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EU Prime Minister Ursula von der Leyen on Saturday praised the bloc for choosing “fair trade over tariffs” after signing the bloc’s first major trade deal with South American Mercosur countries in 25 years.
“We have chosen fair trade over tariffs and productive long-term partnerships over isolation,” von der Leyen said at a ceremony in Asunción, Paraguay.
European Council President Antonio Costa said the agreement sends “a message in defense of free trade, based on the rules of multilateralism and the rules of international law, which underpin relations between countries and regions.”
He said this was in contrast to “the use of trade as a geopolitical weapon.”
The Mercosur agreement, negotiated over 25 years, will create a free trade area involving some 700 million people and phase out around 90% of tariffs across industry, services and agriculture. The European Commission estimates that EU companies could save more than €4 billion a year in customs duties. Mercosur countries have also pledged to open their public procurement markets to European companies on the same terms as domestic competitors.
The agreement provides for the recognition of 344 “geographical indications” and aims to protect European products from counterfeiting, as well as reduce the EU’s dependence on China by securing supplies of critical minerals.
The agreement crystallized divisions within the bloc.
Supporters, led by Germany and Spain, say the EU needs a new trade relationship as the United States closes its markets and China pursues increasingly aggressive trade policies. Opponents, led by France, say the deal threatens European farmers by exposing them to unfair competition from imports from Latin America.
The ball is in the court of the European Parliament
Paris was unable to rally a minority to finally stop They canceled the contract and lost crucial Italian support at the last minute. Rome supported the deal, securing funding for farmers from 2028 and an exemption from the EU’s carbon border tax on fertilizers.
Despite opposing the deal, France secured a safeguard clause that would allow tariffs to be reintroduced if imports from Mercosur increase by more than 5% in sensitive sectors.
The agreement also caps tariff-free access for key agricultural products. Annual beef imports will be capped at 99,000 tonnes with a reduced tariff of 7.5%, equivalent to 1.5% of EU production. Poultry imports will be limited to 180,000 tonnes per year, or 1.3% of EU production.
According to estimates by the European Commission, EU exports to Mercosur countries are expected to increase by 39% (€48.7 billion) by 2040, while imports from Latin America are expected to increase by 16.9% (€8.9 billion).
But as French President Emmanuel Macron wrote in X magazine last week, “the signing of the agreement is not the end of the story.”
Since the contract is currently signed, The ball is in the court of the European Parliament. Ratification requires the consent of parliamentarians, and while supporters hope the EU government’s support will sway undecided MPs, opinion remains sharply divided along domestic lines.
Opponents will test their support as early as next week when the EU’s highest court is expected to vote on a resolution to challenge the deal.
