Habemus Mercosur.
It took leaders from the European Union and Mercosur countries — Argentina, Brazil, Paraguay and Uruguay — a full quarter-century to finalise a trade agreement that will now create the world’s largest duty-free zone.
After dramatic last-minute efforts to derail the deal over unresolved national concerns, European ambassadors on Friday finally approved the agreement, ending a year-long stalemate following since the European Commission’s preliminary political accord last December.
For free-trade advocates, the result is staggering: a joint market of more than 700 million people worth around $22 trillion, over 20% of the global GDP.
The decision lands at a moment when protectionism is on the rise and European industry is scrambling for new markets after the US imposed steep tariffs on EU goods.
“Today’s Council decision to support the EU-Mercosur deal is historic,” wrote Commission President Ursula von der Leyen on X on Friday. “Europe is sending a strong signal. We are serious about creating growth, jobs and securing the interests of Europeans consumers and businesses.”
EU capitals have endorsed the deal through written confirmation, and Von der Leyen will fly to Paraguay next Saturday for the official signing. The final step lies with the European Parliament, whose sign-off is still required with a vote expected in February or March. Although MEPs can only accept or reject the text — not amend it — observers expect a close result.
Adding an extra layer to an already complex process, a group of 145 MEPs proposed in November that the European Court of Justice test the deal’s legality. If lawmakers back the motion in January’s plenary, final ratification will pause until the court delivers its opinion — a step that could delay entry into force by up to two years.
What’s in the EU-Mercosur deal?
The deal, which includes an Interim Trade Agreement (ITA) and a EU-Mercosur partnership agreement, will scrap duties on 91% of EU exports over 15 years — making it the most expansive tariff-cutting pact the bloc has ever reached. The EU already represents Mercosur's second-largest trade partner after China, accounting for 16.9% of the four countries’ total trade in 2023, European Commission data shows.
In return, the EU will phase out duties on 92% of Mercosur exports over as long as a decade.
EU exports are dominated by machinery, chemicals, transport equipment, textiles, and chocolate, while Mercosur largely sells agricultural goods, critical minerals and pulp.
Why the trade pact took 25 years
Trade deals often drag on, but the EU–Mercosur saga shattered records, exposing deep rifts between and within the blocs.
Farm sensitivities, fears of exacerbating deforestation, clashing regulations, and hostile public opinion repeatedly stalled talks. The breakthrough came only after growing economic uncertainty and swelling protectionism — notably the US trade war — shifted political incentives, analysts say.
A major sticking point was the EU’s willingness to increase quotas for sensitive farm products such as beef, ethanol, pork, honey, sugar, and poultry. Under the final deal, up to 99,000 tons of Latin American beef will enter the EU annually at a 7.5% tariff, while 180,000 tons of poultry will be admitted duty-free over five years.
Who are the EU-Mercosur winners?
European industry, notably machinery makers and producers of wine, cheese and spirits stand to benefit handsomely as tariffs fall and products become cheaper for Latin American buyers.
Currently, car parts face duties of 35%, machinery 20%, chemicals 18% and pharmaceuticals 14%. Removing these tariffs should save the EU €4 billion a year, the Commission estimates — a welcome boost at a time when European firms face ever-stiffer Chinese competition and hefty US levies.
Industry lobbies were jubilant: German BDI called the deal an "important success for the German and European economy,” while Italian Confindustria hailed a “historic step that strengthens European competitiveness.”
Who are the EU-Mercosur losers?
For years, European farmers have fiercely opposed the deal, warning that cheap South American commodities, particularly beef and poultry, would overwhelm the EU market. To blunt the blow, the adopted text includes tough agricultural safeguards that suspend tariffs' benefit if imports jump more than 8% above the previous three-year average, and trigger an investigation if prices drop more than 8%.
Brussels also sweetened the farm lobby with a €45-billion top-up to the EU’s seven-year budget, giving governments more room to support their farmers.
But analysts argue fears of a market glut are misplaced. Quotas are tight, and most imported beef is premium-grade, which tends to be pricier than European cuts. In 2024, for instance, imported Mercosur beef fetched roughly twice the average EU market price, according to Eurostat data.
In reference to the safeguards, Bruno Capuzzi, an independent trade analyst, said, “It is like a travel insurance: reassuring by design, but ideally never to be used.”
How does the ‘Donroe doctrine’ fit in?
The EU‑Mercosur pact arrives just as US President Donald Trump champions his “Donroe Doctrine,” asserting dominance over the Western Hemisphere after grabbing Venezuela’s president, Nicolás Maduro, and hauling him to Washington for trial.
By locking in a giant duty‑free area with Mercosur founders, the EU gains strategic clout in the region — from compliance with its environmental and food-safety standards to securing critical raw materials like lithium.
Amid tariff wars and US posturing, Brussels openly sees the deal as a statement: a defence of rules-based trade and a rebuttal to protectionism.
“It [the agreement] should upset Trump, this shouldn’t be a fear,” said David Kleimann, a senior research associate at the ODI think tank. “It should be an objective,”
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