In December 2025, the long-awaited free trade agreement (FTA) between the European Union (EU) and Mercosur reached provisional agreement and in January 2026 was signed, marking a significant milestone after more than two decades of negotiations. Covering a market of over 700 million people and close to 20% of global GDP, the agreement is one of the largest trade deals ever concluded by the EU. However, despite its economic and geopolitical significance, it has faced immediate political and legal challenges. Several EU member states, alongside strong opposition from agricultural sectors and environmental groups, have raised concerns about competition, sustainability and regulatory standards. As farmers’ protests took place in European capitals, the European Parliament voted for the Court of Justice of the European Union (CJEU) to review the agreement on 21 January, stalling ratification. On 27 February, the European Commission announced provisional implementation of the agreement.
What is Mercosur?
Mercosur is a portmanteau of Mercado Común del Sur (translation from the Spanish: Southern Common Market). Established in 1991 as a regional trade agreement, it aims to promote economic integration and cooperation among its members. The four founding member states are Argentina, Brazil, Uruguay and Paraguay. Venezuela was a member from 2012 to 2016 until its suspension for failing to meet its democratic and trade commitments. Bolivia joined in 2024 but is not yet part of the FTA, as negotiations were concluded prior to its accession. It is currently undergoing a transition period of up to four years to align with Mercosur rules and is expected to join the agreement in the future. Associated states include Chile, Colombia, Ecuador, Guyana, Panama, Peru and Suriname, which benefit from preferential trade agreements but do not have full political rights or complete access to the internal market as full members do. For more information, see the Mercosur website.
Why is this agreement significant?
This agreement affects approximately 718 million people (10% of the world’s population) and a gross domestic product (GDP) of nearly €20.5 trillion. Once ratified it will also eliminate 91% of tariffs imposed on EU exports to Mercosur, saving more than €4 billion annually, and protect 344 products with geographical indications (naming rights for agricultural products).
Its significance is even greater in the geopolitical context. With the US trending toward protectionism, this agreement upholds rules-based multilateral trade and helps mitigate the increasingly asymmetric economic relationship between Mercosur and China. It sets regulatory standards, provides the EU access to raw materials in sectors where it is not self-sufficient, and secures agricultural products. Meanwhile, Mercosur gains access to a high-purchasing-power market, attracts more investment, and its exports to the EU benefit from credibility due to the EU’s high standards on sustainability, health and food safety.
Why did negotiations take so long?
Negotiations began in 1999, and since the conclusion of the first commercial agreement in 2019, the process experienced periods of both progress and stalling.
Some of the factors that made the agreement difficult included disputes over agricultural liberalisation and internal tensions within Mercosur, such as Paraguay’s suspension and the issue of Venezuela’s accession. In addition, the strict European standards and regulations on food safety, environmental protection and labour rights required extensive negotiation. Most recently, disagreements within Europe have further complicated the ratification of the updated agreement, which was signed in 2026 but still faces obstacles in the approval process.
However, broader geopolitical and economic factors ultimately facilitated the agreement’s signature. The desire to counterbalance China’s growing presence in South America, respond to rising global protectionism and revitalise Mercosur’s regional role created strong incentives to conclude the deal. Additionally, the agreement was viewed as a way to strengthen interregional cooperation and raise regulatory standards.
Why is the deal contentious?
Agriculture has historically been one of the most protected sectors in the EU’s trade policy, and negotiating this agreement was no exception. Several European countries (most notably France but also Poland, Austria, Ireland and Hungary) argue that European producers cannot compete with cheaper South American imports that are produced under lower labour and environmental standards. Furthermore, it is contended that lowering tariffs on products such as beef, soy, poultry and sugar could incentivise increased production in Mercosur countries, potentially exacerbating deforestation (particularly in Brazil), increasing greenhouse gas emissions, accelerating biodiversity loss and expanding livestock farming associated with agricultural growth.
To address the contentiousness, on 5 March 2026, the EU formally adopted a regulation implementing safeguard clauses to protect European farmers from sudden surges in imports from Mercosur countries that could cause serious harm. The regulation establishes rapid response mechanisms including streamlined procedures, clear thresholds for initiating investigations, defined timelines and continuous market monitoring to ensure effective and timely action. However, it is worth noting (beyond the scope of this blog) that some dispute the effectiveness of safeguards to protect the environment.
Additional measures to alleviate tensions in the agricultural sector include the EU’s Common Agricultural Policy (CAP), which allocates €300 billion to provide farmers with a stable income, alongside a reinforced Safety Net of €6.3 billion over seven years to support farmers through market disturbances.
Why will there be a delay?
The delay is due to the agreement’s mixed nature, as it is divided into a commercial pillar and a political pillar. The commercial part falls under the EU’s exclusive competence in trade and therefore requires only a qualified majority and the consent of the European Parliament, whereas the political part (covering human rights, economic and financial cooperation and political dialogue) requires unanimous approval by all member states. Although the commercial pillar, originally concluded in 2019 and updated, signed and ratified in 2026, has been provisionally applied, it exposed divisions within the European Parliament. As a result, Parliament requested an opinion from the CJEU regarding concerns about unfair competition, the democratic legitimacy of splitting the agreement into two instruments and the ‘rebalancing mechanism’ allowing Mercosur countries to adopt compensatory measures if new EU legislation reduces their export opportunities. Consequently, the agreement, initially expected to enter into force by the end of 2026, is effectively suspended pending the Court’s opinion in a process that will likely take 12 to 18 months.
What are next steps and what will likely happen?
The commercial part of the agreement is provisionally applied despite the European Court of Justice reviewing its legality. If the Court finds that certain provisions are incompatible with EU treaties, renegotiation with the Mercosur countries would be required.
Regarding the political part, further negotiations are needed to achieve unanimity among all European countries, which could take additional time and effort.
