NEWS 27.08.2025
EU-Mercosur Free Trade Agreement – New trade and investment opportunities
After more than two decades of negotiations, the European Union (EU) and the Mercosur countries – Argentina, Brazil, Paraguay, and Uruguay – have finally reached an agreement on the framework of a free trade deal. Initially concluded politically in 2020, the deal took a major step forward on December 6th, 2024, when both sides agreed to strengthen sustainability commitments, namely by including the Paris Agreement and introducing concrete measures to stop deforestation in the Amazon rainforest and other critical ecosystems in the Mercosur region.
The EU-Mercosur Free Trade Agreement (FTA) has the potential to transform commerce between Europe and South America, creating one of the largest free trade areas in the world. Together, the regions represent over 700 million consumers and a combined GDP of more than EUR 20 trillion.
Once ratified, the EU-Mercosur FTA will create a comprehensive framework for trade, covering various sectors and industries. For European companies, particularly small and medium-sized enterprises and agri-food exporters, the agreement promises significant benefits. It is estimated that EU exporters will save over EUR 4 billion annually in customs duties due to the reduction or elimination of tariffs on a wide range of goods, including machinery, chemicals, pharmaceuticals, and agricultural products like wine and cheese. Moreover, the agreement will facilitate access to public procurement markets in Mercosur countries and provide preferential access to key raw materials and green goods, in line with the EU’s green objectives.
At the same time, Mercosur countries will benefit from improved access to the European market, especially for key agricultural products such as beef, poultry, sugar, and ethanol. The agreement will reduce most trade barriers, making it easier for South American producers to sell their goods in Europe. A specific quota for beef allows a certain amount to enter the EU at reduced tariffs, providing an opportunity for Mercosur exporters while keeping balance with European agricultural interests. Beyond agriculture, the deal promotes trade and investment more broadly, helping local businesses grow and supporting employment in the region.
Sustainability is a key part of the agreement. Both EU and Mercosur countries are committed to implementing the Paris Climate Agreement, taking concrete steps to preserve biodiversity, stop deforestation, and ensure that environmental and labour standards are never violated for the sake of investment. Civil society organizations will have a direct role in monitoring how these commitments are implemented, making sure they are more than just words on paper. By combining trade opportunities with environmental commitments, the EU–Mercosur Agreement represents one of the most ambitious examples of sustainable trade in a major international trading area.
From a broader perspective, the agreement improves Europe’s competitiveness and its ability to resist global shocks. This is in line with the EU’s wider approach to competitiveness, highlighting the role of trade policy in reducing dependency and diversifying supply chains. Mario Draghi – the former President of the European Central Bank – in his report on Europe’s economic future underlined said point, stressing that trade agreements are essential to secure raw materials, open new markets, and give European businesses a stronger position in global competition. The EU-Mercosur FTA reflects this approach – by removing trade barriers and expanding cooperation. It creates more predictable conditions for business on both sides and strengthens ties between continents.
As of August 2025, the EU-Mercosur FTA has not yet entered into force. The European Commission has delayed the start of the ratification process, which was initially expected to begin in mid-2025. This delay follows the Commission’s decision to prioritize other global challenges. The FTA requires approval from the European Parliament and the Council of the European Union. Additionally, it must be ratified by all 27 EU Member States, a process that could take even several years. Some member states, notably France and Poland, have expressed strong opposition to the FTA, citing concerns over its potential impact on their agricultural sectors and environmental standards.
Grzegorz Kłodkowski