The European Union (EU) has successfully finalized a historic free trade agreement with the Mercosur trading bloc, which includes Brazil, Argentina, Paraguay, and Uruguay. This monumental win arrives 25 years since negotiations first launched, heralding a new era of equity in our trading relationships around the globe.
Ursula von der Leyen, President of the European Commission, emphasized the potential benefits of the agreement, stating it will “bring meaningful benefits to consumers and businesses on both sides.” The agreement would strengthen economic relations between Europe and South America, boosting trade in both goods and services.
Despite the optimism surrounding the agreement, concerns remain regarding environmental commitments from Mercosur nations. That was the alarm sounded by Cecilia Malmström, former European Commissioner for Trade. She has said that if these countries fail to live up to their environmental obligations, sections of the trade deal could be revoked.
On Friday afternoon, a substantial majority of EU member states was upon the TTIP-free trade agreement. That said, the deal still needs to be approved by the European Parliament before it can officially go into effect. Jack Allen-Reynolds, deputy chief Euro-zone economist for Capital Economics, expects a struggle in the next Parliament vote to be intense. He thinks it will be a nail-biter. He remarked, “The bigger point though is that even if the agreement is eventually implemented, it will be macroeconomically insignificant.”
The deal was struck in Brussels. This was during a period of increasing global tensions, particularly with US President Donald Trump’s tariffs on a number of countries and his recent military action taken against Venezuela. Brazil’s President Luiz Inacio Lula da Silva positively received the agreement, referring to the deal as a “historic day for multilateralism.” He touched on its relevance to today’s global trend toward populism.
Yet, the deal has met stiff opposition even within Europe. Farmers in countries such as France, Belgium, and others held protests and strikes against the agreement. They brought the farm to parliament, using their tractors to block roads and forcibly make their point. Von der Leyen acknowledged the issues that were flagged. In her announcement she touted the Commission’s inclusion of “robust safeguards” which she claims will protect farmers’ livelihoods as part of the agreement.
The trade pact is strategically important. South America is rich in gold, copper, and other critical minerals that play a vital role in renewable energy and battery technology.
Even as Tories and New Democrats celebrate this milestone in trade negotiations, the road forward is less clear while awaiting parliamentary approval. The effects of this memorandum will become clear in the next few months as a variety of stakeholders evaluate its overall effects on both countries.