EU and Mercosur Sign Long-Sought Trade Pact in Asunción

Overview

• Leaders from both blocs signed the agreement on Saturday in Paraguay, with EU chiefs Ursula von der Leyen and António Costa attending and Brazil represented by Foreign Minister Mauro Vieira as President Luiz Inácio Lula da Silva stayed in Brazil.
• The pact phases out tariffs on most trade flows, with Mercosur eliminating duties on 91% of EU goods over up to 15 years and the EU removing tariffs on 95% of Mercosur goods over up to 12 years, alongside quotas for sensitive farm products.
• Safeguards allow the EU to reimpose duties if markets are destabilized, and binding environmental provisions bar products tied to illegal deforestation and permit suspension for breaches of the Paris Agreement.
• The deal now requires approval by the European Parliament and ratification in Brazil, Argentina, Paraguay and Uruguay, with discussion of provisional application and some lawmakers seeking court review that could slow the timetable.
• Covering a market of roughly 720 million people and about $22 trillion in GDP, the agreement faces resistance from some European farmers and governments, while Brazilian agencies project export gains and longer-term growth effects.