secure some economically useful markets for its farmers and workers (and car producers and legal services…), it will also have failed to export its Green Deal, or incentivise other countries to reach the SDGs and their Paris targets, and produce more sustainably.

And given that the objective of carbon neutrality requires serious action by all major emitters, and not just the EU – which represents less than 10% of GHG emissions and diminishing – then the existential objectives surrounding climate action risk failure. So it is a lose-lose scenario for the EU.

The EU will therefore have to modify its level of ambition to get other countries on board. The difficult balance will be to lessen the ambition – without as it were throwing out the baby with the bathwater – without abandoning these worthy, indeed essential goals.

The question for policy makers and negotiators is how that balance can be struck – and how should it look? Is it simply granting longer transitional periods for adjustment? or should commitments that carry a big economic or social cost be trimmed or discarded? Can equivalence, as opposed to taking on identical commitments be pursued more frequently?  Can developing countries, or countries with a negligible environmental footprint, or smallholders be exempted?

The Enemy Within?

The relationship between the EU’s agrifood trade and sustainability goals has become complicated by the EU’s introducing or proposing, parallel to negotiations, a suite of sustainability laws applicable to both imports and domestic products:  CBAM, a Regulation on Corporate Due Diligence (adopted just last week by the European Parliament having been watered down significantly), a Regulation prohibiting forced labour (just now finalised in the European Parliament), and most recently a Regulation forbidding the marketing in the EU of goods associated with deforestation, such as beef, soya, timber, palm oil, rubber, cocoa and their derivatives. While well intentioned (and necessary to tackle global or transboundary problems), these measures are seen by a large coalition of developing countries less as a legitimate environmental policy but rather as a Trojan horse to level the playing field and maintain the competitiveness of Europe’s companies and farmers – who complain that they face stringent environmental regulations from which “dirty” imports are exempt. Several countries are threatening WTO dispute settlement over these new laws, or at least their implementation.

These measures are perceived as impeding market access. What value a concession on beef or wood, if the product cannot be marketed in Europe in the first place due to its environmental footprint? A case of giving with one hand and taking away with the other?

So we risk a paradoxical, even illogical situation whereby negotiations with several emerging economies might be stymied over an issue where the partners not only share the same fundamental global goals, or should do…but where the logic of their cooperation in an increasingly unstable, divided world is more vital than ever.

 In the case of India I am reminded of India’s Nobel prize winning thinker Amartya Sen, who in his work “The Argumentative Indian” described India’s long tradition of dialectics, self-questioning and above all its capacious tolerance for others’ views. If EU-India, EU-Thailand, EU-Mercosur and even the Australia FTA are to pass the finishing line, then it is time for Europe to self-reflect urgently on what is realistically possible, try to see the world from another perspective, and adjust its position downwards. It is time, to paraphrase Sen, for an Argumentative European. To his credit the EU’s Trade Commissioner Valdis Dombrovskis in a recent interview recognised the need to reassess the EU’s green agenda in its trade agreements and reduce ambition.

If Not Now, When?

A third dimension that complicates the EU’s pursuit of sustainability in trade agreements has been revealed by recent protests by farmers across Europe. Farmers are protesting broadly about three things. First the poor returns they get compared to processors and retailers who enjoy most of the value addition. This is a legitimate concern.

Secondly, the cost of complying with ever more stringent environmental regulations – be it setting aside land for biodiversity, bans on the use of certain pesticides, reduction of nitrates (which affected recent elections in the Netherlands), costly animal welfare requirements, reduction of fertiliser use etc. These do represent additional costs.

And third, the threat that cheap imports – Ukrainian poultry, sugar and wheat today, Mercosur beef, poultry, lamb tomorrow – that will displace more expensive domestic production.

 The two last complaints are closely linked. A major complaint of farmers is that imports are undercutting them because other countries – Ukraine, Brazil etc – do not face the EU’s high environmental and other requirements so can produce more cheaply. Unfair competition in their view. This is behind the call by farmer groups, many NGOs and even the President of the French Republic for a clause miroir or “mirror clause” in future trade agreements ie a requirement that imports must be produced exactly in the same way and to the same standards as European products.

This is a complex subject on which I have written separately. For now three basic points. First, this is not about human or plant or animal health and safety. Imported products must always meet EU safety rules, whether traded through an FTA or not, this is never negotiable.

Second point, under WTO law you cannot ban a product simply because you dislike the way it is produced, if the production method does not affect the final product. To allow that would risk to  slide rapidly into protectionism.

Third point, there are some limited exceptions to this in the WTO. In carefully controlled circumstances one CAN ban imports along with a domestic prohibition if their method of production damages the global environment, if it depletes exhaustable natural resources: that is the rationale for the Deforestation Regulation. And you can ban imports on “public morals” grounds (again coupled with a domestic ban). Saudi Arabia bans the import of pork and alcohol; the EU bans the import of dog, cat and seal fur; and one can envisage the future EU regulation banning caging for pigs etc applying to imports too due to widespread public opposition to this practice. What one cannot do is impose these import bans simply on the grounds of unfair competition or levelling the playing field. Says who?

The trade and agricultural communities must continue to debate these issues so as to promote good quality, evidence-based policy making. The debate will raise a number of questions about the relationship between sustainability and agricultural trade and competitiveness. Let us end with two examples of the difficulties involved in analysing measures from the sustainability perspective..

