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EU and Mercosur seal landmark trade agreement
The European Union and the Mercosur trading bloc-comprising Brazil, Argentina, Paraguay, and Uruguay-have concluded a free trade agreement after 25 years of negotiations, despite fierce opposition from European farmers. The deal, described as the EU's largest to date, now awaits approval from the European Parliament in the coming months.
Political reactions and geopolitical significance
Brazilian President Luiz Inácio Lula da Silva celebrated the agreement as a "historic day for multilateralism," framing it as a counterbalance to rising protectionism, particularly under U.S. President Donald Trump's tariffs and recent military actions in Venezuela. EU Commission President Ursula von der Leyen called the deal a "win-win," emphasising its potential to strengthen economic ties and support the green transition.
Former EU Trade Commissioner Cecilia Malmström highlighted the agreement's geopolitical weight, telling the BBC that it sends a "strong signal" to nations that do not prioritise rule-based trade. She also noted that parts of the deal could be suspended if Mercosur countries fail to meet environmental commitments, including pledges to combat deforestation.
Economic impact and farmer protests
The European Commission estimates the agreement will save EU companies €4 billion ($4.7 billion, £3.5 billion) annually in export duties. South American nations, rich in gold, copper, and critical minerals for renewable energy, stand to benefit from increased access to European markets. However, economists caution that the macroeconomic impact may be minimal, with the Commission projecting a mere 0.05% boost to EU economic output-benefits that would not materialise until at least 2040 due to a 15-year phased implementation.
Farmers across Europe have vehemently opposed the deal, fearing undercutting by cheaper imports such as beef, poultry, and sugar. Protests erupted in France and Belgium, with demonstrators blocking roads with tractors. Judy Peeters, a representative for a Belgian young farmers' group, told AFP: "There is a lot of pain. There is a lot of anger."
"We have listened to farmers' concerns and introduced robust safeguards to protect their livelihoods,"
Ursula von der Leyen, EU Commission President
Next steps and challenges
A majority of EU member states endorsed the agreement on Friday, but its fate now rests with the European Parliament, where analysts predict a closely contested vote. Jack Allen-Reynolds, deputy chief Eurozone economist at Capital Economics, warned that even if approved, the deal's economic effects would be "macroeconomically insignificant" in the short term.
The agreement also includes provisions to ensure a stable supply of raw materials essential for the green transition, aligning with broader EU climate goals. However, critics argue that enforcement mechanisms for environmental and labour standards remain a key point of contention.
