President Ursula von der Leyen, along with President António Costa, was in Paraguay last Saturday to sign the EU-Mercosur partnership, including its ambitious trade agreement, which had been 25 years in the making. The Presidents were hosted by President Santiago Peña of Paraguay and the ceremony was attended by other Mercosur leaders.
The EU-Mercosur agreement creates one of the largest free trade areas in the world, spanning 31 countries with 700 million citizens, and it supports the European Commission's strategy of diversification, which enables the European Union to increase its economic security, and reduce excessive dependencies. Indeed, in the last year, negotiations with Mexico and Indonesia have been concluded, while substantial progress has been made with partners such as India, Malaysia and the United Arab Emirates.
During the signature ceremony in the Paraguayan capital, Asunción, President von der Leyen emphasised: "We are creating the largest free trade zone in the world, together. A shared market of 700 million people. A rules-based partnership to grow commerce and investment between our two proud regions. (…) Today we show the world that we stand for openness, for cooperation and for mutual gain in our economies, in our work on sustainability and in our geopolitical choices."
The partnership with Mercosur countries represents a win-win deal. With the EU already being Mercosur's second largest trading partner, the agreement unlocks the next level of that relationship. EU exports to Mercosur are expected to grow by an estimated 39% and support hundreds of thousands of EU jobs.
Furthermore, the two economies are complementary. Europe needs secure access to the raw materials that underpin the clean transition, while Mercosur countries need access to more investment and technology.
The deal eliminates billions of euro in tariffs and opens procurement markets, but it also enshrines shared ambitions on sustainability, with strong commitments on sustainable development and on mutual support in the transition to climate neutrality. As President von der Leyen said: "This agreement sends a strong signal to the world. It reflects a clear and deliberate choice. We choose fair trade over tariffs, we choose a productive, long-term partnership, and above all, we intend to deliver real and tangible benefits to our peoples and companies."
Moreover, the deal constitutes a geopolitical pledge based on shared values, respect for rules and trust. In President von der Leyen's words: "A shared platform for political dialogue on the great questions of our time: Sustainability, equality, but also peace and security. This matters more than ever in today's world, and the message will resonate everywhere."
The President of the Commission also addressed the concerns raised by some EU farmers: "We have heard your concerns, and we have acted on them. This agreement contains robust safeguards to protect your livelihoods, and our sensitive agricultural sectors. It brings substantial economic opportunities for many EU agri-food exporters. It safeguards 350 European geographical indications. More than in any other EU trade deal."
Indeed, the agreement includes measures to make sure that sensitive agri-food products benefit from necessary protection. For example, there is a safeguard mechanism in case of a surge in imports from Mercosur countries, there will be enhanced controls to prevent non-compliant products from entering the EU market, and a Unity Safety net, worth €6.3 billion and available as of 2028, will be an additional layer of protection for farmers in case of market disturbances.
Prior to the signature of the agreement, on Friday, President von der Leyen visited President Lula in Rio de Janeiro. Both leaders gave a joint press conference where President von der Leyen commended President Lula's role and political leadership in the negotiations leading up to the agreement. She also referred to the strategic partnership with Brazil, which will celebrate next year its 20th anniversary and to the ongoing work towards a political agreement on joint investment projects in lithium, nickel, and rare earths.
