EU and Mercosur Sign Trade Pact to Build One of the World’s Largest Free-Trade Areas

Overview

• Bloc representatives signed the deal in Asunción on January 17 to connect markets of roughly 700–720 million people and about US$22 trillion in GDP, with EU chiefs Ursula von der Leyen and António Costa present and Brazil represented by Foreign Minister Mauro Vieira.
• The pact phases out import duties on most bilateral trade, with the EU eliminating tariffs on 95% of Mercosur goods within up to 12 years and Mercosur cutting tariffs on 91% of EU goods within up to 15 years, including immediate relief for many industrial items.
• Sensitive agricultural products enter under quotas and safeguards covering beef, poultry, rice, sugar, honey and ethanol, with EU quotas around 3% by goods or 5% by value and Brazilian market quotas up to 9% by goods or 8% by value, while EU sanitary standards remain unchanged.
• The text includes binding environmental clauses that deny benefits to goods linked to illegal deforestation and allow suspension of the agreement for violations of the Paris Agreement.
• The deal requires approval by the European Parliament and the legislatures of Brazil, Argentina, Paraguay and Uruguay, provisional application of some commercial measures is possible, and resistance persists in parts of the EU after several countries opposed the text and farmer protests intensified.