The European Union and Mercosur countries signed a free trade agreement on Saturday, which has been reported to be one of the most ambitious trade agreements by the EU in Brussels. The trade agreement has received a mixed response, with some industries considering it to be an excellent opportunity, while farming and green activists have opposed it vehemently.
The European Union and the Mercosur, which includes Brazil, Argentina, Paraguay, Uruguay, and Bolivia, have signed a historic deal after 25 years of negotiations, and it will create the world’s biggest free trade area, covering almost 800 million consumers.
Those in support believe that this agreement will increase trade, help with unemployment, and foster economic integration between nations. On the contrary, those opposed believe that
“it will bring a flood of cheaper goods into Europe, which could undermine environmental and social safeguards within the EU, and lead to an increased threat of deforestation in the Amazon and damage European farmers.”
What the agreement includes
Gradual elimination of customs duties
The treaty aims at the progressive elimination of customs duties on about 90% of all goods traded between the EU and Mercosur. This would involve industrial goods, agricultural produce, and processed items, which would be allowed to circulate duty-free between the two blocs. This will ramp up trade, cut costs for businesses, and also make South American markets more accessible to European exporters.
Regulated opening of agricultural markets
The agricultural products that are deemed sensitive by the European Commission, including beef, poultry products, sugar, ethanol, and rice imports, will not be liberalized in full. Rather, the trade agreement sets up quotas with lower or zero tariffs. Such quotas will try to stem the flow of South American agricultural products into Europe but will also allow some safeguarding of European farmers in the process. It is in this section of the trade pact where controversy abounds.
Expanded access to industrial markets
In addition, the agreement will drop tariffs altogether or slash them substantially on most of the industrial products, like autos, spare parts, chemicals, pharmaceuticals, and textiles. To the EU, it means easier access to markets like Brazil that have always followed protectionist policies. For Mercosur countries, this agreement will ramp up competition from European industries, often at an advantage in technological capabilities.
Partial opening of public procurement markets
The agreement grants EU companies access to public procurement markets in Mercosur countries, particularly in sectors like infrastructure, transport, energy, water, and public equipment. European firms will be able to bid on contracts that had been reserved for local players.
With respect to South American countries, this can upgrade the infrastructure, but also can raise some questions about the competitiveness of the local business.
Sustainable development and climate commitments
The agreement includes a chapter on sustainable development, with commitments to respect the Paris Agreement, combat deforestation, and adhere to ILO social standards.
However, these commitments are criticized for being non-binding and lacking effective sanctions. Environmental groups argue that the deal could accelerate deforestation linked to cattle ranching and soy production, undermining the EU’s climate commitments.
Why critics are alarmed
Environmental organizations and farmer unions have been highly vocal against the deal. They argue the agreement:
- encourages intensive agricultural models
- weakens local European farming sectors
- may increase deforestation in the Amazon
- sends a contradictory message to the EU’s climate agenda
Many critics also stress that the environmental clauses are too weak to guarantee compliance or meaningful action.
Who supports the agreement?
European industrialists and exporters
In December, a coalition of European industrialists — representing sectors such as brewers, wine and spirits producers, chocolate manufacturers, and sugar refiners — backed the deal. They argue that the agreement will eliminate trade barriers and secure supply chains for raw materials.
Wine and spirits sector
For European viticulture, the agreement is seen as an opportunity to diversify markets. The French Federation of Wine and Spirits Exporters (FEVS) supported the treaty, emphasizing that it could compensate for falling sales in France and abroad.
The agreement would remove tariffs currently at 35% on spirits and 27% on wines, providing new opportunities for export growth.
Olive oil and dairy products
The deal offers new prospects for products like chocolate, powdered milk, and cheeses, which currently face tariffs up to 28%. It also protects 344 European geographical indications, including products like Parmigiano Reggiano and Champagne, banning imitation labels in Mercosur markets.
Automotive sector
European automakers stand to gain significantly. Tariffs on imported vehicles in Brazil, Argentina, and Paraguay can reach 35%, limiting market access. With tariff barriers reduced, European manufacturers could access a market of more than 260 million people, providing a major growth opportunity.
Machine tools and capital goods
European manufacturers of industrial equipment and technologies support the deal because Mercosur countries seek to modernize their infrastructure and manufacturing sectors. German industry, in particular, sees this as a chance to export technologies and engineering solutions.
Chemistry and pharmaceutical sectors
The agreement would reduce tariffs and non-tariff barriers for chemical and pharmaceutical companies, improve access to public procurement, and protect intellectual property. These sectors see Mercosur as a growing market for healthcare products and industrial inputs.
Who benefits on the Mercosur side?
Beef producers
Beef is the most controversial sector. Brazil, Argentina, Uruguay, and Paraguay are among the world’s largest beef exporters. The agreement grants export quotas to the EU at reduced tariffs, creating major economic opportunities in terms of foreign exchange and job creation.
Soy, sugar, ethanol and poultry industries
These products are central to Mercosur’s export model. Easier access to the European market will boost their economies but also raises concerns about intensive farming practices and environmental impacts.
