-In a previous interview with Clarín, you pointed out that environmental obligations must be distributed equitably by the legislator and not by the courts. Today, with the signing of the EU-Mercosur Agreement, the largest bilateral regulatory framework between both regions is established. Is this treaty the comprehensive legislative response that international trade needed to reconcile business and sustainability?
-The Mercosur Agreement is a great success and will undoubtedly contribute to once again reconciling the economy and sustainability at the interstate level, by integrating sustainability issues into a binding trade framework under international law. It includes commitments on climate protection, biodiversity conservation, the fight against illegal deforestation and the protection of labor rights. For example, the effective application of the Paris Agreement is configured as an “essential element” of the Mercosur Agreement. At the same time, due to its naturally limited scope, the agreement does not exhaustively cover all issues and problems related to sustainability. Furthermore, the effects will also depend on effective implementation: for violations of the chapter on trade and sustainable development, a specific procedure is provided for, first of all, consultations and, subsequently, if necessary, a committee of experts. This committee can make recommendations. Therefore, the procedure has a different structure from that of the classic dispute resolution mechanisms in commercial law. In short, the agreement is an important element, but not a “panacea” for the necessary transformation towards a sustainable economic model.
-Unlike traditional free trade agreements focused almost exclusively on tariff reductions, the new EU-Mercosur Agreement places sustainability demands in a central place. How does this approach transform the rules of the game for a Mercosur company that wants to operate in the European market?
-The repercussions of the agreement for Mercosur companies refer, in particular, to market access. The company must frame its activity within an increasingly regulated European sustainability framework. This also affects the interaction with other EU legislation, for example the Deforestation Regulation: a Mercosur company cannot, for example, benefit from the trade policy facilities established by the Mercosur Agreement if its product does not meet the requirements of other legal acts such as the Deforestation Regulation. This also changes the business risk structure. Companies must be able to demonstrate more clearly under which environmental and social conditions their products are manufactured and their supply chains are organized. At the same time, this development should not be seen solely as an additional burden. The agreement also provides greater legal certainty and facilitates trade, for example by reducing tariffs and simplifying certain trade procedures.
-The European Union approved the Due Diligence Directive on Business Sustainability (DDDSE), which holds large European multinationals responsible for what happens in their global supply chains. To what extent does this directive become a “regulatory export” from Europe to supplier countries like Argentina?
-The export of regulations occurs only indirectly. South American companies that, under their national law, are not subject to such due diligence obligations, only need to comply with European obligations if they fall within their scope. This only applies to large companies. However, smaller companies, as suppliers to European importing companies, can agree sustainability obligations in supply contracts with the latter in order to continue trading with European companies. However, this contractual transfer of obligations reaches its limits when companies do not depend on European markets or when they establish two production lines and only manufacture products intended for the European market in accordance with due diligence obligations.
-The political background of the EU-Mercosur Agreement was marked by resistance from European agricultural sectors that feared unfair competition. How does the Due Diligence Directive on Business Sustainability (DDDSE) seek to equalize the playing field (level playing field) between European and South American producers?
The Corporate Sustainability Due Diligence Directive can help create a ‘level playing field’ as it does not impose sustainability obligations solely on European companies. Under certain conditions, it also applies to companies from third countries, provided that they achieve a sufficiently high turnover in the EU. However, in the case of the agricultural sector it is important to clarify: the Due Diligence Directive on Corporate Sustainability does not directly oblige all South American producers to comply with European production standards, but rather obliges companies included in its scope to identify risks related to human rights and the environment in their value chains and counteract them (indirect effect of sustainability requirements on producers and suppliers). The ‘level playing field’ is therefore achieved not so much through identical production standards as through comparable due diligence requirements and greater internalization of environmental and social costs in business decisions.
-Many productive sectors and SMEs in Argentina view these requirements—such as satellite traceability against deforestation or carbon footprint reporting—with concern, seeing them as non-tariff barriers or unaffordable costs. From a European legal perspective, where does the legitimate demand for sustainability end and where does the risk of protectionism begin?
From a legal point of view, the limits lie mainly in discrimination, necessity and proportionality: the European Union can pursue environmental and climate protection as legitimate regulatory objectives, even if this hinders trade. However, under WTO rules, such requirements must be applied in a non-discriminatory manner and must not unnecessarily restrict trade. In short: European law certainly allows for ‘green’ trade requirements, but not ‘green protectionism’.
-You have visited Argentina on other occasions to give conferences and had the opportunity to learn about part of the country’s culture and economy. Based on that type of knowledge, which do you think are the Argentine sectors that could benefit the most from this agreement and which ones face the greatest challenges?
-From a legal point of view, it is expected that Argentine sectors whose products will obtain, thanks to the agreement, better access to the EU market and, at the same time, benefit from the reduction of current tariffs, will especially benefit. These include, in particular, agricultural and food products, such as wine and certain agricultural raw materials, as well as the critical raw materials sector, especially lithium. In the case of lithium, the agreement expressly provides for better access to the European market and lower tariffs. On the contrary, sectors whose products are particularly affected by European obligations on the environment, traceability and due diligence have a greater need for legal adaptation. This applies in particular to the beef and soy sectors, as well as other supply chains linked to deforestation. In these cases, additional accreditation and compliance requirements may partly offset facilitation of market access.
-Argentina is a strategic agro-industrial export hub for Europe. Given the new map drawn by the EU-Mercosur Agreement, what is your recommendation so that regional economies do not see the Due Diligence Directive on Business Sustainability as a bureaucratic threat, but as a competitive advantage over other global markets?
-From a legal point of view, the key lies in understanding the Due Diligence Directive on Business Sustainability not only as an additional burden, but as an investment in market competitiveness and legal certainty. Companies and, in particular, suppliers in Argentina can establish traceability structures, environmental and human rights standards, as well as documentation of their supply chains from the beginning. In this way, they will be able to better integrate into European value chains and more easily comply with the requirements that the Corporate Sustainability Due Diligence Directive imposes on large European companies or certain companies from third countries. Furthermore, the Business Sustainability Due Diligence Directive expressly provides for a risk-based approach and support mechanisms for smaller business partners. Therefore, competitive advantage arises above all where sustainability compliance is not established solely as a reaction to European standards, but rather becomes a demonstrable quality characteristic of Argentine products and supply chains. In this way, a regulatory obligation can become a market access advantage. Behind the promise of a market of more than 700 million consumers, the Mercosur-EU Agreement raises a decisive question: are Argentine companies prepared to compete under increasingly demanding environmental and social standards?
Particular signs
In his previous visit to Argentina, in 2024, the German jurist Marc-Philippe Weller warned in this newspaper that climate change can no longer be denied and that environmental compliance requires clear rules dictated by laws and not by “idealization.” Today, with the historic background of the signing and ratification of the European Union-Mercosur Agreement this year, the Vice-Rector of the University of Heidelberg returned to receive the Honoris Causa Doctorate at the San Pablo-Tucumán University on October 8. On this occasion, the jurist Weller gave the conference “Doing business in Europe: the Agreement with Mercosur and the business sustainability requirements of the EU” at the aforementioned university.
Source: www.clarin.com
