Mercosur–EU Free-Trade Agreement: What's in It and What's Next?

The FTA would connect Mercosur’s four founding members—Argentina, Brazil, Paraguay, and Uruguay—with the 27 member states of the EU. This represents more than 700 million people and a combined GDP of over $21 trillion, creating one of the world’s largest free-trade zones. Estimates suggest that the FTA could save businesses more than $4 billion in taxes once it is in full effect, and it is expected to increase the flow of goods, services, and investment. 

How? The FTA, when it enters into force, will gradually remove or reduce tariffs on most goods traded between the economic blocs. For European countries, it creates more favorable conditions to sell key exports currently subject to tariffs of up to 35 percent including machinery, vehicles, and transport equipment; and chemicals and pharmaceutical products; as well as wines and cheeses. Mercosur would remove taxes on 91 percent of EU exports, mostly within 15 years. Hybrid and electric vehicles (18 years), hydrogen-fueled vehicles (25 years), and cars powered by other new technologies (30 years) are subject to longer time frames for trade liberalization, but tariffs on hybrids and electric vehicles will benefit from an immediate reduction to 25 percent from 35 percent when the agreement comes into effect. 

The EU would eliminate duties on 92 percent of Mercosur exports. The majority of Mercosur goods would benefit from an immediate removal of tariffs if ratified, with the rest happening gradually over varying time frames of up to 10 years. South American countries expect to sell more minerals and agricultural goods, which today make up around 70 percent of Mercosur’s exports to the EU. 

Still, it doesn’t allow for unfettered trade.There will be quotas on Mercosur beef, pork and chicken, as well as honey, rice, corn, and other agricultural products. 

The text agreed upon in December 2024 also incorporates environmental standards and a commitment to the Paris Agreement and includes a review clause that makes possible future adjustments to the agreement. 

Nonetheless, there remains a series of steps before implementation. What procedures does each bloc need to carry out to get the trade deal off the page and into shipping containers? 

Among Mercosur states, the full agreement will be submitted to each national congress for review and ratification. For now, this only applies to the bloc’s four founding members: Argentina, Brazil, Paraguay, and Uruguay. Bolivia, which became a full member in July 2024, can sign on to the deal only when it has adopted all of the South American trade bloc’s rules. 

The incumbent Mercosur leaders all have voiced support for the agreement, though President Santiago Peña of Paraguay expressed that he was not fully “satisfied,” believing that “a lot more” could have been done. 

In Europe, the European Commission submitted the agreement to both the European Parliament and the Council of the European Union for review and ratification. The Commission presented the deal in two parts: a full Partnership Agreement encompassing political and cooperation elements alongside trade and investment provisions, and an interim trade agreement.

The Council, which convenes each country’s head of government, agreed on January 9 to move forward with both, although Austria, France, Hungary, Ireland, and Poland voted against it and Belgium abstained. Approval in the European Parliament, a body composed of directly elected representatives, requires a simple majority. Given the ongoing protests from Europe’s influential agroindustrial industry, analysts believe the vote could be close. 

On the Mercosur side, the FTA can be implemented bilaterally. This means that the FTA enters into force for each member state one month after their respective government confirms ratification by the national legislature. 

Brazil and Uruguay are thought to be the most likely to conclude this process first. In Argentina, the deal is not on the congressional docket for February, with debate on a major labor reform taking priority. Paraguay’s Foreign Minister Rubén Ramírez Lezcano reiterated his country’s hesitations on the deal, saying in January, “There should be broader access and fewer market regulations.”

On the European side, although the political and institutional components of the agreement require ratification by each country’s legislature to be implemented, the EU bodies have the authority to greenlight the commercial aspects of the deal. Following the January 9 decision by the Council, European Commission spokesperson Olof Gill said that the interim trade agreement could even go into effect before approval from the Parliament, but added that Commission was working to acquire the necessary votes. A vote is expected in April or May, per Reuters.

The interim trade agreement will be replaced by the complete EU-Mercosur Partnership Agreement once all EU countries have ratified the latter, a process with no clear timeframe. The EU-Canada economic and trade agreement, for example, was signed in 2016 and has been provisionally applied since 2017 while awaiting approval from all EU member states for full implementation.