The European Union has finalized a free trade agreement with South American nations, concluding 25 years of negotiations despite opposition from agricultural producers in several European countries.
The accord with the Mercosur trading bloc – comprising Brazil, Argentina, Paraguay, and Uruguay – now awaits ratification by the European Parliament in the coming months.
Brazilian President Luiz Inacio Lula da Silva lauded the agreement as a “historic day for multilateralism” following its culmination in Brussels by the four South American nations.
This development occurs amidst global trade tensions, including tariffs imposed by former U.S. President Donald Trump and recent geopolitical events.
The EU has presented the agreement, poised to be its most significant free trade arrangement to date, as mutually beneficial. However, concerns have been raised that inexpensive imports could disadvantage European farmers, particularly in the beef, poultry, and sugar sectors.
“In an international scenario of growing protectionism and unilateralism, the agreement is a signal in favour of international trade as a driver of economic growth, with benefits for both blocs,” President Lula stated on X.
European Commission President Ursula von der Leyen asserted the deal would “bring meaningful benefits to consumers and businesses, on both sides”.
Farmers across Europe have staged protests against the agreement, including demonstrations with tractors in France and Belgium.
“There is a lot of pain,” Judy Peeters, representing a Belgian young farmers’ group, told AFP during a protest near Brussels. “There is a lot of anger.”
President Von der Leyen noted the Commission’s consideration of farmers’ concerns, resulting in “robust safeguards” within the agreement to protect their livelihoods.
Beyond trade and political cooperation, the European Commission emphasized the agreement’s potential to address climate change through commitments to combat deforestation and ensure a consistent supply of raw materials vital for the global green transition.
The Commission estimates that the agreement will save European companies €4 billion ($4.7 billion, £3.5 billion) annually in export duties.
South American countries possess significant reserves of gold, copper, and essential minerals crucial for renewable energy and battery technology.
Cecilia Malmström, former European Commissioner for Trade, told World Business Express on BBC World Service that aspects of the trade agreement could be suspended if Mercosur countries fail to uphold environmental protection commitments.
“[This agreement] is also a very strong geopolitical signal today to other powers who do not appreciate rule-based trade in the same way as we do,” she stated.
While a majority of EU member states affirmed their support for the free trade agreement, it remains subject to approval by the European Parliament before implementation.
Jack Allen-Reynolds, Deputy Chief Euro-zone Economist at Capital Economics, anticipates a closely contested vote in the parliament.
However, he suggested the deal’s overall impact might be limited, citing the Commission’s projection of a mere 0.05% increase in EU economic output.
“The bigger point though is that even if the agreement is eventually implemented, it will be macroeconomically insignificant,” he said.
“And because it will be phased in over 15 years, these benefits won’t arrive until 2040 at the earliest.”
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