EU and Mercosur Seal Trade Pact; Ratification Now the Test

Overview

• Leaders signed the agreement on January 17 in Asunción, with Brazil represented by Foreign Minister Mauro Vieira as President Luiz Inácio Lula da Silva did not attend.
• The pact phases out tariffs on most trade flows—Mercosur on roughly 91% of EU goods and the EU on about 95% of Mercosur goods—while setting quotas and safeguards for sensitive agriculture.
• Binding environmental provisions bar benefits for goods linked to illegal deforestation and allow suspension in case of Paris Agreement breaches, with sanitary standards in the EU remaining strict.
• Political hurdles persist inside the EU after objections from France, Poland, Austria, Ireland and Hungary, alongside farmer and environmental group opposition.
• EU technical estimates project up to €9 billion more Mercosur exports to the EU by 2040 and an Ipea study sees a 0.46% boost to Brazil’s GDP by 2040, while Paraguay’s president said recent U.S. tariffs helped spur Europe to close the deal.