After 25 years of negotiations, a qualified majority of European Union (EU) member states have completed a comprehensive trade agreement with Mercosur. Mercosur is the South American trade bloc comprising Argentina, Brazil, Paraguay, Uruguay, Venezuela, and Bolivia. 

This agreement would create a common market of over 700 million people, representing one of the largest trading partnerships globally by population and economic potential.

The European Commission is expected to ratify the agreement in Paraguay imminently, marking a significant step in EU-Latin America trade relations. The deal seeks to reduce tariffs, improve market access, and foster regulatory cooperation, enhancing trade flows between the two regions.

Terms of the deal and its economic impact

The European Commission will remove tariffs on 91% of products imported from Europe to Mercosur countries over 15 years. This agreement covers industrial products, agricultural goods, and services.

Reciprocally, the EU will remove duties on 92% of all exports from Argentina, Brazil, Paraguay and Uruguay, the four founding members of the South American trading bloc.

It also introduces provisions on sustainable development, intellectual property rights, and dispute resolution mechanisms. The deal is projected to increase EU exports to Mercosur countries by an estimated €4 billion annually.

EU Commission President Ursula von der Leyen stated it a “historic trade deal.”  The deal stands to benefit European manufacturers, particularly in the automotive sector, where current Mercosur tariffs reach 35%, and wine producers are currently facing 17% import duties in South American markets.

Beyond trade, the agreement is designed to strengthen political and strategic ties, supporting cooperation on issues such as climate change and digital trade.

For the EU, it serves as a strategic counterbalance to China’s growing influence in Latin America. Simultaneously, against the backdrop of increased tariff measures from the United States under President Donald Trump’s administration, both European nations and Mercosur countries appear to be seeking more predictable and stable trading partnerships. 

Divergent views of the EU members

Despite broad support, several EU countries have expressed opposition or reservations. France, Austria, Hungary, Ireland, and Poland have raised concerns about the potential impact of increased agricultural imports from Mercosur, fearing that beef, poultry, and other food products from Latin America could undercut domestic farmers and threaten rural economies. Belgium abstained from the vote.

French President Emmanuel Macron noted that “the EU-Mercosur agreement is a deal from another era, negotiated for too long on outdated foundations,” with limited economic benefits for French and European growth.” 

Addressing these concerns, von der Leyen stated: “We have heard the concerns of our farmers and our agricultural sector and we have acted on them. This agreement contains robust safeguards to protect their livelihoods.” This include mechanisms that activate if imports from Mercosur countries exceed specific thresholds.

Ireland’s EU Commissioner Michael McGrath also quoted that the deal “gives EU businesses a valuable opportunity to gain a stronger foothold in a market of 270 million people, helping to create jobs and generate wealth in the EU.”

“EU agri-food exports to Mercosur were worth €3.3 billion in 2024. The EU – Mercosur agreement will open unprecedented access to the countries of Mercosur for European farmers and food producers and we believe Europe’s agri food sector is well placed to take advantage of these opportunities,” he added.

Ratification process and implementation timeline

The European Commission is expected to proceed with formal ratification procedures in Paraguay as early as next week. Von der Leyen is scheduled to travel to Paraguay, likely on Monday, to finalise the agreement with South American leaders.

Following this step, the ratification process through the European Parliament and various national legislatures may present further hurdles before implementation.

Although the broad outlines have been established, considerable work remains to be done to implement the full scope of the agreement. The effectiveness of safeguard mechanisms designed to protect European farmers from potential market disruption will be closely monitored. 

The outcome will depend on the implementation process, technical negotiations, and political developments in Europe and South America. This will determine if it leads to sustainable EU-Mercosur economic relations or just delays deeper conflicts over agricultural competition and market access.