After over 25 years of negotiations, the European Union and the Mercosur bloc of South American nations have signed a landmark free trade agreement, creating one of the world's largest free trade areas.
Signed on January 17, in Asuncion, Paraguay, the deal is aimed at deepening economic ties between the two regions. Bolivia, Mercosur's newest member, may join the agreement later, while Venezuela remains excluded after being suspended from the bloc.
What The Agreement Covers
The deal will gradually eliminate tariffs on over 90 per cent of trade between the two sides once it comes into force. South American countries will gain expanded access to European markets for agricultural exports such as beef, poultry, sugar and soy.
In return, European firms will face lower barriers when exporting cars, machinery, chemicals, pharmaceuticals and other industrial goods to South America. Together, the two blocs represent a combined market of more than 700 million consumers.
Why Negotiations Took So Long
Talks began in the late 1990s but repeatedly stalled over deep political and economic differences. European farmers raised concerns about competition from cheaper South American agricultural imports, while the EU pushed Mercosur countries to meet stricter environmental, food safety and labour standards.
Disputes over deforestation, animal welfare and production regulations, along with frequent political changes in South America, contributed to decades of delays.
Why The Deal Was Revived Now
The agreement gained momentum amid rising global trade tensions and the renewed use of tariffs by the United States under Donald Trump.
Faced with increasing protectionism, the EU sought to diversify its trade relationships and reinforce rules-based commerce. For Mercosur countries, the deal offers stable access to a major export market at a time of global economic uncertainty.
Why The Deal Is Geopolitically Significant
It strengthens the EU's presence in a resource-rich region increasingly influenced by China and contested by the US. European Commission President Ursula von der Leyen framed the pact as a conscious choice in favour of “fair trade over tariffs” and long-term cooperation.
For South America, the deal signals an intention to maintain diverse global partnerships rather than align too closely with any single power.
Why European Farmers Are Opposed
Farmers in several EU countries fear the agreement could lead to an influx of cheaper agricultural imports, putting pressure on domestic prices and incomes. They also argue that South American producers may not face the same environmental and labour standards.
To address these concerns, the EU included quotas on sensitive farm products, phased tariff reductions and promised additional subsidies, though opposition remains strong in countries like France.
Is There Consensus Within Mercosur?
Support for the deal is broad across South America, but not without political nuance. Brazilian President Luiz Inacio Lula da Silva has long championed the agreement as a symbol of multilateral cooperation, even as tensions with the EU surfaced over regulatory demands.
In Argentina, President Javier Milei, once a critic of Mercosur, endorsed the pact, arguing that protectionism is a key cause of economic stagnation.
What Still Needs To Happen Before It Takes Effect
The agreement must be approved by the European Parliament and ratified by each Mercosur member state before it can be implemented.
Ratification in South America is expected to be relatively smooth. In Europe domestic political resistance and lobbying by farm groups could complicate or delay the process.
How The EU-Mercosur Deal Matters
If ratified, the pact would create one of the world's largest free trade zones and reinforce support for open markets at a time when trade wars and economic nationalism are on the rise.
It stands as a test of whether large, complex trade agreements can still succeed amid political pressure and whether major economies are willing to commit to cooperation over confrontation.
