EU, Mercosur set to sign long-sought free trade pact in Paraguay, creating one of the world’s largest markets
The European Union and South America’s Mercosur are poised to sign a free trade agreement in Asuncion, Paraguay, on Jan. 17, capping more than 25 years of negotiations and creating one of the world’s largest free trade areas. The pact would eliminate tariffs on more than 90% of bilateral trade across a market representing about 30% of global GDP and more than 700 million consumers.
- Advertisement -
The deal, agreed in Brussels last week despite mounting resistance from European farmers, is expected to be formalized in Asuncion with European Commission President Ursula von der Leyen and European Council head Antonio Costa traveling via Rio de Janeiro for the ceremony. Paraguay’s president, Santiago Pena, will host. Uruguay’s president, Yamandu Orsi, will attend, while the participation of Argentina’s Javier Milei and Brazil’s Luiz Inacio Lula da Silva remained unconfirmed.
Talks between the EU and Mercosur’s founding members — Argentina, Brazil, Uruguay and Paraguay — began in 1999 and have repeatedly stalled over market access and standards. Bolivia, though a member of Mercosur, was not part of the original negotiating group and will not be a party to the pact at this stage.
The European Commission negotiated the text but fell short of winning unanimous political backing inside the bloc. France led a late push to block the agreement, citing concerns for farmers and environmental safeguards, with Ireland, Poland, Hungary and Austria also voting against. A shift by Italy in favor ultimately cleared the way for approval in Brussels. The agreement still faces a ratification gauntlet by Mercosur members and the European Parliament, where a majority is not guaranteed.
Farmer protests intensified in recent days in France, Poland, Ireland and Belgium, reflecting fears that the deal will open the door to a surge of cheaper South American products produced under standards they argue are less stringent than EU rules. In response, the European Commission announced a crisis fund and safeguard provisions that would allow preferential tariffs to be suspended if imports spike and cause serious market disruption.
Supporters cast the agreement as a strategic answer to a more fragmented global trading system. Lula last week hailed an “historic day for multilateralism” after the EU breakthrough, pointing to a world of “growing protectionism and unilateralism.” Argentine trade analyst Luciana Ghiotto called the deal essential “to show that there is a third way without tying ourselves to the United States or China,” adding that the rush to conclude it is linked to President Donald Trump’s administration and its expansive use of tariffs. Political scientist Alejandro Frenkel of Argentina’s University of San Martin said the accord helps the EU shore up strategic autonomy and its role as an international actor, while offering Mercosur a rare win amid internal divisions over how to respond to U.S. pressure on countries such as Venezuela and Cuba.
Beyond its geopolitical signaling, the agreement promises broad tariff cuts across industrial goods, agriculture and services. EU exporters would gain improved access to South American markets for machinery, cars and chemicals, while Mercosur producers would benefit from lower barriers on farm products and selected manufactured goods — provisions that underpin both the alliance’s economic potential and the political friction it has stirred.
The signing will start a new phase in which national parliaments in Mercosur and the European Parliament assess the text and the safeguards tied to it. For backers, the prize is a transatlantic economic bridge that diversifies supply chains and deepens ties across two continents. For skeptics, it is a test of whether the deal can expand trade without undercutting livelihoods or weakening standards.
Much now rests on whether the political momentum that carried the pact to Asuncion can withstand the pressures of ratification — and whether the promises of market access, resilience and multilateralism can prevail over protests at home.
By Abdiwahab Ahmed
Axadle Times international–Monitoring.
