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-fuelled 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, the document has not yet been signed and there remain 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? 

Before the official document bearing the terms and condition of the agreement can be signed, the legal teams of both blocs need to review the text to ensure its viability in each jurisdiction. This process, also referred to as “legal scrubbing,” works in conjunction with the translation of the text into all official languages of both the EU and Mercosur. Once this is complete, the Mercosur heads of state and the president of the European Commission can sign the agreement.

After the December 2024 announcement of the agreement in Montevideo, Uruguay's Foreign Minister Omar Paganini said that he expected both blocs to carry out this process in the “coming months.”

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 will submit the agreement to both the European Parliament and the Council of the European Union for review and ratification. Approval in the European Parliament requires a simple majority of votes among the body’s representatives.

Mechanisms for approval in the Council, which is composed of ministers from member countries, are slightly more complex. There, it needs to be ratified by at least 55 percent of member countries (i.e. 15 of 27), representing no less than 65 percent of the EU’s population. The agreement can be blocked by a minimum of four countries that represent at least 35 percent of the bloc’s population. Citing an international relations expert, an AFP fact check estimates that this process could take approximately two years, if there are no major hurdles.   

French President Emmanuel Macron has called the deal “unacceptable” and France, whose farmers have led the opposition to this FTA, may be looking for support to block the deal in the Council. A week before the agreement was announced, Poland’s Prime Minister Donald Tusk said that his country would not accept the agreement in its current form. France and Poland represent around 23 percent of the EU’s population, short of the amount needed for a veto. The support of a few countries, including Austria and the Netherlands, is uncertain. 

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. 

The European Commission has yet to decide on the path to implementation should the agreement be approved by the Council and the Parliament. One option would depend on the approval of all 27 member states’ national legislatures for the FTA to be fully implemented. The other pathway allows for commercial aspects of the deal to go into effect once the EU bodies give the green light, while each member country can decide independently to provisionally apply the political and institutional dimensions of the FTA. The latter has been the procedure used for the EU–Canada agreement, negotiations for which were finalized in 2014, with a deal signed in 2016 and provisionally applied since 2017. 

All said, it is unclear how long the path to implementation for the Mercosur–EU FTA will be.