EU, Mercosur Seal Historic Free Trade Deal After 25 Years of Talks

The European Union and the South American Mercosur bloc signed a landmark free trade agreement on Saturday, capping 25 years of negotiations and paving the way for what would become the largest trade agreement in the EU’s history. 

The breakthrough, however, comes wrapped in political controversy, legal uncertainty, and mounting concerns from farmers and environmental groups.

The agreement was signed in Paraguay by senior EU officials and representatives of Mercosur, which includes Argentina, Brazil, Paraguay, and Uruguay. Together, the two blocs account for around 30% of global GDP and represent a combined market of more than 700 million consumers.

European Commission President Ursula von der Leyen hailed the deal as a strategic choice, posting on X: “We choose partnership and cooperation. We choose our businesses. We choose our people.”

Brazilian President Luiz Inácio Lula da Silva welcomed the agreement as “very positive, especially for the world and for multilateralism,” stressing that the partnership goes beyond trade and reflects shared values such as democracy, rule of law, and human rights.

Negotiations between Brussels and Mercosur began in 1999, making this one of the longest-running trade talks ever undertaken by the EU. Momentum gathered in recent months despite resistance from several member states, notably France, as well as opposition from agricultural lobbies.

Trade between the two blocs reached €111 billion in 2024, roughly balanced in value. The EU mainly exports machinery, chemicals, and transport equipment, while Mercosur’s exports are dominated by agricultural products, minerals, wood pulp, and paper.

The agreement aims to slash tariffs across a wide range of goods, significantly expanding bilateral trade. Supporters argue it is a strategic necessity, particularly as European companies face rising U.S. tariffs and as the EU seeks to reduce dependence on China by securing access to critical raw materials.

Despite majority backing from EU governments, the deal remains highly contentious. Austria, France, Hungary, Ireland, and Poland voted against it this month, mainly due to concerns over the impact on European farmers. Belgium abstained.

Critics warn the agreement could flood the EU market with cheap agricultural imports, especially beef, undercutting European producers. Environmental groups argue it may accelerate deforestation in South America, particularly in the Amazon, undermining the EU’s climate commitments.

The EU and Mercosur signed two separate agreements, including an interim trade agreement focused solely on commercial aspects, and a broader association agreement covering political dialogue, sectoral cooperation, trade, and investment.

While the interim trade agreement could theoretically enter into force after signing, EU practice dictates approval by the European Parliament, which is unlikely before April or May 2026. Opposition is expected from lawmakers in countries that voted against the deal, as well as from far-right and far-left parties.

More significantly, 145 Members of the European Parliament have demanded that the EU Court of Justice assess the legality of key provisions before parliamentary approval. A vote on whether to refer the agreement to the court is scheduled for January 21. Such a move could delay the process by up to two years, or even derail the agreement altogether.

At the heart of the legal challenge is the so-called rebalancing mechanism, which allows Mercosur countries to seek adjustments if EU policies harm their expected economic benefits. Opponents argue this could constrain the EU’s ability to introduce new environmental or health regulations.

Even if the interim trade deal clears the European Parliament, the broader association agreement faces a far more complex ratification process, requiring approval by all EU member states, and in some cases regional parliaments, as in Belgium. A precedent looms: the EU–Canada trade agreement signed in 2016 is still awaiting ratification by ten EU countries.

Ratification is also required in all Mercosur states, though officials expect a smoother path there. Parliamentary debates are likely to begin in late February or early March, after the summer recess. Uruguay hopes to be the first to ratify, while approval in Brazil is expected to face limited resistance.