Pilot Clinic: University of São Paulo, Spring 2021

Beneficiary: International Chamber of Commerce – ICC Brazil

Executive Summary

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This Report assesses the extent to which environmental provisions in the selected free trade agreements (FTAs) might impact the parties’ trade and environmental policies by comparing the main environment-related provisions and enforcement mechanisms of the following FTAs: European Union (EU)-Chile, Brazil-Chile, and EU-Mercosur. The comparison of environmental commitments in the FTAs is divided into four broad categories, three of which have been suggested by Bronckers and Gruni (2021): (i) defensive clauses that exempt parties from strictly complying with trade rules in light of environmental concerns (defensive clauses); (ii) obligations that are based upon existing international environmental standards (derivative commitments); (iii) obligations that are related to existing domestic law (domestic regulation); and (iv) aspirational clauses that seek to promote a higher degree of environmental protection (aspirational clauses).

Defensive clauses, which basically rely on or refer to the text of GATT Article XX, allow the imposition of trade-restrictive measures by an importing party to address environmental concerns and interests. The Report shows that all three FTAs at issue contain a provision whereby parties are exempted from complying with trade obligations when faced with certain domestic policy goals.

Regarding derivative commitments, the EU-Mercosur FTA includes more substantive provisions and require the effective implementation of relevant Multilateral Environmental Agreements (MEAs). The EU-Chile FTA does not even have a provision recalling or referencing multilateral commitments. The Brazil-Chile FTA refers to some MEAs, but it does not call for their effective implementation in the same manner that the EU-Mercosur Agreement text does.

Because none of the FTAs has a dispute settlement mechanism with the power to issue binding decisions in the event of violations to environmental commitments, ensuring the parties’ compliance with these provisions can be challenging. Nevertheless, the interplay of references to MEAs with the Article XX of GATT-like provision, especially in the EU-Mercosur FTA, may further enable parties to implement unilateral measures to pressure other parties in the direction of environmental protection.

This Report also compares the provisions on right to regulate in the FTAs at issue. A relevant difference is the express recognition of the precautionary principle in the EU-Mercosur FTA, in contrast to the Brazil-Chile FTA. That recognition may also increase the room for domestic measures in the environmental area that impact trade. Another difference is the fact that the EU-Mercosur FTA includes an express “non-regression” and “non-enforcement” prohibition regarding domestic environmental regulation.

Concerning the aspirational clauses, the Report argues that it may be difficult to assert the effective implementation of higher degrees of environmental protection through these clauses.

The Report also discusses that the core premise of the dispute settlement mechanisms in the FTAs at issue is the exclusion of violations to environmental commitments from the standard, trade-related, and adjudicative means of dispute resolution. This makes the future impacts of the FTAs on environmental and trade policies more complex to assess.

Read the full report here.