Many heads of state and government from European and South American countries, as well as representatives of the European Union at the highest level, have hailed the fact that, after three decades of negotiations, the EU has finally concluded its free trade agreement with Mercosur. However, the ovation has not been unanimous. Some countries, such as France, Austria, Poland, Ireland and Hungary, have voted against the signing of the agreement within the EU Council because they fear that it will have a negative impact on the agricultural sector and food sovereignty in European countries. But what does the signing of this agreement really entail?

The EU-Mercosur Partnership Agreement (EUMPA) represents a very important step towards achieving an interregional partnership between the two regions, which constitutes the ultimate goal of the Interregional Cooperation Framework Agreement signed in 1995. The EUMPA creates a free trade area comprising more than 700 million people and accounting for almost a quarter of global GDP, benefiting small and large businesses on both continents. It also represents a geopolitical response to a scenario marked by tension, conflict and tariff threats, demonstrating the benefits of free and fair trade and partnerships based on shared values and principles.

For Mercosur economies, this agreement implies preferential access to a highly integrated market, offering significant opportunities for exports of primary and agricultural goods, foreign direct investment and access to global value chains. Furthermore, the gradual elimination of tariff, non-tariff and regulatory barriers under the Agreement may result in greater competitiveness and market diversification for Mercosur countries, promoting export growth and attracting European capital. However, Mercosur leaders have already announced that they are not content with being merely ‘commodity exporters’. They want to produce and sell industrial goods with higher added value.

What happens in Europe is a different matter altogether. The EUMPA involve significant risks for European farmers, mainly due to increased competition from lower-cost agri-food imports from Mercosur countries, where production and environmental standards are considered less stringent. This regulatory, competitive and environmental asymmetry could erode the profitability of European farms subject to stricter regulations and generate price volatility in the internal market. In addition, the increase in import volumes poses additional challenges in terms of health controls and traceability, with potential strains on the EU’s border inspection systems.

In recent years the European Commission has sought to normatively design a trade agreement capable of addressing all these risks, mitigating the negative consequences for European farmers and addressing the concerns of its most sceptical critics. Has it succeeded?

The latest version of the agreement: The most protective one?

The commercial content of the agreement has changed very little from the 2019 version. The Parties’ intention remains to reduce tariffs by 91% over 10 years and up to 15 years for products considered sensitive. The European sector that benefits most from the agreement is the automotive sector, while the Mercosur sector that benefits most is agriculture and livestock, specifically beef. Some of the significant new developments relate to trade transparency, as customs procedures have been simplified and made more transparent, with the agreement emphasising digital cooperation, technology exchange and data protection, and with greater commitments made to benefit small and medium-sized enterprises with a view to facilitating their access to markets. Likewise, with regard to the exchange of critical raw materials and minerals such as lithium, the text reveals a certain reluctance reflecting the lessons learned from the war in Ukraine in terms of diversifying sources of raw materials, energy and markets, strengthening the geopolitical resilience of both parties. Moreover, the new review clause offers the parties the possibility of negotiating amendments to the elements of the agreement that are of interest to them. Finally, a legally binding safeguard mechanism that protects sensitive European products in case of a surge in imports from Mercosur countries. Specifically, the regulation sets out how the EU can temporarily suspend tariff preferences on agricultural imports from Mercosur if these imports harm EU producers. As explained by the Council, it builds on existing EU safeguard tools but introduces faster procedures and simpler triggers to launch investigations to protect EU farmers.

Although all these developments represent significant progress towards free trade with safeguards and guarantees with regard to previous trade agreements signed by the EU with third countries, the part of the EUMPA that has generated the most debate has been the trade and sustainable development chapter.

Sustainable development: the killer issue of the EUMPA

The instruments of the EU’s Common Commercial Policy have evolved significantly and substantially over recent decades, but always in the service of the Union’s objectives and values, which include the promotion of sustainable development. Thus, since 2007, the EU has been consistently incorporating into all its “new generation” bilateral and regional free trade agreements a Trade and Sustainable Development Chapter (TSDC) in which the Parties recognise the importance of promoting the growth of international trade in a manner that contributes to sustainable development, in which economic development, social development and environmental protection are mutually reinforcing components.

