Trade in Raw Materials Between the EU and Latin America

In March 2014, parliamentarians from the Euro-Latin America Parliamentary Assembly (EuroLat) voted in favour of a resolution on “Trade in raw materials between the European Union and Latin America” [1]. The resolution stresses that a transition towards a different model is needed and suggests several practical steps to improve the current situation.

The story of resource extraction and resource consumption

In the past years, raw materials have become a topic of high priority in both LA and the EU. Prices of many raw materials have increased, whilst export restrictions from China and supply shortages have caused problems for the EU industry. In response to these challenges, the EU has begun to implement political measures to secure its position on the market, and hence its access to raw materials [2]. Conversely, in LA we see a strong trend towards ever-higher exports of primary goods like raw materials based on a strong belief held by political elites that this will bring about economic development. This has caused severe social and environmental problems in the regions of extraction [3].

Unfortunately, the policy of the EU and its member states has been to put huge efforts in securing access to raw materials mainly from the South rather than seriously focusing on reuse, recycling, resource efficiency and changing consumption patterns [4]. European companies therefore benefit from a range of different instruments, such as export credits, which do not foresee adherence to any binding environmental and human rights standards. It has been warned that such policies will further undermine sustainable development efforts in the South [5,6].

In LA many governments from both left wing and conservative parties strongly connect their development plans to resource extraction. The Latin America and Caribbean (LAC) region is the world’s main source of raw materials. 13 countries in the region number are among the world’s top 15 providers of mineral resources [1]. Whilst the countries have different policies in terms of revenue distribution and the management of natural resources, we see a general re-primarisation of exports as the driving force behind these economies. The difference between neo-extractivism (Ecuador, Bolivia and Venezuela) and traditional extractivism, practised in countries like Chile, is that in neo-extractivism the revenues from extraction are invested in social programs. This was and still is seen by many as a progressive way of ruling. However, in terms of environmental impact, dependency on world markets and impacts on local populations, neo-extractivism is not necessarily different from other forms of extractivism [7]. A particular dependency arises from the fact that the state’s spending budget is highly connected to extraction activity, which often leads to repression of opponents [7]. In a nutshell, what we see in many LA countries is that new mining frontiers lead to increased conflicts between local populations, companies and governments [8–11]. The scientist Arellano-Yanguas [12], who investigated resource conflicts in Peru, speaks of a new kind of resource curse which now takes place at the regional level instead of the national level.

A EuroLat resolution on resource trade in response to the current problems

In March, the EuroLAT assembly voted for a resolution which can be seen in many ways as a response to the problems that have emerged in the context of resource use and trade. The resolution assumes that both the Free Trade Agreement that Colombia and Peru obtained with the EU as well as the EU-Central America Association Agreement will increase the trade flow in raw materials from LA to the EU even more. It is therefore necessary  to further regulate and monitor the processes related to these material flows.

Unequal terms of trade and counterproductive measures of current policies

The resolution highlights the problems of traditional trade relations which are unequal in the way that Latin America exports raw materials and imports manufactured goods. It stresses the inherent problem of LA being the principle source of minerals worldwide, whilst simultaneously being the region with the highest biodiversity.

Moreover, the resolution presents a shared request for a transition towards a more just and fair model of society. It proposes several measures of how to get there, and mainstreams human and labour rights together with environmental issues into the areas of finance, trade and extraction. To implement these demands made by the parliamentarians, much of the current policy framework in the EU and LA would have to be changed. For instance, the current free trade agreements between the continents would have to be revised to include binding human rights clauses, whilst instead of only aiming to secure access to raw materials, the EU Raw Materials Strategy  would need to integrate a binding mechanism that ensures our planet is preserved for future generations (see Resolution, paragraph 8). The focus of the European strategy would need to be connected to a joint strategy of the continents and a shift from the focus on access to raw materials on the world market to the reduction of using materials. Re-prioritisation of exports would have to be reversed in LA, reducing extraction instead of increasing it. Similarly, recycling cooperation between the EU and LA would need to be introduced to enable mutual benefits.

