Transitions in development: the European Green Deal and Latin America

By José Antonio Sanahuja, Director, Fundación Carolina, Spain, Special Advisor for Latin America and the Caribbean to the High Representative of the European Union for Foreign Affairs and Security Policy

The response to COVID-19, the ecological transition and strategic autonomy are the three driving forces of the European Union’s (EU) broad transformative programme. This programme involves deep changes in its own social and economic development model and in its relationship with the world. It is a short-term reaction to a pandemic that has fast become a systemic crisis. But it is also the EU’s long-term response to an international context of globalisation in crisis and challenges to the international order. The future of EU-Latin America relations will be deeply affected by these transformations.  

For the EU, as for Latin America, the pandemic is a catalyst for change. This time the reaction has been quite different in terms of monetary or fiscal measures compared to the self-destructive cycle of austerity adopted in the European debt crisis. Following an immediate response from the European Central Bank, the council adopted a first range of modest financial support measures. But in July 2020 the European Council agreed on an unprecedented package of 1.8 trillion euro, including the new 2021-27 budget and the “Next Generation” recovery programme. The programme involves linking budget, new common taxes and Eurobonds, paving the way to a common treasury. Therefore, this agreement is an important federal step forward, that just six months earlier would have been unbelievable. Beyond its macroeconomic and fiscal impact, these investment instruments will also push the EU towards an ambitious shift in its development model.

In many respects, the pandemic, exposing the weaknesses of the EU, has induced a strong societal and geopolitical response that combines a broad social, green and digital transformation, with the reassertion of the EU’s commitment to regionalism and multilateralism. It has triggered a geopolitical awakening and greater strategic autonomy in the international arena, sending a strong political message to EU partners in Latin America and the Caribbean.

The long-term strategic horizon of this macroeconomic and fiscal response had already been in place before the pandemic with the European Green Deal launched in December 2019, as the overarching policy goal of the European Commission and a key European contribution to achieving the Agenda 2030. The European Green Deal is not a sectoral policy for mitigation and adaptation to climate change, or for the care of biodiversity. It is, according to the Commission, a comprehensive strategy to “… transform the EU into a fair and prosperous society, with a modern, resource-efficient and competitive economy”, prioritising the human dimension in a “just and inclusive” way.

“The pandemic, exposing the weaknesses of the EU, has induced a strong societal and geopolitical response that combines a broad social, green and digital transformation, with the reassertion of the EU’s commitment to regionalism and multilateralism.” #DevMatters

Additionally, the European Green Deal has a socio-political dimension, answering to wide-ranging problems of democratic disaffection, loss of trust in institutions and the rise of nationalist, illiberal and far-right forces: the stated objective of the European Green Deal is also to regain public trust and “bring together citizens in all their diversity with the authorities” and economic sectors.

It is a programme of great ambition and transformative potential. It started with a proposal for a Climate Law to achieve climate neutrality by 2050; and a number of initiatives to decarbonise the energy mix via renewable sources such as solar photovoltaic, offshore wind or green hydrogen. Additionally, it proposes a transition to a circular, less natural resource intensive economy; a massive energy efficiency building rehabilitation programme; sustainable and smart mobility measures and biodiversity conservation; and an ambitious agriculture, land use and food production reform, with a “farm to fork” strategy. To this end, the programme will carry out new “green” taxes and market corrective measures, including the reform of the EU Emission Trading System.

The programme takes on the need to reorient the financial system and speculative capital towards the ecological transition in a highly financialised context and in the face of a visible “liquidity trap”, with negative interest rates. For this, it gives a central role to massive public investment. It also includes “just transition” measures to alleviate the costs of adjustment in regional policy and for workers who will lose their jobs and will need retraining and new job opportunities.

Finally, the Green Pact proposes a broad industrial policy strategy in sectors such as energy, digital technologies or electromobility. With this, the EU is responding to the dynamics of deglobalisation, focusing on industrial restructuring and its own internal market, to spur a new global economic cycle of reorganising global supply chains on a regional basis.

