How will regulations and changes related to the Green Deal affect Brazil’s trade relations with EU countries? What is the biggest challenge?
The regulations related to the EU Green Deal will have an important impact on EU trade with Brazil. The carbon border adjustment mechanism and the coming regulations that will require EU importers of beef, soy, coffee, cocoa, timber and palm oil to certify that these six commodities come from lands that have not been deforested or contributed to land degradation will require adjustments and creation of additional reporting and certification for the traded agricultural goods. With the need to establish effective traceability and certification mechanisms, the tendency is to further reduce the trade flow in the coming years.
The EU once was Brazil’s major agricultural trade partner. Not anymore. Brazilian agricultural trade has been shifting towards China since it joined the World Trade Organization 20 years ago. Now, almost 40% of all Brazilian ag products go to China and only 15% to the EU. For some commodities, the numbers are higher: more than 70% of soybeans and 50% of beef are sold to China. Besides the new regulations, the major problem for the trade between Brazil and EU are tariffs and non-tariff barriers. The EU and Mercosur (which is a bloc that includes Brazil, Argentina, Paraguay and Uruguay) negotiated a free trade deal, that reduces or eliminates tariffs and barriers, and has a very good environmental chapter, but still has to be signed and ratified by the parliaments. This trade deal would foster trade and introduce higher environmental standards – important for both EU and Brazil. Without it, the agricultural trade will continue getting smaller.
What steps your country is taking towards a zero-carbon economy and food & agricultural sector? What are the most important / recent challenges?
President Bolsonaro announced ambitious commitments at the Leaders Summit on Climate in April this year: to end illegal deforestation by 2030 and to reach carbon emissions neutrality by 2050. At the same time, Brazil has yet to announce its adjusted Nationally Determined Contributions and allocate additional funding for the implementation of the environmental commitments. Brazil has one of the most rigorous environmental legislations in the world. Around 66% of the country is still covered by native vegetation, including a certain portion of vegetation on agricultural lands that farmers are required to preserve. At the same time, in order to meet the announced climate targets – especially with regard to deforestation, the country will need to improve enforcement and deal with conflicts related to land ownership, indigenous land and other challenges. There will be a need to significantly increase public and private sector funding and create efficient market mechanisms. Everyone is looking forward to Brazil’s commitments in Glasgow. As Brazil is one of the biggest agricultural producers and also a leader in agricultural technology and productivity, it will be essential for the global effort to fight climate change.