Existing policies such as the European and German Raw Materials Initiative which aim to tackle export restrictions of raw materials, or the underperforming proposal for a directive on conflict minerals [13,14], are examples of current policy making that strongly contradicts the measures demanded in the resolution.

In the following section we take a closer look at the current situation of resource policies and impacts along with the proposed improvement measures of the resolution regarding 1) environmental, human and labour standards 2) democracy and right to justice and 3) the transformation towards a different model of production.

1) Environmental standards and human and labour rights in the current policy framework

For many years civil society and scholars have criticised the fact that companies have too many rights and people too few [15]. Free trade agreements between the EU and the Andean Community (Colombia and Peru) as well as the EU-Central America Association Agreement, for example, do not include binding measures for compliance with human rights, environmental and labour standards. Neither does the EU Raw Materials initiative launched in 2010 foresee any concrete steps to ensure these. It only mentions human rights in the context of an undefined concept of “raw materials diplomacy” [2]. At the same time the initiative aims to increase investments by European companies in mining. Although environmental damage and the violation of human rights and labour standards are commonplace in the extraction industry, there are no institutions where affected parties can direct their accusations to. Furthermore, the promotion of foreign trade by European governments is not connected to any environmental or human rights standards.

How are human and labour rights and environmental standards implemented in LA?

The examples of environmental damage caused by the extractive industry are numerous. In Peru alone there are around 100 conflicts related to mining, with water and land use being core issues [16]. In many places the water and soil pollution is obviously related to mining activities, with intakes of lead (Pb) and arsenic (As) increasing for households living nearer to mines such as the gold mine Yanacocha in Northern Peru [17]. People also are deprived of their right to water as mines compete with agriculture for water, making local populations unable to continue farming as before [18,19]. Water access is often a privilege given to companies instead of the local people, making water entitlement a core issue of many conflicts [16,18].

Instead of being strengthened, environmental standards and the protection of environment has been weakened in many ways in Latin America. Firstly, there is an increasing criminalisation of environmental defenders in many Latin American countries, whereby people defending the environment are treated as enemies by the state [8,10,11]. Secondly, there is a systematic weakening of environmental standards through opposing legislation, such as a modification of several laws introduced in Peru in July 2014 which incentivise investment [20] and a new mining law in Brazil that could result in the weakening of environmental protection [21]. Meanwhile [22], the environmental and social safeguards of the World Bank that often serve as a reference point are currently at risk of being watered down [23]. As mining frontiers expand further, vulnerable ecosystems are put at stake.

In terms of employment, there are many examples where regions have become poorer after mining activities began, instead of improving their job opportunities (INEI 2014). Rather than being labour intensive, surface mining is in fact land intensive and local people lose their livelihoods due to the deterioration or loss of land and water. Work contracts are frequently very short term and scarce and often cannot replace the livelihoods lost through the impact of the mine in the long run [24,25].

In response to these problems the EuroLat resolution proposes to mainstream environmental, human and labour rights and to jointly develop a mechanism which ensures them. It asks for binding mechanisms to preserve the physical situation for the future, and to implement a production model that is sustainable and inclusive. In order to achieve this it demands amongst others :  

1) “Control mechanism to prevent imports into the EU of mining products extracted without social, labour, safety and environmental guarantees” (Paragraph 20)

2) Direct liability of companies in regards to human rights, environmental standards and ILO core labour standards (Paragraph 17)

3) Supports the establishment of an International Penal Court for the Environment (Paragraph 17)

2) Equal participation and access to justice is still a dream

Raw materials policy making has been characterised by little transparency and very limited participation possibilities for civil society and affected people in LA and the EU, despite its huge impact on human lives in the countries of extraction. Many policies seem to be drafted for business alone without sincerely considering its implications on development, human rights and the environment. Transparency is crucial for democratic policy making, which should consider the perspectives and needs of different stakeholders. There needs to be the right to access justice for affected population. Unfortunately this is not the case both in Europe and Latin America.

