Unpacking the EU-Mercosur Trade Agreement

On Dec. 6, the European Union and Mercosur (a trade bloc that includes Brazil, Argentina, Uruguay, Paraguay and Bolivia) announced a political agreement on a trade deal that aims to remove or reduce tariffs and non-tariff barriers on various products, such as food, cars, machinery and clothing.

This deal has been in the making for 25 years. Negotiations began in 1999 and went through different phases. In June 2019, an agreement was reached, but obstacles soon emerged. After Jair Bolsonaro became president of Brazil and intensified Amazon deforestation, opposition to the agreement grew within the EU. At the same time, the EU began developing an anti-deforestation law that introduced stricter rules than those initially agreed upon by the two blocs, further straining relations with Mercosur. Resistance to the deal also was increased among EU farmers, who feared it would flood the market with cheap agricultural products, particularly meat, while consumer associations argued that it would compromise the EU’s food safety standards, especially regarding the use of growth hormones in animal farming — banned in the EU but still permitted in some cases in Mercosur.

The updated text of the December 2024 agreement tries to address criticism, introducing a commitment to halt deforestation by 2030 and protective measures whenever scientific evidence regarding environmental or food safety risk is insufficient. Despite these changes, opposition in the EU remains strong, with France and Poland leading the resistance, while Germany and Spain back the agreement.

A significant part of the debate is based on perception rather than economic realities. Bettina Rudloff, a researcher at the German Institute for International and Security Affairs (SWP) and co-author of a 2021 study on the potential effects of the EU-Mercosur deal, argued that a sudden influx of cheap meat into the EU market is unlikely.

“Based on the text of the 2019 agreement, we estimated that less than 4% of European meat consumption would come from Mercosur; it would enter gradually and would be mainly premium cuts,” she said.

Rudloff explained that while 4% of consumption isn’t significant from an economic perspective, agriculture is an emotional issue in many European countries, often overshadowing the facts. “Ultimately, the debate is less about economics and more about politics,” she said.

Although the December 2024 agreement is an important milestone, it simply marks the end of negotiations. In fact, after a 25-year preamble, the showdown within the EU is just about to start, and the outcome is still uncertain. In typical EU fashion, what lies ahead is a maze of political tactics and complicated decision-making processes.

For the deal to be effective, it must be approved first by the Council of the EU and then by European Parliament. The approval of member state parliaments also may be required, depending on how the agreement is submitted. Trade agreements typically consist of two parts. One focuses on trade, which is the exclusive competence of the EU. The other addresses political cooperation, which requires approval from both EU and all national parliaments. If the two parts are submitted separately (as a split agreement), the trade part can be approved by the EU alone. If it’s submitted as a whole package (mixed agreement), it also must be approved by parliaments of each of the member states, effectively requiring unanimity.

As Thomas Verellen, assistant professor, European Union law, at Utrecht University, explained, the intention of the Commission — the executive arm of the EU that conducted the negotiations — is likely to move forward with a split agreement. “If the trade part gets approved at EU level, it will come into effect even if the non-trade part hasn’t been ratified by all member states,” he said.

Either way, approval by the Council is not at all granted. The legislative body is made up of one minister for each member state and follows a qualified majority rule: a proposal passes if it is supported by at least 55% of member states (15 out of 27) representing at least 65% of the EU population. To prevent the largest countries from having a disproportionate influence, an additional rule states that for a proposal to be rejected, at least four member states must vote against it. With the opposition of France and Poland and the favorable vote of Germany and Spain, all eyes will be on Italy, the third most populous country in the EU. Its head of government, Giorgia Meloni, stated they won’t approve the deal unless there are safeguards for farmers in place. If France and Poland manage to convince Italy to vote no, the three countries together will only need the negative vote of one more member state to block the deal.

For many observers, a rejection of the deal likely would be its definitive end. With potential new U.S. tariffs on the horizon and China’s growing influence in the Mercosur region, that would deal a serious blow to EU trade.