Initiative seeks to “green” China-Brazil agricultural trade

RIO DE JANEIRO, BRAZIL – Since 2003, when China became a net importer of food for the first time, the gap between imports and exports has widened. In 2019, it became the world’s largest importer of agricultural products. Today, agricultural products’ quality, availability, and accessibility increasingly define China’s food security situation.

In this scenario, China has the potential to exercise leadership in making its agricultural trade more environmentally sustainable, echoing the high-level discourse of “ecological civilization” and China’s adherence to the Glasgow Leaders’ Declaration on Forests and Land Use, launched at COP26 in November.

Pressures have also increased for consumers and buyers in the global supply chain to take greater environmental responsibility. That is mainly due to the long-term ineffectiveness of producing countries in mitigating the environmental footprints of agricultural products. There have even been calls for boycotts of some products.

In recent years, international actors, from governments to NGOs, have reached out to Chinese civil society organizations to learn about the Asian country’s position and progress on the issue of commodity sustainability.

Through research, analysis, and project implementation, the Global Environmental Institute (GEI) has developed its role in joining forces to address deforestation.

A PATTERN IN HABITAT LOSS CAUSED BY AGRICULTURE

Trase’s 2020 Yearbook, a data-driven transparency initiative, shows that half of the deforestation risk embodied in soybeans and beef exported from Brazil is concentrated in just 1% and 2%, respectively, of the municipalities producing these products.

In 2021, Trase probed whether or not China imports from these municipalities and, if it does, to what extent it relies on them. Analyzing China’s sourcing patterns in Brazil and Argentina between 2009 and 2019, it was found that habitat conversion linked to the export of two of the main soft commodities – soybeans and beef – from both countries to China is also spatially concentrated.

Take, for example, Chinese imports of Brazilian soybeans during the 2009s. They come from three producing regions: the central-eastern region of Matopiba, which is the part of the four states of Maranhão, Tocantins, Piauí, and Bahia that lies within the Cerrado biome; the central-western state of Mato Grosso; and southern Brazil, which includes the states of Paraná, Santa Catarina, and Rio Grande do Sul.

Soybean-induced habitat conversion was significant in Matopiba, Brazil’s newest soybean frontier that accounted for 9%-about 6.1 million tons of the country’s soybean exports to China in 2018. In particular, six municipalities had extremely high rates of agriculture-induced habitat conversion.

Purchasing agricultural products from these townships traps a consumer market and exposes it to the risk of so-called “demand-driven environmental destruction.” China cannot simply ignore these “problem” hotspots and switch its sourcing locations to others.

Although southern Brazil and Mato Grosso have comparatively lower degrees of habitat conversion incorporated into China’s imports, they still face sustainability risks and environmental constraints.

Southern Brazil is remote from recent deforestation hotspots and has supplied China with more than one-third of Brazilian soybean imports for more than a decade. It was found that it has only five municipalities with a notable, albeit low, level of habitat conversion.

However, in 2021, its production was significantly affected by extreme weather. Production in the southern state of Rio Grande do Sul, the second-largest soybean exporting state to China, fell 46% last year due to an unusual drought. Climate change caused unexpected and significant fluctuations in local productivity. The region also has limited capacity to expand agriculture, given the erosion and fragmentation of agricultural land.

So far, Mato Grosso is relatively free of these constraints. In 2020, the state contributed 29.27% and 15.49% of Brazil’s total soybean and beef production, respectively. More than half of those commodities produced in the state were exported to China. Mato Grosso accounted for 14% of China’s soybean imports in 2020 and 6.8% of beef imports. Thus, the state plays a dominant role in Sino-Brazilian agricultural trade.

The analysis found a comparatively low degree of habitat conversion associated with China’s soybean imports from Mato Grosso in 2018. Only two municipalities show moderate levels of deforestation, despite the state being surrounded by three major biomes: the Amazon rainforest, the Cerrado savanna, and the Pantanal tropical wetlands. It partly explains why in 2015, it was one of two Brazilian Amazon states to receive funding from the UK and Germany through the Brazilian National REDD+ Strategy.

Through interviews with multiple stakeholders and analysis of policy documents, it was found that, to some extent, Mato Grosso achieves synergy between agriculture and biodiversity conservation in several ways. Primarily, these are administrative and policy innovations such as the jurisdictional approach (a form of landscape management within clearly defined boundaries that has a high level of government involvement and participation of other stakeholders), conditional access to agricultural credit, revitalization of preservation areas, and support for local food chains and family farming. Technological advances, such as the reclamation of degraded lands and the integration of livestock farming into forests and digestible feeds, also play an important role.