Lacking democracy and coherence in European policy making

The EU Raw Materials Initiative was drafted without any participation of civil society, nor even the involvement of the European Parliament. It closely follows the German Raw Materials Initiative which was drafted behind closed doors in close cooperation with German industry, a move criticised by civil society [22]. One instrument of the German strategy to secure access to resources is the so called “resource partnership” established with countries like Mongolia, Kazakhstan and more recently Peru. These partnerships were also drafted and signed behind closed doors, despite protest and warning from civil society. Whilst the voice of the potentially affected or civil society is not taken seriously, industry has an institutionalised right to participate in the development and implementation of these agreements [26]. When it comes to raw materials, non-transparent policy making dominates.

Another example for this lack of democratic processes is the current attempt to implement rules on EU level related to minerals coming from conflict areas following the US Dodd Frank Act which was weakened in the interest of German industry [13,27]. Instead of the binding rules which were foreseen in the beginning, voluntary standards became the core of the European conflict minerals directive. This policy could have been a step towards the demanded certification schemes and import controls proposed by the resolution (see measures resolution paragraph 1,2,6), however, the proposal for the directive now trails North American policy making in terms of human rights standards and contradicts the demanded measures of the EuroLat resolution (paragraph 8). In many ways the European Raw Materials policy is inconsistent with the concept of policy coherence for development adopted by the European Parliament [6].

Decisions do not consider local populations in Latin America

Many conflicts in the context of resource extraction are caused by the fact that local populations feel that they cannot participate enough in the governance of their own natural resources. These are founding the basis of their livelihoods [16,28,29] This is the case both in countries governed by right wing as well as rather left wing governments following the logic of neo-extractivism. Peru, for example, is a mining country since decades with neo-liberal investment conditions and a weak social welfare system [30]. Ecuador, in contrast, is a country recently starting to use mining as a way to create state income for social expenditures [31]. Despite the different paradigm both countries experience huge protests against new mining ventures. Also in Mexico, Bolivia, Argentina and Guatemala similar protests can be observed [11,32,33].

The decision that mining will take place is mostly made at the national level without considering locals and even regional governments that often have no hope in rejecting decisions. Free prior consent  is a legal requirement in many of the countries due to ratification of the ILO convention 169 but this is rarely implemented adequately [35,36]. Scholars argue that even when free prior consent is implemented, as observed in Colombia, it does not necessarily serve the local population [37]. Rather than having the potential to express the needs and will of the local population, free prior and informed consent can serve corporations as a tool to weaken local resistance. There is never a real possibility for affected populations to reject a mining operation. Participatory forums implemented by companies are thus often perceived as hypocritical by community members [38].

Protest as a way of expressing disagreement is criminalised in Latin America

Protests often are the only way to express disagreement with national policies promoting mining projects. But in several LA countries protest against these large scale projects is largely restricted [11]. In Peru for example, the law has been changed to enable dealing with social protests in a similar way to war by using the military and weapons. A recent change in law made the use of weapons against protestors free from punishment. Several institutions have interpreted this change in law as a “licence to kill” [39,39,40]. With this law it becomes even more difficult to receive justice in the context of extraction . In Ecuador a law has been passed that restricts NGO involvement in political matters as mining operations are pushed ahead [41,42]. Environmental defenders are often declared to be terrorists, whilst an NGO demanding indigenous rights was shut down in November 2013 [28].

To face these problems the resolution demands that :

4)    Following the ILO Convention 169 indigenous people must be consulted on decisions affecting them, including the carrying out of extraction activities on their land (Paragraph N)

5)    Victims should have the right to appeal to the International Labour Organisation (ILO), the World Trade Organization (WTO) and the International Center for Settlement of Investment Disputes (ICSID) (Paragraph 17)

6)    Regional financial institutions have to be strengthened and their social and environmental requirements must be tightened to improve the access to information and public involvement (Paragraph 19)

3)    Transition towards a different model

Repeatedly the resolution insists that extractivism isn’t a viable model in the long run due to finite resources and undesired environmental and human right effects (Paragraph M). It sees a necessity to diversify the economies in LA (Paragraph O) and to start a joint EU-LA transformation towards an energy transition and a sustainable management of national resources. To that end, structural changes of the economies oriented towards the reduction of dependency on raw materials, recycling and reuse on both continents are demanded. As a result, human welfare could increase without harming the environment (Paragraph 5).