The European Green Deal also has an important external dimension, given the global nature of the climate emergency. Promoting the ecological transition and, in particular, the Paris Agreement, will be a central goal in the EU’s foreign and security policy, and, in relation to the latter, a recognition of the climate emergency as a threat and as a source of instability. This means using the economic weight of the EU to promote higher environmental standards in trade, exports, and global value chains, showing what Anu Bradford calls the “regulatory power” of the EU.

It will also involve a more assertive environmental diplomacy in multilateral fora and in bilateral relations with the US, China, and other regional partners like Africa, Asia and Latin America, in both interregional and bilateral frameworks. The stated aim is to establish “green alliances” pushing for greater ambition in decarbonisation and climate neutrality goals.

Climate leadership was already part of the EU’s international identity and narrative. However, this raises a number of policy coherence issues on trade, development finance or investment regulations. Climate targets should account for 40% of future EU development aid allocations. EU aid and investment instruments should abandon fossil energy projects and shift to renewables and efficiency initiatives. The definition of environmental, social and governance criteria in finance institutions, vehicles and operation will be a critical issue. Coherence issues also arise in investment treaties, as has been suggested by the controversy surrounding the revision of the Energy Charter Treaty, a legal instrument now invoked by companies with investments in fossil energy for suing governments pursuing a faster decarbonisation. Policy coherence also needs to be reinforced in trade policy, as illustrated by the debates on the EU-Mercosur Agreement and the deforestation of the Amazon. Indeed, the European Green Deal asked for a binding mandate for future EU partnership agreements with third countries to include a new environmental clause linked to the Paris Agreement and Climate Change goals, similar to the democratic clause that has been mandatory in all EU external agreements since 1995.

“Beyond preserving livelihoods and economies, bi-regional co-operation should promote a long-term vision for recovery and an exit from the crisis that supports a development in transition strategy.” #DevMatters

Combining the European Green Deal and a more assertive foreign policy for strategic autonomy also requires the EU to be more coherent in its external relations, and to overcome deep-rooted silo mind-sets and decision-making procedures in the Commission and member states. Assuming that trade, environment and sustainable development issues are also foreign policy issues, a more re-politicised and integrated approach is needed. A good example, again, is the linkage of the EU-Mercosur Agreement to the Paris Agreement on climate change, which has served as a containment measure in the face of Jair Bolsonaro’s threats of withdrawing Brazil from the regional market of Mercosur. And it has increased the political costs of the disastrous environmental policy of Bolsonaro’s government in the Amazon.

This example shows that Association Agreements, such as the contested EU-Mercosur one, should not be seen as mere free trade agreements. They have a relevant geopolitical meaning as devices for enhancing strategic autonomy on both sides in facing the globalisation crisis and the so-called new bipolarity between the United States and China, which would place Latin America and the EU in a position of strategic subordination. Neither Mercosur nor the EU were constituted as mere free trade areas, and an agreement between the two cannot be seen in those terms either. A renewed view of the Partnership Agreements implies reinforcing its role as a common framework for policy dialogue and regulatory convergence in support of development in transition, with a social, green and digital transition on both sides.

In this context, it must be emphasised that a geopolitical EU that wants to reconcile interests and values in its relationship with Latin America must assume a broader societal agenda. The EU is now the main global actor approaching Latin America with policies focused on the key concerns of its societies: social inclusion, gender equality, employment, the quality of democracy, human rights, security and peace, the environment and everything that makes up the 2030 Agenda, and that involves a sorely needed renewal of the “social contract”.  

Of course, COVID-19 is the most pressing issue in that relationship, both in societal and geopolitical terms. Against the pandemic, EU action and the bi-regional relationship can be more effective through a robust multilateral response on issues such as access to external financing, dealing with the region’s high external debt, or universal and equitable access to vaccines. Moreover, systemic crises – such as COVID-19 – are an opportunity for change, rather than for a return to normalcy. As noted in the ministerial EU-LAC meeting on December 14th 2020, beyond preserving livelihoods and economies, bi-regional co-operation should promote a long-term vision for recovery and an exit from the crisis that supports a development in transition strategy. One that is digital and green, but also focused on social cohesion. Only then can Latin America and the EU reaffirm the geopolitical relevance of their relationship.