The European Union and South American bloc Mercosur are set to sign a historic free trade agreement on Saturday, creating one of the world’s largest free trade areas. The pact, over 25 years in the making, aims to eliminate tariffs on more than 90 percent of bilateral trade between the two regions. The agreement is expected to favor exports of European cars, machinery, wines, and spirits to Mercosur, while the South American bloc will have easier access to European markets for its beef, sugar, rice, honey, and soy.
The EU and Mercosur account for 30 percent of global GDP and over 700 million consumers. The agreement has been under negotiation since 1999 between the EU and Mercosur founding members Argentina, Brazil, Uruguay, and Paraguay. Bolivia, also a member of Mercosur, will not be a party to the pact.
European Commission President Ursula von der Leyen and European Council head Antonio Costa will attend the signing ceremony in Asuncion, Paraguay, along with host president Santiago Pena and Uruguay’s president, Yamandu Orsi. The attendance of Argentina’s leader, Javier Milei, and Brazil’s Luiz Inacio Lula da Silva is not confirmed.
The agreement has sparked tensions with Europe’s agricultural sector, which fears an influx of cheaper South American products due to less stringent production standards. Thousands of farmers have been protesting in France, Poland, Ireland, and Belgium in recent days. To address these concerns, the European Commission has announced a crisis fund and safeguards allowing for the suspension of preferential tariffs in case of a damaging surge in imports.
The pact is seen as a significant step towards multilateralism in the face of growing protectionism and unilateralism. Argentine trade analyst Luciana Ghiotto noted that the agreement is essential to show that there is a third way without tying themselves to the United States or China. The deal must still be ratified by Mercosur members and the European Parliament, where a majority in favor is still not certain.
The signing of the agreement marks a rare victory for Mercosur at a time of crisis and internal fragmentation. For the EU, the deal is a way to shore up autonomy and a place as a significant actor internationally. The agreement is expected to have a significant impact on global trade and economy, and its implementation will be closely watched by international observers.
