EU-MERCOSUR Agreement, great news despite everything

And it is a milestone because it took more than 25 years of negotiations to achieve it, which are still being questioned today by sectors and countries that consider themselves harmed by the creation of this new free trade area, which is home to more than 700 million citizens-consumers.

The entry into force of the Agreement, once ratified by the European Parliament, will offer significant new trade opportunities for all EU companies, driving an estimated 39% increase in annual exports to Mercosur (around €50 billion), while supporting hundreds of thousands of jobs in the EU. For Mercosur, the increase in exports to the EU is estimated at €9 billion.

In these times of growing uncertainty, the Agreement sends a strong geopolitical signal, demonstrating the shared commitment of the EU and Mercosur to multilateralism and the rules-based international order. And despite the obvious global uncertainty and growing fragmentation, it underscores the value of cooperation, dialogue, and international partnerships.

European Commission President Ursula von der Leyen summed it up as follows: “We [the EU and Mercosur] will support each other in our respective clean and digital transitions. And the signal to the rest of the world is that both are choosing cooperation over competition and partnership over polarization.”

Without being exhaustive, it is worth explaining, at least briefly, the wide range of economic opportunities for the EU:

- It will eliminate tariffs on EU exports, including key agri-food and industrial products such as cars, machinery, and pharmaceuticals, saving European companies more than €4 billion annually in tariff payments.

- It will make investment in key supply chains, including critical raw materials and related goods, easier, faster, and safer.

- It will strengthen economic security and support the digital and green transitions on both sides.

- It will help the EU and Mercosur shape global trade rules in line with the highest standards in the EU.

Despite protests from farmers, who see the agreement as the apocalypse for the primary sector and the European countryside, the truth is that it will also open up unprecedented access to the Mercosur region for European farmers and food producers.

Brussels estimates a 50% increase in EU agri-food exports to Mercosur. The reduction in tariffs will be key for products such as wine, spirits, dairy products, and olive oil. The Agreement will also protect 344 EU geographical indications, traditional high-value foods and beverages, from unfair competition and imitations.

Beyond the rhetoric, and of course if they are scrupulously respected, the EU has included carefully calibrated tariff quotas to limit market access for sensitive products imported from Mercosur. This is a mechanism of legally binding safeguards, which will have to be observed through reinforced controls, so as to prevent products that do not comply with European standards from entering the Union market.

This mainly affects plant protection products, which must be free of traces when they arrive in Europe, and meat products, which must not have been artificially fattened with banned hormones and antibiotics, one of the key accusations made by European farmers against their South American counterparts.

In addition to strengthened controls and the harmonization of production standards, the EU is committed to creating a €6.3 billion fund, the Safety Net for Unity from 2028, to act as additional protection for European farmers in the event of market disruptions.

Nor has the EU renounced its ambitious and enforceable commitments on climate action, which are part of the Paris Agreement. This translates into the development of concrete commitments with Mercosur for sustainable development, with particular attention to women and their economic and labor rights; a commitment to work towards climate neutrality by 2050; and a clear contribution of trade to the ecological transition.

As an exclusive competence of the EU, the Interim Trade Agreement will continue its ratification process, which requires the approval of the European Parliament and the adoption of a decision for its conclusion by the Council (heads of state and government of the 27 member states). After that, it will enter into force for all, including countries that have opposed its signing.

It should be noted that Brazilian President Luiz Inácio Lula da Silva, one of the main promoters of the agreement, was absent from the signing ceremony in Asunción. Even the best political leaders have their egocentricity, and Lula is no exception.

The agreement was scheduled to be signed last December next to the impressive Iguazu Falls on the Brazilian side, and Lula was eager to take advantage of his pro tempore presidency of Mercosur to get a photo opportunity.

The Europeans asked to delay the signing for a month, which allowed Italy to change its mind and provide the qualified majority, in terms of number of countries and population, which cleared the way for the signing to proceed. However, the signing had to take place in the capital of Paraguay, which has held the pro tempore presidency of Mercosur since January 1, thus depriving Lula of the opportunity to host such a historic event.