One of the most frequently asked questions in recent months has been whether the Revised EU-Mercosur trade deal adequately addresses trade-environment-development interlinkages.

The 2019 version of the EUMPA contained a very ambitious TSDC in terms of substance, whose content already exceeded the level of environmental protection provided for in other European trade agreements with developed partners such as Canada. In addition, it included new requirements that went beyond the existing obligations in other trade agreements regarding information exchange and the promotion of voluntary private initiatives. However, like its counterparts at that time, it lacked a dispute settlement mechanism that could lead to the imposition of sanctions or the suspension of the benefits of the agreement in the event of non-compliance with these provisions.

In view of the LSE report on the potential impact of the EUMPA and the opposition of some EU Member States, the version of 6 December 2024 has introduced amendments to the TSDC.

Firstly, the most important amendment related to the Paris Agreement, for which a specific annex entitled ‘The Paris Agreement as an essential element’ was drafted. In it, the Parties recognised that the global threat of climate change requires the widest possible cooperation by all countries to reduce global greenhouse gas emissions and adapt to the adverse effects of climate change in a manner that does not jeopardise food production, and that developed countries continue to take the lead. The most significant aspect of this amendment was the possibility for the Parties to suspend, in whole or in part, the benefits derived from the agreement in the event of non-compliance with this provision by another Party. This suspension was designed as a measure of last resort and could only be imposed in the event of a particularly serious and substantial violation of the Paris Agreement. Nonetheless, in the version submitted to the Council of the European Union and to the European Parliament on 3 September 2025 this provision disappeared and art. 18.15(5) of the TSDC firmly states that `No Party shall have recourse to dispute settlement under Chapter 21 for any matter arising under this Chapter´, thus not being capable of suspending the benefits derived from the agreement in the event of non-compliance.

Other new features of the EUMPA TSDC relate, for example, to strengthening the Parties’ commitment to combating deforestation. The TSDC also includes additional commitments on trade and women’s empowerment and training, the development of sustainable supply chains, including in the areas of energy and the green transition, provisions to promote trade in sustainable products and products that help conserve biodiversity and the livelihoods of indigenous peoples, and the reaffirmation of ILO commitments, giving priority to child labour during implementation.

While it is true that there have been significant changes compared to the 2019 version, we believe that the EU has missed a great opportunity to demonstrate its commitment to sustainable development and to make the protection of both the environment and core labour rights more effective. The main limit of this TSDC is the failure to extend the possible suspension of trade benefits under the agreement in the event of non-compliance with any international treaty on the environment or core labour rights included in the chapter, as this chapter of the agreement is subject to a specific dispute settlement procedure.

Next steps and way forward

The last few weeks have been very hectic in Brussels. On 9 January 2026, the Council of the European Union announced the decision of authorising the signing on behalf of the Union of the EUMPA. On 17 January 2026, the Agreement was signed by both blocs in Asunción, Paraguay, creating the world’s largest free trade area, as Antonio Costa, president of the European Council, highlighted in his speech.

Does this mean that the process has been completed and we now have a free trade agreement in force? As President Emmanuel Macron pointed out, ‘the signing stage of the agreement does not mark the end of the story’. Following the signature of the agreement, on 21 January, the European Parliament has decided to request the European Court of Justice to assess whether the EUMPA is in conformity with the EU treaties. Once the Parliament has obtained this opinion, it will be able to vote to grant consent (or not) to the Agreement. In this event, the EUMPA will fully enter into force once all EU member states and Mercosur parties have completed ratification. As this is a mixed trade agreement, if one State decides not to ratify it, the agreement will not enter into full force.

Given that the opinion of the European Court of Justice may take several months, important voices are already beginning to be raised calling for the provisional application of the agreement, including Ms. von der Leyen’s. Although no formal decision has yet been taken, Brussels has indicated that it would be ready to act once a Mercosur country completes its domestic ratification. Provisional application would allow parts of the agreement, such as the strictly commercial ones, to take effect as soon as the first Mercosur country ratifies it, subject to the authorisation by the Council and the Parliament.

Therefore, despite the revelry and joy of the moment, the coming months will continue to be marked by political and normative tensions.

Editor’s note: The picture used in this article can be found here.