The global trade wars prompted by President Donald Trump´s protectionist actions are leading to a revival of interest in trade agreements between regions outside the United States. Trade is now more geopolitical than ever. Case in point: After more than 25 years of negotiations, the European Union has finally concluded a trade agreement with the four countries of Mercosur (Argentina, Brazil, Paraguay, and Uruguay), establishing a free trade area covering almost 800 million people.
Although a signing ceremony is set to happen in Brazil, the EU-Mercosur accord is almost, but not quite, a done deal. The signing will require decisions in the four parliaments of the Mercosur countries as well as approval by the European Parliament and a qualified majority of EU member states. Failing to sign it would be a serious blow to Europe´s desire to forge an independent geopolitical path at a time of rampant destructive trade fights.
The European Union is leading the way on trade
The European Union already has more free trade agreements than any other jurisdiction in the world. Trade agreements facilitate commerce, investment, and business opportunities, but in the European Union, they are embedded in broader partnership agreements and thereby also lead to cooperation in security, migration, research, sustainable development, and other matters.
After the Trump administration’s “Liberation Day” tariffs earlier this year, the European Union concluded a deal calling for tariffs on European goods of “only” 15 percent—the highest transatlantic tariffs since the 1930s. During the Obama administration, the United States and European Union had tried to negotiate a comprehensive trade agreement, the so called Transatlantic Trade and Investment Partnership (TTIP), deepening two-way trade that stands at $4 billion a day and supporting 16 million jobs. But Trump killed the talks in his first term. With the new American tariff regime, Europe is stepping up its efforts to diversify its trade relations. Earlier this year, the European Union opened negotiations with the United Arab Emirates; resumed long dormant talks with Malaysia, the Philippines, and Thailand; concluded negotiations with Indonesia; stepped up efforts to conclude talks with Australia and India; and updated an agreement with Mexico.
Almost twenty years of negotiations
The Mercosur talks were launched in 2008 but paused and resumed in 2016. When President Jair Bolsonaro of Brazil took office in 2019, the European Parliament and many EU member states balked over his policies destroying the Amazon Basin. The Brazilian president was also reluctant to sign up for the sustainability requirements in the agreement.
The agreement has now been updated with a new chapter on sustainable development and specific provisions on deforestation. The negotiations were finally concluded in December 2024. Still, several European countries are facing farmer protests over food imports from Mercosur countries. It has long been unclear if a country like France, where the protests have been the loudest, and other countries (Belgium, Poland, Austria, and the Netherlands) will ratify the agreement. EU trade agreements are valid for all countries; no one can opt out once they have entered into force. The Mercosur agreement needs only a qualified majority so France and a couple of other countries could vote no or abstain. However, if several countries still oppose, the planned signing ceremony on December 20 could still be postponed. The goal is to have unanimity, especially after all these years of negotiations.
To appease protests, the European Union has adopted a safeguard mechanism that will be triggered if import prices from Mercosur are at least 10 percent lower than the same or competing EU product and the imports increase. Brazil has voiced its discontent over this mechanism but will likely accept it.
For Europe, the deal will cut duties on more than 91 percent of goods exported to Mercosur and improve access to crucial raw materials while promoting fair and rules-based trade. For Mercosur, a cut or reduction of tariffs will open possibilities for new exports in honey, rice, ethanol, beef, and other agricultural products. For both partners, customs procedures will be streamlined and technical standards aligned. The agreement also includes dedicated support to small and medium-sized companies on both sides.
The agreement further includes €1.8 billion in EU economic support for the Mercosur countries, and green and digital transition via the European Union's Global Gateway Investment Agenda.
Beyond these economic gains, the agreement deepens Europe’s relations with the Latin American region while reducing its dependence on China and the United States. The Mercosur region is heterogeneous, however. President Javier Milei of Argentina has close ties to the Trump administration, which has extended strong economic support for his reforms.
A more strategic partnership between the continents
Beyond South America, the European Union can use the Mercosur accord as a stepping stone for deepening ties with all of Latin America. The European Union will hold a joint summit with CELAC, the Community of Latin American and Caribbean States, in Santa Marta, Colombia, on November 9–10. The meeting is hosted by President Gustavo Petro of Colombia from the CELAC side and was supposed to be cohosted by European Council president Antonio Costa and European Commission president Ursula von der Leyen from the EU side, with many prime ministers participating. However, several leaders from Europe are now sending lower ranking ministers instead, most likely out of fear of angering President Trump, who has called the Columbian president a terrorist and a drug smuggler.
CELAC is a network including all 33 Latin American and Caribbean countries, created in Caracas in 2011 to foster regional cooperation. It has huge potential to become a powerful bloc, but it has no institutions and no secretariat. The region is rather divided, but the summit in November could energize the bloc and identify areas of cooperation with Europe in derisking and diversifying away from the United States. Countries from both continents are committed to defending a rules-based trading system. Latin America has a lot of renewable energy resources as well as an abundance of the critical raw materials and rare earth minerals that the European Union needs and for which it seeks to reduce its dependence on China. The European Union on the other hand has the investment and capital needed in Latin America. The European Union already has several trade agreements in the region: with Chile, the four Andean countries, Central America, and one with Mexico that has now been updated and modernised and is expected to be signed early next year. Furthermore, there is a trade agreement between the European Union and the 14 countries of the Caribbean, the EU-CARIFORUM agreement. In total, when the EU-Mercosur accord enters into force, there will be formal deals between the European Union and 27 Latin American countries.
In a world of increased polarization and growing protectionism, and where old partnerships need to be rethought, stronger ties between Latin America and the European Union make sense, if leaders on both sides of the Atlantic can show the courage and foresight to take the necessary steps, starting with the signing ceremony in December.
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This publication does not include a replication package.
