EU-Mercosur trade agreement: the final stretch?
The signing of the trade deal between the EU and the founding Mercosur countries (Brazil, Argentina, Uruguay and Paraguay) was initially planned for 20 December 2025. However, the EU managed to secure additional time to convince stakeholders concerned about the impact of the deal on the EU agricultural sector and on the environment. Now that end-of-year festivities are behind us, the ratification of the EU-Mercosur trade agreement again comes to the forefront. But even if the trade agreement is signed in the coming days, the EU's work will not be done.
A lengthy process
The EU-Mercosur trade agreement has been a long time in the making. Negotiations on the agreement between the EU and the Mercosur countries have been dragging on since 2020 and were interrupted several times during this period. This is not surprising as the stakes are high: the free trade agreement, if ratified, would create one of the largest free trade zones in the world, covering more than 700 million people spread over 31 countries. Mercosur is currently the EU’s tenth largest trade partner for goods, while the EU is Mercosur’s second largest partner. At the moment, the deal excludes Venezuela (suspended from Mercosur since 2016) and Bolivia (which joined Mercosur in July 2024 but still needs to comply with all Mercosur treaties and regulations before it can ratify the EU-Mercosur free trade agreement). The latter is likely to join in the next years.
A placeholder deal
The trade agreement that is currently on the table (officially called the Interim Trade Agreement (iTA)) is a temporary agreement that will be repealed and replaced by the larger EU-Mercosur Partnership Agreement (EMPA), which also has a Political and Cooperation pillar, once the latter is ratified. The European Commission stated that the decision to split the agreement in two separate texts was made to speed up the implementation process. Because the content of the iTA is an exclusive EU competence, it only requires a qualified majority in the European Council and a majority in the European Parliament, making the ratification process somewhat easier. The EMPA on the other hand will have to be ratified by all EU Member States individually, a lengthy process with a lot of potential pitfalls.
High stakes
The EU-Mercosur agreement’s aim is to boost two-way trade and investment, including by lowering tariff and non-tariff barriers. Once signed, the trade deal will (gradually) eliminate tariffs on over 90% of traded goods. This will have a significant impact on EU industrial products subject to high tariffs, such as cars and auto parts (tariffs of 35% and 14-18%, respectively), machinery (14-20%), clothing (35%) and chemicals (up to 18%). To protect the EU agricultural sector, a variety of mechanisms were proposed to limit the impact of the agreement. These include tariff quotas for sensitive agricultural products such as beef, poultry, cheese, sugar and ethanol. These are the maximum quantities of products that can enter the EU at reduced or zero tariffs. Above these quotas, the old tariffs will again apply. Moreover, the agreement will also protect more than 350 EU food and drink products, including 15 from Belgium, from imitation from Mercosur countries. The deal also includes measures to uphold the EU’s strict standards on food safety, and animal and plant health for imports into the EU. Additionally, the agreement includes enforceable environmental and labour rights commitments and enhances the EU’s access to key raw materials that are crucial for the green transition.
Points of contention
The EU-Mercosur has both supporters and opponents. The agribusiness sector is one of the most visible groups in the EU-Mercosur debate as many EU farmers worry about unfair competition from Mercosur countries. In principle, agricultural products imported into the EU will have to meet the same sustainability, safety and health standards as goods produced in the EU, but many farmers fear that in reality this will not happen and that the agreement will create an uneven playing field.
The EU has made several proposals to address the agricultural sector's concerns around unequal competition. These proposals include safeguard clauses, procedures for monitoring and investigating market distortions, strong support commitments for farmers and automatic brakes on trade flows in case of market imbalances. Critics, however, point, among other things, to the vague wording used to describe some safeguard measures and uncertainty about how the EU can deploy them without causing disputes over trade obligations.
Another point of contention is the potential environmental damage the agreement could cause, with deforestation as one of the most important worries. One specific contentious measure in this respect is the rebalancing mechanism. This provision allows all parties to open dispute settlement procedures if they feel that measures taken by the other party nullify or substantially impair the benefits of the agreement, thus potentially opening the door to challenges on EU-regulations like the deforestation regulation or the carbon border adjustment mechanism.
Not just economic implications
There is more to the EU Mercosur agreement than just trade. One other important motive behind the trade agreement lies in the geopolitical and strategic sphere. With the agreement, the EU wants to counterbalance China's growing influence in South America. The Mercosur region has important reserves of critical raw materials needed for the green transition and defense industry, including graphite, lithium, nickel, manganese, rare earths and niobium. By importing more of these strategically important raw materials from Mercosur countries, the EU hopes to reduce its dependence on China. The trade agreement could also provide additional motivation for EU companies to redirect their supply chains from China to South America. This in turn could result in a welcome influx of investments for the Mercosur countries, many of which are trying to reform their local industries.
The work continues
Time will tell if the concerns of those affected by the EU Mercosur trade agreement will become a reality. One thing is sure, signing the deal will not be the end-point. For one, this is because the iTA is only temporary and the more elaborate EMPA still needs to get approval from all member states. But also, it is because the EU should closely monitor the broad impact of the deal on producers, consumers and other stakeholders.