Monday, December 4, 2023

With mirror clauses, Brussels can keep its environmental promises

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When the EU proposed its anti-deforestation law in November, Brussels lawmakers were expecting pushback from a number of key trading partners. Expectedly, Brazil hit back at the EU, accusing the bloc of “protectionism” by employing environmental regulation as a pretext to prevent Brazilian agricultural products from entering the European market. As a major exporter of beef to the EU, Brazil’s ire is no surprise. After all, the law sets mandatory due diligence rules for companies that place six agricultural products – beef, soy, palm oil, coffee, cacao and timber – on the common market, and forces them to ensure that only deforestation-free produce reaches European consumers.

The law comes at a time when Brussels is trying hard to step up its efforts in the realm of environmental protection and emission reduction, particularly in the wake of the COP26 meeting that brandished ending global deforestation by 2030 as one of its major achievements. The proposed legislation still needs to be approved by the European Parliament and the Member States, but it could have potentially far-reaching effects: since those six product categories make up 19% of all imports into the common market, it is regarded as a major overhaul of import regulation for the bloc.

But despite both the enthusiasm and angry responses it has elicited, the law is hardly a cure-all for the issue of deforestation. As long as there are no provisions to effectively track and trace the supply chain from the beginning to when products enter the common market, deforestation-free products for European consumers cannot be guaranteed. Nowhere is that shortfall more starkly illustrated than in the beef trade between Brazil and the EU. 

Bug in the system

The central flaw of the proposed legislation has to do with placing the burden of proof for the product’s origins on the final exporter, even when these companies have no means to provide this guarantee. This is particularly true when it comes to beef products, and even more true in the case of Brazil, by far the world’s largest beef exporter. Put simply, Brazilian cattle are not individually traceable from birth to slaughter, as European regulations require of European producers and putting them at a competitive advantage. 

This is the result of “cattle laundering”, a system designed by Brazilian ranchers to hide cows born and raised on illegal farms, often the leading drivers of deforestation, by moving them to law-abiding ranches. As the identification of cattle is done at the level of the “feedlot”, the last farm where the animals spend a few weeks before being slaughtered, the manoeuvre effectively obscures most of the environmental impact across the cattle’s life. Not only is this in violation of Brazil’s own environmental laws, but it also means that illegally raised beef responsible for forest destruction is very much being sold to Europe, with between 25% and 40% of all beef entering the EU coming from Brazil. 

The impact of this practice is enormous: a 2017 study in the state of Mato Grosso found that around half of all cattle raised there could be traced to farms that practice deforestation. Researchers also discovered that 2% of cattle farms in Brazil are responsible for 62% of all potentially illegal deforestation, meaning that even when a majority of ranchers follow the regulations, those that do not can have an outsized negative impact on the whole industry. The system of cattle laundering has no doubt contributed massively to the recent uptick in rainforest destruction that has reaching a 15-year high in 2021. 

Mirror clauses, or the need for reciprocity

Although cattle laundering may not be a household term, it is one of the reasons that the Mercosur-EU deal, which was signed in 2019, was harshly criticized for its lack of sustainability impact assessments, particularly by France which has so far refused its ratification. That Paris would swim against the stream that way is no coincidence: French president Emmanuel Macron has sought for years to compel Europe’s trade partners to follow the EU’s lead and implement its due diligence rules and system as they come with mechanisms designed to accurately track supply chains – and also with a framework that Brussels can assess and deploy for punitive measures if trading partners are found to be in violation of these rules.

Such “mirror clauses” are seen as instrumental in creating a fair-trade relationship with the world based on environmental and ethical standards, thereby ensuring that “if Europe lives up to certain standards, those same standards should be reflected in trading partners.” Mirror clauses would facilitate compliance for the private sector by extending the burden of cattle tracing to also include the state. Any partner state’s failure to live up to those standards would risk invoking trade boycotts from the EU. 

Traceability in the Brazilian beef sector is only one of many applications because the underlying rationale of mirror clauses remains the same across the board, namely that it’s only possible to manage what can be measured – in this case, tracking a cow from its birth to the slaughterhouse and verifying the absence of illegal deforestation throughout its upbringing and fattening. 

France’s time to shine

France will likely prioritize plans to implement mirror clauses in EU trade agreements during its EU presidency next year. Paris is no longer alone in this fight since the mirror clause proposal is increasingly viewed as a way for the EU to flex its muscles in fulfilling environmental goals in far-flung parts of the world. In late November, the Spanish Minister of Agriculture, Luis Planas, announced that his country will strengthen its collaboration with France in the promotion of mirror clauses in European trade agreement negotiations in what is an important reinforcement for the issue on the member state level. 

The EU should be able to use its economic status to great effect. With a population of nearly half a billion and high incomes, the European bloc is one of the most prized export markets in the world. This alone should be incentive enough for other countries to heed the reciprocity principle, as a European import embargo could prove disastrous for most economies. By drawing a line in the sand and asking its trade partners to adopt the same standards, the EU will force the hand of countless governments to implement better environmental legislation. Mirror clauses is the manner in which Brussels can leverage its normative power to full effect.

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CEO, co-founder and editor-in-chief of NE Global. Mr. Waller is a veteran journalist, analyst and political advisor, having spent 25 years covering the former Soviet Union, Europe and the Middle East.


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