The Association Agreement between the European Union (EU) and Mercosur (EU-Mercosur), for which technical negotiations concluded in 2019 after more than twenty years, constitutes the largest bi-regional trade pact ever negotiated. Beyond its tariff dimension, the agreement must be understood as an instrument of geopolitical positioning within a context of global trade fragmentation, great power rivalry, and the reconfiguration of value chains.
This analysis evaluates its real economic viability, the structural asymmetries between both regions, and the main political blockages that have prevented its ratification—specifically European agricultural protectionism and the environmental conditionality associated with the Green Deal—incorporating a critical reading of both the European approach and Mercosur’s internal weaknesses.
1. Strategic Dimension of the Agreement
The EU and Mercosur jointly comprise a market of around 780 million consumers and nearly 20% of global GDP. From the European perspective, Mercosur has historically been a primary destination for Foreign Direct Investment (FDI), with an accumulated stock exceeding €330 billion in the last decade—a figure surpassing combined European investment in China and Russia.
However, the prolonged delay in ratification has had clear strategic consequences: China has displaced the EU as the main trading partner of Brazil and Argentina, consolidating its influence through bilateral agreements, infrastructure financing, and control over key supply chain segments. In this context, the EU–Mercosur agreement has evolved from a commercial opportunity into an element of economic security for Brussels.
2. Commercial Architecture and Tariff Liberalization
The agreement envisions broad but asymmetric liberalization. According to estimates by the European Commission and ECLAC (CEPAL), over 90% of bilateral trade would become tariff-free once transition periods are completed. However, these figures must be interpreted with caution, as their effective impact will depend on the utilization rate of the agreement, regulatory requirements, and the capacity of companies to comply with technical and environmental standards.
- Potential benefits for the EU:
- Manufacturing Industry: Progressive elimination of high tariffs on automotive (up to 35%), machinery (14–20%), and chemical products (up to 18%).
- Estimated Savings: Around €4 billion annually in customs duties under scenarios of intensive agreement usage.
- Geographical Indications: Protection of over 350 European products, reinforcing brand value and European quality agricultural income.
- Potential benefits for Mercosur:
- Preferential Access to the European Market: Zero or reduced tariffs for approximately 90–93% of its exports, with a particular impact on agribusiness.
- Sensitive Quotas: Beef (99,000 tonnes with a 7.5% tariff), poultry, sugar, and ethanol, designed to mitigate opposition from European producers.
The design reflects a political balance rather than an economic one: the EU protects sensitive agricultural sectors, while Mercosur accepts significant openness in manufacturing.
3. Geopolitics of Resources and Value Chains
One of the least visible but most strategic elements of the agreement is access to critical raw materials. The EU has identified 34 resources essential for its energy and digital transition; several of them are concentrated in Mercosur countries, such as lithium (Argentina and Brazil), niobium, and iron ore.
The agreement aligns with the European Global Gateway strategy, aimed at reducing dependence on China for strategic inputs. For Mercosur, the opportunity lies in integrating into value chains of greater complexity. However, this potential will only materialize if accompanied by active industrial policies, investment in local capabilities, and real technology transfer mechanisms. Otherwise, there is a risk of reproducing a classic extractive relationship, a recurring fear in Latin American structuralist literature.
4. Political Obstacles and the “Brussels Effect”
4.1 European Agricultural Protectionism
Opposition from farmers in France, Ireland, and Poland has been one of the main brakes on the agreement. The central argument is the alleged unfair competition derived from less stringent environmental and animal welfare standards in Mercosur. Although the agreement incorporates the precautionary principle and strict sanitary mechanisms, the debate has been widely politicized and linked to the defense of European food sovereignty.
4.2 Environmental Conditionality and “Green Neoprotectionism”
Since 2023, the EU has demanded additional environmental commitments aligned with the European Green Deal and the Regulation on Deforestation-free products (EUDR). For Brazil, Argentina, and Paraguay, these demands alter the original balance of the agreement and are perceived as disguised non-tariff barriers. Economically, regulatory compliance costs may exclude small and medium-sized South American producers from the European market, favoring large conglomerates with greater adaptive capacity.