Unfortunately, current developments run counter. The belief that life improves through modern technology is widespread. Intentionally short life spans of products due to planned obsolescence (planned weaknesses in the product or unsupported software updates) are tolerated by politicians as it increases production and consumption, and consequently the GDP. Instead of seriously addressing the need to reduce resource use and aiming for policies to insure high quality and reusability, European governments push their own companies to engage in the mining sector. However, the relationship between LA and the EU does not have to be like this. As the resolution stresses repetitively, cooperation could become more human and environmentally friendly than it is at the moment. Cooperation must do more than aiming for macroeconomic gains.

Progress in a different direction

Some of the demands of the resolution can be closely linked to the debates of post-extractivism in LA and degrowth in Europe. In communities and in academia the transformation of our current system towards a less resource intensive model is seen as a necessary step by many. The attendance figure of a conference on degrowth in September 2014 in Germany revealed that several thousand people want to think about ways how to overcome a resource intensive growth paradigm. The European debate on degrowth and the Latin American debate on post-extractivism, the extraction only of what is necessary for the region, are often debated separately but belong together. Movements with demands linked to the resolution are emerging and there are some calling for the establishment of an Environmental Court of Justice, whilst the EU is also looking at ways to put ethical criteria for public procurement in place .

The implementation of the resolution’s demands is possible although many processes at the moment run counter. The demands are not revolutionary, but their implementation could bring us much closer to a fair and ecologically sustainable cooperation between the EU and LA.

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Endnotes

1) The Euro-Latin American Parliamentary Assembly (EuroLat)  is a parliamentarian institution of the Strategic Bi-regional Association which was established in June 1999 as a result of summits between the EU, LA and the Caribbean. It has 150 members; 75 are from European Parliament and 75 from Latin American parliaments. The decisions taken are not binding, however they show common opinion. In this case it shows a strong and widespread discomfort felt with the current situation in both continents.
2) The Euro-Latin American Parliamentary Assembly (EuroLat)  is a parliamentarian institution of the Strategic Bi-regional Association which was established in June 1999 as a result of summits between the EU, LA and the Caribbean. It has 150 members; 75 are from European Parliament and 75 from Latin American parliaments. The decisions taken are not binding, however they show common opinion. In this case it shows a strong and widespread discomfort felt with the current situation in both continents.
3) EC (2011), COM (2011) 25 final: Tackling the challenges commodity markets and on raw materials, Brussels, available at: http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=COM:2011:0025:FIN… (accessed 9 October 2011).
4) Other demands of the resolution to mention are: 1) The Commission and the EU’s strategic suppliers’ countries should “jointly develop an effective raw materials traceability system from extraction and import through to recycling or disposal, and to introduce a mutual certification scheme for raw materials and their trading chains (Certified Trading Chains)” (Paragraph 21)
2*) An agreement to contain joint mechanisms that oversee investment practices and their transparency along with sustainable impact and production conditions (Paragraph 11) 3) Exclusion of trade in metals and hydrocarbons produced using slave labour or other illegal methods or sourced from protected areas (Paragraph 10)
5) “Free, prior and informed consent recognizes indigenous peoples’ inherent and prior rights to their lands and resources and respects their legitimate authority to require that third parties enter into an equal and respectful relationship with them, based on the principle of informed consent [...].The underlying principles of free, prior and informed consent can be summarized as follows: (i) information about and consultation on any proposed initiative and its likely impacts; (ii) meaningful participation of indigenous peoples; and, (iii) representative institutions” [34].
6) Despite this development Germany signs a partnership agreement with Peru to trade natural resources without for seeing binding human right standards.
7) Other measures proposed by the resolution concerning participation and access to justice are: 1) Support for setting up regional bodies to settle investment disputes and to guarantee fair and balanced rules when handling conflicts between transnational companies and states (Paragraph 19). 2) A review of both international and bilateral legislation in pursuit of an appropriate model of production [...], medium and long-term action negotiated between both regions with public participation that is as broad as possible (Paragraph P). 3) Profits are taxed and the public is involved in democracy, with the aim being to establish a balance between interests and rights (Paragraph 1).