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 the date 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, 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. 

The interim trade agreement comes into effect on May 1, but the trade blocs are facing the possibility that a legal challenge could again derail the deal in a couple of years. What’s at stake as the European Court of Justice examines the accord? 

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. 

But on January 21, the Parliament, a body composed of directly elected representatives, voted narrowly to refer the deal to the European Court of Justice. Europe’s top court is now responsible for adjudicating whether the agreement runs afoul of any environmental or consumer protection laws, and if the deal can go into force without the Parliament’s approval. Shortly after, German Chancellor Olaf Scholz, a proponent of deal, criticized the Parliament’s vote, adding, “We mustn’t let ourselves be held back by those who want to use the lever of trade policy to drive the weakening of Europe.” The Court’s decision is expected by 2028.

Nevertheless, the Commission, the EU’s executive body, leveraged its power to proceed with the provisional application of the trade deal. Commission leadership had reminded EU members that it could circumvent parliamentary approval but would have preferred to avoid taking this unusual step. The political and institutional aspects of the full Partnership Agreement, however, do require ratification by EU member states. This includes cooperation mechanisms on issues such as security, migration, and technology.   

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. Mercosur’s four founding members—Argentina, Brazil, Paraguay, and Uruguay—have already completed this step. 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. 

Argentina’s libertarian President Javier Milei fast-tracked congressional debate on the deal after it was signed in January, although he raised concerns about quotas and other safeguard measures. Upon ratification, he described the deal as "a fundamental step towards strengthening Argentina's international integration." 

If the European Court of Justice clears the way for the deal, 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.

Correction: A previous version of this article incorrectly used a quote from 2019 to refer to events in 2026.