How Switzerland has placed the environment at the heart of a commercial treaty

The recently concluded free trade agreement between Switzerland and Mercosur includes environmental commitments. It responds to increasing public vigilance on ecological issues linked to international trade.

After eight years of negotiations, the agreement between the Mercosur countries and the member states of the AELE was finalized this month. It provides for the abolition of customs duties on industrial products, agricultural products and foodstuffs – including Swiss chocolate – while discreetly introducing a geopolitical turning point: Switzerland has taken the lead of an effort aimed at integrating an environmental protocol linking the agreement to climatic commitments. It thus responds to the growing pressure of consumers in favor of a social responsibility.

The European Free Trade Association (AELE) brings together Iceland, Liechtenstein, Norway and Switzerland. Mercosur is a South American regional union including Argentina, Brazil, Paraguay, Uruguay and Venezuela. Bolivia, which joined Mercosur after the start of the negotiations, did not take part in the discussions.

The way in which Switzerland has led negotiations on the environmental protocol illustrates the way in which the country-a dominant economy within the AELE-seeks to reconcile its national interests and to protect its farmers in the face of South American competition. On the Mercosur side, the government of Luiz Inácio Lula Da Silva, at the head of the first economy of the block, relies on bilateral agreements at a time when trade tensions with American president Donald Trump are intensifying, while defending a positive climate agenda.

Switzerland’s insistence on an environmental protocol arises in particular from criticisms formulated by elected officials and elected officials and the agricultural world in the face of competition deemed unfair from South American producers-criticisms still lively despite government efforts to alleviate concerns during negotiations.

“Switzerland systematically seeks to conclude trade agreements which promote sustainable growth, both at home and in partner countries,” said the State Secretariat for the Economy (SECO).

No taxes on chocolate and meat

The AELE and Mercosur completed their discussions in early July, after 14 cycles of negotiations. The agreement opens access to a combined market of around 290 million consumers and to an estimated GDP of $ 4,390 billion (3510 billion francs) in 2024.

For Switzerland, the Treaty could generate up to 160 million francs in customs savings per year, according to SECO.

Beyond the figures, the agreement offers South American countries preferential access to strategic markets for their agricultural exports. Products such as beef, pork, poultry, roasted coffee or fruit will benefit from improved entry conditions in European markets.

In exchange, European countries will be able to export without customs duties and with increased protection of their intellectual property of high added value products, such as pharmaceuticals, chemicals or chocolate.

Climatic issues included

Beyond the drop in customs tariffs, the agreement reflects the subtleties of the Aele diplomacy-in particular that of Switzerland-which seeks to establish partnerships centered not only on the flows of goods, but also on social and environmental responsibility. A form of “climate diplomacy”.

If the members of the AELE are united on socio-environmental principles, Switzerland claims to have been the engine of the introduction of these clauses, largely in response to internal pressure.

“Switzerland undertakes to include specific provisions on the social and environmental aspects of trade whenever it negotiates new free trade agreements or that it revises,” says Seco.

According to Manfred Elsig, professor of international relations at the World Trade Institute of the University of Bern, the inclusion of such clauses is a relatively recent phenomenon in the commercial diplomacy of the AELE, initiated with the agreement signed between Switzerland and Indonesia in 2021. This already responded to the concerns expressed by organizations representing Swiss farmers.

“Since the free trade agreement with Indonesia, the attention paid to these issues has increased. This trend is also reflected in the recently concluded agreements with other developing countries, such as Thailand. It is certain that the Swiss public will closely examine the environmental implications of the treaty with Mercosur, ”says Manfred Elsig.

Expected to be signed by the end of the year, the agreement reaffirms the sovereign law of states to fix their own levels of environmental and social protection – a frequent thing in the Aele agreements – while seeking alignment with multilateral treaties such as the Paris Agreement, the Convention on Biological Diversity or the Fundamental Conventions of the International Labor Organization.

Under the leadership of Swiss diplomacy, the text also includes commitments from Mercosur countries in the conservation of biodiversity, sustainable agriculture, women’s participation in international trade and recognition of traditional knowledge of local and indigenous communities.

In particular, it is planned that international suppliers of digital services – operating via computer networks – can only benefit from the advantages of the agreement if the electric mix of their country of origin is based at least 67% on clean energies.

To guarantee the application of these commitments, the treaty provides for cooperation, monitoring and dialogue mechanisms focused on transparency and prevention of arbitrary sanctions – a notable advance, the environmental clauses having long been avoided as soon as a legally binding framework was at stake.

A valve for interior tensions

For Stefano Jud, a postdoctoral researcher at the Wyss Academy for Nature of the University of Bern, the inclusion of these commitments also aims to dismantle internal political tensions. “The Swiss parties favorable to the agreement used this clause as a key argument to respond to the concerns of its opponents linked to the environmental impact of Indonesia,” he explains.

According to him, as for the agreement with Indonesia, which included such provisions, this new text could rekindle strong opposition. “If the agreement with Mercosur was subject to referendum, I would expect this ‘green reaction’ harmful to its acceptance, especially since the exporters of Mercosur are perceived as direct competitors of Swiss farmers and are associated with sensitive ecosystems like the Amazon”.

Despite government efforts to highlight the environmental clauses it supports, part of the Swiss company remains opposed to the agreement.

The Green Party reaffirmed its opposition in an open letter. He denounces an increased industrialization of agriculture in Mercosur countries, with deleterious effects on the environment, local communities and animal welfare. “More agricultural free trade means more environmental destruction,” said Green National Councilor Christine Badertscher.

And pressures on the treaty could still increase. The Swiss Union of Peasants intends to analyze the agreement meticulously. If necessary, it will require additional guarantees. According to a declaration to the Keystone-ATS agency, it wishes to assess the opportunities and risks that the agreement represents for Swiss agriculture.

Conversely, the umbrella association of the Swissmem industry welcomed a major success for the entire economy, hoping for a rapid ratification. She believes that a referendum would be an insult.

According to Stefano Jud, despite political clashes, Switzerland can take advantage of its comparative advantage in terms of high environmental standards to protect its economy and strengthen its international reputation, under the seal of environmental governance.

“In this context, the chapter on sustainable development serves as a safety net for Swiss farmers. It is a form of protectionism disguised under the guise of sustainability. In parallel, these provisions also make it possible to convince a more urban and cosmopolitan electorate, attentive to the global environmental and social issues of agriculture, and favorable to more sustainable production systems, ”he concludes.

Text reread and verified by Virginie Mangin, translated from English using an automatic translator/DBU

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