Background on the Agreement and Key Parties Involved
For over two decades, the European Union (EU) and the Mercosur trade bloc comprising Argentina, Brazil, Paraguay, and Uruguay have been engaged in negotiations for a comprehensive free trade agreement (FTA). This week, the EU took a significant step forward by securing qualified majority support in the Council of the European Union, despite opposition from countries like France, Poland, and Ireland.
The Significance of the Agreement
If ratified by Mercosur, this FTA would establish the world’s largest free trade area, encompassing nearly 25% of global GDP. The agreement aims to reduce and eliminate tariffs on international trade, creating a market of over 700 million consumers. The EU’s industrial sectors, such as automotive and machinery, would gain access to a historically protected market in Mercosur.
EU’s Stance and Key Votes
On Friday, the EU Council endorsed the trade deal with Mercosur by a qualified majority of 21 in favor out of 27 votes. France, Poland, Hungary, Austria, and Ireland voted against the agreement, while Belgium abstained. Italy, crucial for the agreement’s approval, voted in favor after securing concessions from the European Commission for its agricultural sector.
Impact on EU and Mercosur Sectors
For the EU, this FTA will eliminate tariffs for 91% of its exports to Mercosur. This move opens doors to a historically protected market for competitive EU industries, including automotive and machinery. Tariffs on these sectors, ranging from 35% to 14%, will gradually disappear.
- EU Beneficiaries: The chemical, pharmaceutical, and agroalimentary sectors will especially benefit. These industries export billions of euros annually, with products like wine and cheese protected by geographical indications.
- Mercosur Beneficiaries: Tariffs will be eliminated for 92% of Mercosur’s exports to the EU. This will grant preferential access in products such as beef, soybeans, honey, and biofuels under a quota system to limit the impact on European producers.
In the agroindustrial sector, a significant area of interest due to Mercosur’s production capacity and Europe’s resistance, nearly all exportations will receive tariff benefits. An analysis by the Buenos Aires Grain Exchange indicates that 99.5% of Mercosur’s agroindustrial exports will have tariff advantages, with complete elimination for 84% of these products and partial tariff preferences for 15.5%.
- Immediate Tariff Elimination: 70% of agroindustrial exports will have immediate tariff elimination, including fishery products (e.g., hake, scallops, squid), soybeans and their derivatives, certain fruits (apples, pears, peaches, cherries, and table grapes), nuts, dried fruits, vegetable oils for industrial use (soybean, sunflower, and corn), animal by-products (beef, pork, sheep), and other animal origin products (e.g., offal, fat, and bovine semen).
Negotiation History and Future Steps
The EU-Mercosur FTA’s pursuit was formalized in a 1995 cooperation framework agreement, which entered into force in 1999. However, formal technical negotiations only began in Buenos Aires in April 2000. The negotiation process has been complex and prolonged, with lengthy impasses due to strong sectoral interests, particularly in agricultural and industrial products.
Next Steps
The EU’s approval to sign the Mercosur agreement does not represent the final step in closing this historic pact. The agreement may still encounter its last hurdles during ratification in the European Parliament in 2026.