However, there is still a need to strengthen the state’s law enforcement capacity to combat illegal habitat conversion, especially in the municipalities of Paranatinga and Feliz Natal.

Based on these findings, attention should be directed to that small number of high-risk areas, such as the six soybean-producing municipalities of Matopiba, to promote climate and nature-friendly agricultural practices and reduce supply chain volatility. Chinese stakeholders should emphasize these at-risk areas as part of their long-term sourcing strategies. Deforestation linked to beef affects more townships, requiring more resources and coordination.

It is also recommended that Chinese companies take a conservative approach to invest in agriculture and related sectors, including infrastructure in southern Brazil. As for Mato Grosso, its policy and technological innovations mean that GEI finds it constructive to engage with local government and industry players, recognizing their progress and helping them improve their governance capacity.

CHINA AND BRAZIL: A BILATERAL PARTNERSHIP FOR BEST PRACTICES

GEI is one of the first Chinese NGOs to “go global”. It was the first Chinese NGO to investigate the environmental and social impacts of the timber trade between private Chinese companies and Africa and Southeast Asia back in 2007. Since then, it has worked in 11 countries in these two geographies to address the environmental externalities associated with bilateral trade.

GEI has successfully worked with Chinese government agencies, including the Ministry of Commerce, the National Forestry and Grassland Administration, and the then Ministry of Environmental Protection, to introduce a set of guidelines to regulate the overseas investment and trade activities of Chinese companies, including the landmark 2013 Guidelines for Environmental Protection of Overseas Investment and Cooperation.

In 2015, GEI signed a Memorandum of Understanding (MoU) with the Myanmar government to combat the illegal timber trade through a legal verification scheme. It was followed by a high-level MoU signed between the Chinese and Myanmar governments in 2017 that led to creating a high-level working group for bilateral coordination and cooperation involving multiple stakeholders.

Now, GEI is adopting this approach to promote sustainable agricultural trade between China and Brazil.

Over the past year, GEI worked with the Mato Grosso state government to acquire information for Chinese partners on Brazilian agricultural regulations and the bilateral trade relationship.

GEI discovered that the state government has been interested in learning about the Chinese government, business, and consumer attitudes toward Brazil-China trade’s environmental and social sustainability. Therefore, GEI and three parties from Mato Grosso, the state government included, signed an MoU on March 8, 2022.

In addition to the Mato Grosso state government, the other signatories to the MOU were the Mato Grosso State Federation of Agriculture and Livestock (FAMATO), a chamber of commerce of farmers’ unions, cooperatives, and traders, and the Mato Grosso Meat Institute (IMAC), a beef-focused research and technology institute.

The partnership will operate at both the bilateral and national levels. At the bilateral level, the four parties, with the participation of private actors from both countries, will draw up a pragmatic roadmap to create a market in China for sustainably produced Mato Grosso beef. For these products to be recognized in the Chinese market, the parties will jointly explore the possibility of establishing certification systems in China for sustainable beef products, including those that emit net zero carbon in their production.

To define what is “sustainable,” the parties will identify existing good practices and what can realistically be achieved, including but not limited to zero deforestation, low carbon emissions, and promotion of organic practices and family farming. A two-pronged approach will incorporate these definitions and criteria into the roadmap. One part promotes environmentally positive technological intervention in land use, animal feed production, and livestock farming in Mato Grosso. The other is market integration between China and Mato Grosso by establishing compatible certification frameworks.

Within China, the four parties to the MOU will reach out to potential buyers and develop mechanisms such as certification to ensure market access and possible financial means that can improve affordability.

EXPECTATION SCALING UP

GEI believes that recognizing and rewarding good governance and best practices in producing countries can significantly transform agricultural production and trade. It anticipates that the roadmap laid out for Mato Grosso can be scaled up and applied to that small number of municipalities in Brazil whose trade with China continues to cause significant deforestation and habitat loss.

But that is not the end of the story. It is also planned to establish a pilot project to explore the potential of low-carbon agricultural systems in China. The aim is to design low-carbon agricultural practices and develop standards to guide and certify this type of agriculture with the help of Brazil’s experience in this area, including its existing practices, offset methodology, certification, and market management.

This MoU demonstrates that Chinese civil society organizations have begun to pay serious attention to sustainability issues in the country’s global supply chain. It indicates that producing and consuming countries share a common interest in promoting environmentally positive practices and working together towards a greener supply chain.

With information from Dialogo Chino