Human rights violations and environmental harms, like loss of tropical forests, are closely linked to agricultural trade. The role of international market demand for commodities such as soy in causing those problems is clear, yet they remain mostly unaddressed. Therefore, European countries have led a new global trend on mandatory human rights and environmental due diligence, advancing the EU's growing global regulatory ambitions.
Those advances are celebrated as important steps in the right direction. Beyond improvements linked to the European market, there is hope for the so-called Brussels Effect. The term Brussels Effect describes how the EU has long pursued the goals of legal harmonisation through regulation (as part of an agenda of establishing the EU as the global regulatory hegemon). The Brussels Effect refers to the externalisation of EU norms and standards beyond its jurisdiction. The underlying logic of the Brussels Effect is that producers and multinational companies would not want to forgo Europe's large and affluent market. Instead, they will find it more cost-efficient to streamline their operations according to those higher standards, triggering a form of convergence to the top (further reading: Braford, 2020).
In a recent (2024) paper published in Global Policy Bastos Lima & Schilling-Vacaflor analysed the prospects for successful externalisation of Europe's sustainability standards using Brazilian soy as a case.
Their analysis exposes how the practice of supply chain divergence (i.e., the segmentation of exports tailored to different consumer requirements) can easily evade policy impacts and negate their additionality where Europe commands a minor market share. Europe’s market share is decreasing, and exporters can just segment their supply chains to meet different consumer requirements, reserving a small share for the European market that complies with the EU regulations, while not changing the overall direction of the company.
The authors point out that in order to avoid becoming just a niche market with stricter regulations, the EU would need to expand on its actions by (i) engaging with other major consumer countries to export its standards, e.g. Asian markets, (ii) including financial actors and companies trading with other markets, or (iii) moving beyond ‘do no harm’ policies to adopt more strategically targeted ‘do good’ instruments to counter drivers of deforestation on the landscape level.
Sources and further reading:
Bastos Lima, M.G. & Schilling-Vacaflor, A. (2024) Supply chain divergence challenges a ‘Brussels effect’ from Europe's human rights and environmental due diligence laws. Global Policy, 00, 1–16. Available from: https://doi.org/10.1111/1758-5899.13326
Bradford, A. (2020) The Brussels effect: how the European Union rules the world. New York: Oxford University Press.