The EU's Landmark Mercosur Deal Promises Much But Delivers Little

The revised EU-Mercosur trade deal offers limited economic benefits for Europe, while its environmental provisions may undermine the bloc’s climate ambitions.

https://www.socialeurope.eu/the-eus-landmark-mercosur-deal-promises-much-but-delivers-little



After years of contentious negotiations, the European Union (EU) and the Mercosur bloc reached a final agreement on their association pact in December 2024. This followed additional talks in 2023 and 2024, prompted by strong criticism of the initial 2019 draft from environmental organisations and several EU member states with significant agricultural sectors. The decision among Mercosur governments for a final agreement was a “rare convergence”. Most observers anticipate that the European Commission will soon propose a “split ratification” process, meaning the trade elements would require a qualified majority in the Council and the European Parliament, while political cooperation would also need ratification by individual member state parliaments.

Our recent study, which assesses the changes introduced during the 2023-2024 negotiations, offers an updated analysis of the agreement’s potential economic, ecological, and political ramifications. In essence, we conclude that the new provisions will not significantly alter the economic and political impacts of the agreement. If anything, they primarily ensure economic net benefits for Mercosur countries. The new environmental safeguards, demanded by the EU, are largely symbolic or, concerningly, could even weaken recent EU regulatory initiatives, such as the EU Deforestation Regulation.

Economic Concessions to Mercosur Defer EU Benefits

The agreement’s economic amendments include exemptions for the liberalisation of public procurement in Mercosur countries, particularly Brazil, extended tariff elimination schedules for automobiles, especially electric vehicle imports, and the introduction of special automotive investment safeguard measures. These modifications largely aim to shield Mercosur’s automotive sector, which is expected to face increased pressure under the agreement.

These specific changes are unlikely to affect the overall results of aggregated economic impact assessments, such as the one conducted by the London School of Economics for the European Commission, as they are too specific to be factored into the underlying Computable General Equilibrium (CGE) models. Therefore, the aggregate effects remain consistent with pre-2023-2024 negotiation expectations: a modest 0.1 percent increase in overall EU GDP, alongside potentially slightly negative employment effects of minus 0.06 percent, equating to a loss of 120,000 jobs. In Mercosur, GDP changes are projected to range from a gain of 0.1 percent to 0.7 percent.

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