5. Structural Asymmetries and Risk of Re-primarization
The main risk for Mercosur is not commercial, but structural. Opening up to high-productivity European manufactures—automotive, machinery, chemicals—may weaken local industrial sectors, particularly in Brazil and Argentina, where industry already faces competitiveness issues. Currently, over 80% of Mercosur exports to the EU correspond to commodities or natural resource-based manufactures, while Europe exports high value-added goods.
Added to this imbalance in tangible goods is the liberalization of the services sector—finance, telecommunications, maritime transport, and insurance—where the EU holds a competitive global hegemony. The facilitated entry of European service providers consolidates the EU’s surplus in intangibles and partially offsets its agricultural deficit, but adds an extra layer of pressure on Mercosur economies, which are net importers of these high value-added services and lack global champions in these sectors.
Without coherent industrial policies, effective regional coordination, and regulatory stability, the agreement could deepen the productive gap. This risk is not theoretical: previous experiences of asymmetric agreements show that liberalization without industrial strategy tends to consolidate center–periphery patterns.
Structural Impact Table: EU-Mercosur Agreement
| Dimension | European Union (EU-27) | Mercosur (Brazil, Argentina, Uruguay, Paraguay) |
| ADVANTAGES AND OPPORTUNITIES | 1. Access to Industrial Markets: Elimination of high tariffs (up to 35% on cars, 14-18% on machinery and chemicals). Estimated savings of €4 billion/year in customs duties. 2. Geopolitics and Critical Resources: Privileged access to strategic raw materials (lithium, copper, niobium, iron) vital for the energy transition and de-risking from China. 3. Geographical Indications (GIs): Protection of 350 European products (e.g., Champagne, Prosciutto di Parma) against imitations in the South American market 4. Services and Public Procurement: European companies will be able to bid on government contracts in Mercosur countries on equal terms with locals (transport, infrastructure). | 1. Agro-export Power: Consolidation of export quotas with 0% or reduced tariffs for beef (99k tonnes), poultry (180k tonnes), sugar, and ethanol. Access to a high-purchasing-power market. 2. Institutional Modernization: The adoption of European standards (ISO, phytosanitary) may force an improvement in productive quality and logistics, increasing global competitiveness. 3. Import of Capital Goods: Access to European machinery, industrial technology, and pharmaceutical inputs at lower cost (tariff-free), which is vital for updating the productive matrix. 4. Attraction of Investment (FDI): A renewed flow of European capital is expected in renewable energy, infrastructure, and service sectors. |
| DRAWBACKS AND RISKS | 1. Impact on Primary Sector: Strong opposition from farmers (France, Ireland, Poland) who fear competition from South American products with lower production costs and lax regulations. 2. Reputational and Environmental Risk: Internal social and political pressure regarding the import of products linked to deforestation (soy/meat), clashing with the European Green Deal and anti-deforestation regulation (EUDR). 3. Sanitary Controls: Challenge in ensuring that 100% of imports meet strict EU food safety standards (“Farm to Fork”). | 1. Risk of Deindustrialization: Local manufacturing industry (especially in Brazil and Argentina) might not withstand competition from tariff-free European industrial products, accentuating the “re-primarization” of the economy. 2. Loss of Regulatory Sovereignty: European environmental demands (side letter) are perceived as non-tariff barriers that limit agricultural development and legislative autonomy. 3. Government Procurement: Opening public tenders limits the capacity of Mercosur states to use state purchasing power to foster national industry (“Buy National” policies). |
| ECONOMIC BALANCE | Industrial Surplus: Gains competitiveness in high value-added exports (cars, pharma, machinery). | Agricultural Surplus: Gains volume and price in commodities, but risks the SME industrial fabric. |
6. General Balance
For the EU, the agreement reinforces its industrial position, ensures access to critical resources, and preserves geopolitical relevance in South America. For Mercosur, it offers access to a high-purchasing-power market and cheaper capital goods, but at the cost of greater competitive pressure on its industry and service providers.
In conclusion, the EU–Mercosur Agreement is economically viable, but politically fragile. Its ultimate viability will not depend on tariffs, but on the capacity of both regions to build political trust. If the EU maintains a unilateral approach regarding environmental matters and Mercosur fails to offer credible guarantees of sustainability and industrial policy, the opportunity cost will be high.
The failure of the agreement would not imply maintaining the status quo, but rather an acceleration of Mercosur’s strategic reorientation toward Asia and the Pacific, consolidating an Atlantic divergence that would reduce European influence in one of the most resource-rich regions on the planet.
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