EU, Mercosur bloc sign trade deal after 25 years of talks, reject ‘tariffs’ and ‘isolation’

Summary

• EU hails choosing "fair trade over tariffs" with Mercosur, aiming for a productive, long-term partnership, according to Ursula von der Leyen.
• The trade deal, 25 years in the making, eliminates tariffs on over 90% of bilateral trade between the EU and Mercosur nations.
• Amid global tensions, the agreement signals support for free trade and multilateralism, contrasting with the "use of trade as a geopolitical weapon".

ASUNCION - South American and European Union officials on Jan 17 signed a major trade deal, which they hailed as sending a powerful message at a time of tariff threats, global uncertainty and protectionism.

The deal between the 27-nation European Union and Mercosur bloc members
Brazil, Argentina, Uruguay and Paraguay creates one of the world’s largest free trade areas after 25 years of tricky negotiations.

It was given fresh impetus amid the sweeping use of tariffs and trade threats by US President Donald Trump’s administration, which has sent countries scrambling for new partnerships.

Mr Trump on Jan 17 threatened multiple European nations with tariffs
of up to 25 per cent until he manages to gain control of the Danish territory Greenland.

“We choose fair trade over tariffs, we choose a productive long-term partnership over isolation,” EU chief Ursula Von der Leyen said at the signing ceremony in Asuncion, Paraguay.

Paraguay’s President Santiago Pena also praised the treaty as sending “a clear signal in favour of international trade” in “a global scenario marked by tensions”.

European Council head Antonio Costa said the deal stood in contrast to “the use of trade as a geopolitical weapon.”

And Brazil’s Foreign Minister Mauro Vieira said the deal was a “bulwark... in the face of a world battered by unpredictability, protectionism, and coercion.”

Brazil’s President Luiz Inacio Lula da Silva – a key architect of the accord – was unable to attend the ceremony due to scheduling conflicts, and met Dr Von der Leyen in Rio de Janeiro on Jan 16 where he praised it as a victory for multilateralism.

In Paraguay, leaders said the treaty would bring jobs, prosperity, and opportunities to people on both sides of the Atlantic.

‘It’s not fair’

Together, the EU and Mercosur account for 30 per cent of global GDP and more than 700 million consumers.

The treaty – which still needs to be approved by the EU Parliament and ratified by each Mercosur nation – eliminates tariffs on more than 90 per cent of bilateral trade.

It is expected to come into force by the end of 2026.

The deal will favour European exports of cars, wine and cheese, while making it easier for South American beef, poultry, sugar, rice, honey and soybeans to enter Europe.

This has angered European farmers,
who have rolled tractors into cities like Paris, Brussels and Warsaw to protest a feared influx of cheaper goods produced with lower standards and banned pesticides.

“We have good quality Irish beef and good standards here, and they don’t have the same standards in South American countries,” said Ms Trisha Chatterton, a 50-year-old farmer at a protest in Ireland
earlier this month.

“It’s not fair,” said Luis, a 24-year-old Belgian cattle farmer who took part in a December protest
that turned ugly, as demonstrators set piles of tyres on fire and hurled potatoes at police.

Key power Germany, as well as Spain and the Nordic countries, strongly support the pact, eager to boost exports as Europe grapples with Chinese competition and a tariff-happy administration in the White House.

Some in South America are also wary about the impact of the treaty.

In Argentina, it is estimated that there could be a loss of 200,000 jobs just from the dismantling of the local automotive industry, trade and investment researcher Luciana Ghiotto told AFP.

Safeguard and quotas

In a bid to allay fears, the European Commission announced a crisis fund and safeguards allowing for the suspension of preferential tariffs in case of a damaging surge in imports.

However Argentina’s libertarian President Javier Milei warned against quotas and safeguard which “will significantly reduce the economic impact of the agreement and will go against its essential objective.”

According to EU estimates, European exports to Mercosur are expected to rise by 39 per cent, while Mercosur exports to the EU could increase by 17 per cent.

By 2040, the agreement is projected to boost the EU’s GDP by €77.6 billion (S$116 billion) and Mercosur’s GDP by €9.4 billion. AFP