The Latin American countries of Mercosur and the European Union signed a “historic” treaty in Paraguay on Saturday, creating one of the world’s largest free-trade zones, despite concerns within both blocs. Together, they account for 30% of global GDP and more than 700 million consumers.
The free trade agreement between the European Union and Mercosur was signed on Saturday in Paraguay. – AFP
The agreement had been under negotiation since 1999 between the EU and the founding countries of Mercosur (Argentina, Brazil, Paraguay and Uruguay). A majority of EU member states have recently backed it, despite opposition from several, including France. Numerous demonstrations against the treaty have taken place in several EU countries, while large sections of civil society in Mercosur countries are also opposed.
“We choose fair trade over tariffs, a long-term productive partnership over isolation,” declared president of the European Commission, Ursula von der Leyen, shortly before signing the agreement.
“And above all, we intend to deliver concrete, tangible benefits to our people and our businesses,” she added.
It is a “clear signal in favour of international trade” in a context of “tensions”, said Santiago Peña, President of Paraguay, who currently holds Mercosur’s rotating presidency.
The treaty eliminates tariffs on more than 90% of bilateral trade and boosts European exports of cars, machinery, chemicals, wines and spirits. In return, it eases access to the European market for South American beef, poultry, sugar, rice, honey and soya beans, with duty-free quotas that are causing alarm among affected sectors.
The president of the European Council, António Costa, said in Asunción on Saturday that the agreement sent “a message of defence of free trade, based on rules, multilateralism and international law as the basis for relations between countries and regions”, in contrast to the “instrumentalisation of trade for geopolitical ends.”
For its supporters, the EU-Mercosur agreement will help revive Europe’s ailing economy and strengthen diplomatic relations with Latin America.
But some also see the signing as a threat to sectors on both sides of the Atlantic. In South America, observers remain wary of the treaty’s effects, particularly on local industrial companies. In Argentina, the impact on the automotive industry could result in the loss of 200,000 jobs, according to estimates, notes Luciana Ghiotto, who holds a doctorate in social sciences from the University of Buenos Aires.
For its European detractors, it will disrupt agriculture with cheaper products that do not necessarily comply with EU standards, due to insufficient controls. It has met resistance from farmers and livestock producers in a number of European countries, who have mobilised in large-scale protests against its signing, in France, Poland, Ireland and Belgium.
To calm anger in the sector, the European Commission has drawn up a series of clauses and concessions in recent months, including strengthened guarantees for the most sensitive products. A large farmers’ rally is scheduled for next Tuesday in Strasbourg, outside the European Parliament, which must still vote on the treaty in the coming months.
However, beyond agriculture, the signing has pleased European business representatives. European business, which represents 28 European industry associations (ranging from construction to services, and also including the textile, clothing and footwear industries), welcomed the agreement on Saturday.
Euratex has been advocating for the agreement for months.
“According to Euratex data, in the first seven months of 2025, EU textile and clothing exports to Mercosur reached 299.5 million euros, an increase of 4.4% compared to the same period in 2024,” the federation noted in the autumn.
“Clothing exports saw a particularly strong rise, up 9.2%, while textile exports increased by 2%.”
A similar tone can be heard across many organisations. European business argues that “by 2040, the agreement is expected to add 77.6 billion euros to EU GDP, translating into a 39% increase in EU exports to Mercosur.”
Buoyed by the potential for their industries, the federations are now calling on MEPs to ratify the text.
Strasbourg is, therefore, likely to come under heavy pressure from both supporters and opponents of the agreement in the months ahead.
With AFP
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