Don’t miss out on the latest updates
Stay up to date with the EU trade news by subscribing to our myFT Digest delivered straight to your inbox.
The European Union and four South American countries have reached a significant trade agreement that would establish a market of 700 million people by eliminating tariffs on over 90% of goods.
European Commission President Ursula von der Leyen and leaders of the Mercosur nations finalized the deal, the largest for both parties, after 25 years of negotiations at a summit in Uruguay.
“This agreement is beneficial for consumers and businesses on both sides. We aim for fairness and mutual advantage,” she stated after attending the Mercosur conference.
The EU exported €56 billion worth of goods in 2023 to the four founding members of Mercosur and €28 billion in services in 2022. “After more than two decades, we have successfully concluded the negotiations,” said Brazil’s President Luiz Inácio Lula da Silva on social media.
However, European farmers and environmental organizations have expressed opposition to the deal, citing concerns about environmental damage and lower standards for animal welfare and pesticide use in Mercosur countries, which include Argentina, Brazil, Paraguay, and Uruguay, with Bolivia seeking to join.
The agreement still needs to navigate several political obstacles in Europe before implementation. It must be translated into all EU languages and reviewed by legal experts, a process that could take several months.
Subsequently, the Commission must secure approval from EU member states, with four or more countries representing at least 35% of the EU population being able to block its adoption. It also requires the support of the European Parliament, which has a strong farmer representation.
France, the largest agricultural producer in Europe, remains opposed to the deal due to concerns about sanitary standards and environmental regulations. President Emmanuel Macron has sided with protesting farmers, arguing that the agreement would expose them to unfair competition.
Other EU countries, including Poland and the Netherlands, share similar concerns. The Commission is expected to split the deal, allowing core trade provisions to take effect first, while other areas such as investment would require approval from all 27 national parliaments.
Brazil, as the largest economy in Latin America, led the final negotiations on behalf of Mercosur and secured protections for its automotive industry, with tariffs on electric and hybrid vehicles phased out over 18 years.
One key issue was the EU’s push to include binding climate and deforestation commitments in the agreement, a move criticized by many in Mercosur nations as a form of disguised protectionism.
Brazilian farmers are concerned about a new EU law that aims to ban commodities from deforested lands by 2025, potentially limiting the benefits of the trade deal by restricting market access.
The Commission assured that commitments to workers’ rights and environmental protection will be enforced through a dispute settlement mechanism.
Argentina’s President Javier Milei emphasized the need for autonomy in trade arrangements for Mercosur countries during the summit, urging for a quicker process in reaching agreements.
Joe Moran, director of the European Policy Office of Four Paws, highlighted the importance of new animal welfare regulations should the deal be approved, emphasizing the need for ethical standards in trade agreements.
Additional reporting by Alice Hancock in Brussels, Amy Kazmin in Rome, Ciara Nugent in Buenos Aires, and Raphael Minder in Warsaw