The European Union and the South American bloc Mercosur signed a long-awaited free trade agreement on Saturday in Paraguay, marking the EU’s largest trade deal to date after 25 years of negotiations.

The agreement aims to reduce tariffs and boost trade between the two regions. It now requires approval from the European Parliament and ratification by the national legislatures of Argentina, Brazil, Paraguay and Uruguay.

The signing ceremony was attended by European Commission President Ursula von der Leyen, European Council President Antonio Costa, and leaders of Mercosur countries. Brazilian President Luiz Inacio Lula da Silva was represented by his foreign minister.

Concerns and Support

While most EU member states approved the deal last week, it has faced opposition from European farmers and environmental groups, who fear an influx of cheaper South American agricultural products and increased deforestation.

Von der Leyen said the agreement would create the world’s largest free trade zone, stressing that Europe is choosing “fair trade over tariffs” and long-term partnership over isolation.

Costa described the pact as a milestone that strengthens economic security amid global political uncertainty.

Economic Impact

Trade between the EU and Mercosur — a combined market of around 700 million people — reached €111 billion in 2024.

• EU exports: machinery, chemicals, transport equipment
  
• Mercosur exports: agricultural products, minerals, wood pulp and paper
  

Brazil said the deal reflects President Lula’s strategy to diversify export markets, noting parallel negotiations with the UAE, Canada, Vietnam and India.

Despite remaining concerns over regulations and environmental safeguards, Mercosur leaders believe the pact will unlock new investment and trade opportunities for both regions.

Source: Reuters | Agencies