EU and Mercosur Finalise Historic Free Trade Agreement After 25 Years of Negotiations

The European Union has concluded a significant free trade agreement with Brazil, Argentina, and three other South American countries in the Mercosur alliance. This deal, finalised after 25 years of negotiations, aims to create a market of over 700 million people, representing nearly a quarter of the world's GDP. It is expected to save businesses approximately 4 billion euros annually in duties.

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European Commission President Ursula von der Leyen praised the agreement as a "truly historic milestone" amid rising global protectionism. If ratified, it will benefit European manufacturers and South American farmers by reducing tariffs on products like Italian wine and Argentine steak. Von der Leyen emphasised the political necessity of the deal, which she negotiated for the EU's 27 member countries.

Mercosur's First Major Trade Pact

The Mercosur trade bloc includes Brazil, Argentina, Uruguay, Paraguay, and Bolivia. This agreement marks Mercosur's first major trade pact beyond deals with Egypt, Israel, and Singapore. However, all 27 EU member states must approve it before it takes effect. France leads opposition within the EU due to concerns about its farming industry.

French President Emmanuel Macron has previously criticised the deal as harmful to French farmers. It remains unclear if his concerns have been addressed in the final agreement. Von der Leyen assured that the accord would benefit around 60,000 companies exporting to Mercosur by offering reduced tariffs and simpler customs procedures.

Concerns and Support

Germany and Spain have supported the agreement. German Chancellor Olaf Scholz noted that an "important obstacle" had been overcome, while Spanish Prime Minister Pedro Sánchez described it as an "unprecedented economic bridge" between Europe and Latin America. He pledged Spain's efforts to ensure its approval.

Despite excitement from Mercosur nations about increased exports to the EU, European farmers fear competition from cheaper South American imports. Environmental groups warn that the deal could worsen deforestation in the Amazon and increase pesticide use. The agreement results from lengthy negotiations dating back to a 1999 Mercosur summit in Rio de Janeiro.

Negotiations gained momentum in 2016 when former US President Donald Trump imposed tariffs on Europe. Market-friendly leaders in Argentina and Brazil also supported free trade. A preliminary deal was announced in June 2019 but faced setbacks due to political changes and environmental concerns.

Brazilian President Luiz Inácio Lula da Silva accelerated talks upon returning to power in 2023. He hailed the agreement as a victory for both regions, highlighting shared values and interests between Mercosur and the EU. Argentine President Javier Milei also supports the deal, which aligns with his free-market principles.

The European Parliament must also endorse the pact, though this step is not expected to be contentious. Senior lawmakers have welcomed it as a significant milestone in EU-Mercosur cooperation. However, ratification could take years based on past EU trade agreements like CETA with Canada.

Brian Winter from the Americas Society/Council of the Americas expressed scepticism about swift ratification due to historical delays in similar agreements. Despite these challenges, stakeholders remain optimistic about the potential economic benefits of this landmark trade pact between Europe and South America.