Whose Sustainability?

The first is the need for objectivity and facts on whether, and to what extent, production methods in third countries are indeed unsustainable and should be stopped, for example by prohibiting imports. Take the case of Brazilian beef and its link to Amazon or Cerrado deforestation. The EU’s own Sustainable Impact Assessment of the EU-Mercosur Agreement  concluded that the beef concession given to Mercosur would have negligible impact on deforestation as the cattle were reared and slaughtered without needing to clear forests (also for the soy they were fed with). A smaller study commissioned by the Agriculture DG four years ago reached similar conclusions.

So in what way is the Brazilian beef unsustainable?  Do the transportation costs lead to undue GHG emissions?  Again probably not. Brazilian beef comes via marine transport which has a very low environmental footprint. And is the Brazilian beef – by its efficiency of production –  consuming fewer resources and inputs and producing fewer emissions than European beef? It may well be the case. So at least from an environmental or climate perspective imported beef may be no less sustainable than European beef production. And so more trade may not ipso facto be bad for sustainability. But even if Brazil produces sustainably for Europe does it not produce unsustainably for its China market, whose consumers do not care about the Amazon being cut down? Is that our business?

But then let us put forward some more awkward questions. Is it sustainable in social and economic terms to allow imports from Brazil to hasten the decline of beef production in Europe and the abandoning of farms and bankruptcy of farmers in regions where nothing else can be done? Because Sustainability is not just about environment, it has two other pillars, the social and economic. And will the volumes coming in from Brazil (up to 99’000 tons) actually have that effect?

But then whose farmers should we care about? Farmers in developing countries or farmers in Europe? Brazilian farmers will argue that it is in line with the EU’s sustainability claims to reduce poverty in the developing world by giving them a living.

A second and equally topical example, the ban on the use of the very effective but possibly carcinogenic herbicide glyphosate used in the production of maize, soya, wheat and oats. Ban its use in Europe on environmental grounds – it can affect soil health – or due to risk to human health? Fine! Banning its use on imports is less defensible as the imports do not affect the health of Europeans and is it the EU’s concern if Brazil or the US deplete their soils or affect their farmers’ health when producing maize and soya?  

And if glyphosate makes the imported maize and soya cheaper is that not good news for our pork production industry which depends on cheap imported maize and soya which we cannot produce cheaply or at scale in Europe?  So there is a potential three way conflict between the environmental, social and economic aspects of sustainability. 

It gets more complicated still. If glyphosate is banned across the board in Europe, it is good for Europe’s environment, soil, biodiversity perhaps, but less good for producers of wheat and oats whose production costs will go up, absent a better alternative herbicide. They might go out of business, unable to compete with cheaper Ukrainian or South American imports.

This is why farmers in Europe are protesting against stringent environment and pesticide rules that push up their costs. Again, Europe faces a trade-off between the different pillars of sustainability – and for the time being the environmental pillar is being severely watered-down in the run up to European and other elections in Europee. The last four month has seen the withdrawal of the Commission’s proposed Regulation on Sustainable Pesticide use, the watering down of the law on Restoration of Forests, the dropping of the proposed Caging Regulation, the relaxation of several environmental requirements under the current Common Agricultural Policy, the abandonment of organic farming targets or a sustainability labelling scheme, and the abandoning of efforts to agree a new Directive on Corporate Due Diligence across the supply chain. This is quite a hall of shame!

In The Long Run We Are All Dead

But it is even more complicated than that.  The longer the delay to these environmental and other laws the more this will result in depleted and climate vulnerable soils, water and air, reduced biodiversity and pollinators, increased greenhouse gas emissions, and greater vulnerability to extreme weather events  – we see it already! – all of  which will in turn in the long term reduce the health and productivity of Europe’s farm land, and threaten food security.  Maynard Keynes famously said that “in the long term we are all dead”. True, but we do not want to die prematurely. Europe’s farmers, in trying to slow down climate action, are cutting off the branch they are sitting on.

The recent backtracking on environmental, climate and animal welfare legislation also carries international consquences. It weakens considerably Europe’s credibility towards third countries whenever Europe urges or tries to coerce them via FTAs to improve the sustainability of their own agricultural production and trade. Europe cannot expect third countries to sign on to stringent sustainability requirements if it is not leading by example. It certainly undermines Europe’s arguments in forthcoming WTO dispute settlement cases that one can expect from developing countries aggrieved by new environment-based barriers (green protectionism in their view) to their exports.

This article raises as many questions as it gives answers. It implies a pragmatic way forward for the EU’s future FTAs. It poses several questions on the management of the trade and sustainability agenda more broadly. In which circumstances is there a conflict or at least potential contradiction between the different pillars of sustainability? Whose sustainability are we talking about? Europe’s or the developing world’s? Which agricultural trade policies adopted by the EU are genuinely sustainable? And what policy changes are needed to maximise sustainability while supporting both trade and the interests and long term livelihoods of European producers?  One can only hope that in the year ahead – post EP  elections and under a new European Commission – some of these questions will be seriously debated and cogent answers found.

Author’s note: This article is based on a lecture given at Maastricht University in the framework of a Horizon Europe Project “Making Agricultural Trade Sustainable”.

John A Clarke
John A Clarke
Former director of international relations, European Commission, and former head of the EU Delegation to the WTO and UN in Geneva