The European Union (EU) and Mercosur countries have reached a landmark agreement to establish one of the world's largest trade deals, encompassing a free trade area of over 780 million people. The announcement was made during a summit in Montevideo, Uruguay, where European Commission President Ursula von der Leyen hailed the deal as a “historic milestone” after more than two decades of negotiations.

The agreement, which will eliminate duties on over 91% of EU goods exported to Mercosur, promises to deliver significant economic benefits. European exporters are expected to save up to €4 billion annually in tariffs, alongside gaining streamlined customs procedures and improved access to raw materials. For example, 6% of lithium mined in Argentina and substantial percentages of aluminum, bauxite, and tantalum from Brazil will be allocated to European markets. Simplified customs processes and reduced barriers aim to enhance business opportunities, particularly for small and medium-sized enterprises.

Von der Leyen highlighted the importance of the agreement for Europe’s economy, emphasizing that it will bolster opportunities for the 60,000 companies currently exporting to Mercosur. "This is not just an economic opportunity but a political necessity in a world increasingly defined by confrontation," she said, signaling the EU's intent to deepen ties with Latin America amid global tensions and competition.

However, the deal has drawn sharp criticism, particularly from France, which has voiced concerns about its potential impact on domestic agriculture. French farmers fear competition from lower-priced South American imports, such as beef and poultry, which could undercut local markets. France has been at the forefront of opposition, with other EU member states, including Poland, Ireland, and Austria, also expressing reservations. Italy, while undecided, has conditioned its support on guarantees for its agricultural sector.

France’s junior trade minister, Sophie Primas, has pledged to rally opposition, warning of the deal’s implications for European farmers. Meanwhile, President Emmanuel Macron, already grappling with political instability following the resignation of Prime Minister Michel Barnier’s government, faces mounting pressure at home to resist the agreement.

Supporters of the deal argue that it strengthens the EU’s influence in Latin America at a time when China is expanding its investments in the region. Germany has been a vocal proponent, viewing the deal as a lifeline for its struggling exporters. Siegfried Russwurm, head of the Federation of German Industry, called the agreement a “much-needed growth impulse” for both the German and European economies.

The political and economic complexities surrounding the deal have led to calls for careful ratification processes. The agreement must first be approved by the European Parliament and the Council of the EU. While Brussels may separate the trade component from political and cooperation pillars to streamline ratification, national parliaments across the EU must eventually weigh in, potentially delaying its full implementation for years.

Von der Leyen acknowledged the agricultural concerns, pledging robust safeguards to protect EU farmers and uphold health and food standards. "This agreement includes protections for over 350 geographical indications of EU food and drink, maintaining Europe’s high standards," she stated, attempting to allay fears of domestic agricultural harm.

The announcement comes amid rising global economic tensions and speculation about the trade policies of the incoming U.S. administration. For the EU, this deal represents a strategic move to secure partnerships in an evolving geopolitical landscape. As von der Leyen concluded in Montevideo, the agreement serves as both a triumph of diplomacy and a cornerstone of Europe's future economic and political strategy.

Sources:

• Euronews
• Politico