EU and Mercosur sign trade deal, but ratification faces major hurdles amid deep EU divisions

After more than a quarter-century of often turbulent negotiations, top officials from the European Union and the South American Mercosur bloc signed a comprehensive free trade agreement on Saturday in Paraguay.

The pact, which could create one of the world’s largest free-trade zones covering over 700 million people, was hailed by EU leaders as a strategic step toward fair trade and economic security in a volatile global landscape. However, the signing marks only a milestone – not the conclusion – of the process, with fierce internal divisions within the EU, particularly from France, casting serious doubt over full ratification.

European Commission President Ursula von der Leyen and European Council President Antonio Costa joined leaders from Mercosur nations – Argentina, Brazil (represented by its foreign minister), Paraguay, and Uruguay – for the ceremony in Asuncion. Von der Leyen described the accord as sending “a very strong message to the world,” emphasizing a choice for “fair trade over tariffs” and a “productive, long-term partnership over isolation.” Costa called it a “milestone in shoring up our economic security” amid rising global tensions.

The deal aims to eliminate about 90% of tariffs across industrial, services, and agricultural sectors over a phased 10-15 year period, with EU exports projected to rise 39% (€48.7 billion) to Mercosur by 2040, and imports from the region increasing 16.9% (€8.9 billion). Bilateral trade reached 111 billion euros in 2024, dominated by EU machinery, chemicals, and vehicles on one side, and Mercosur agricultural goods, minerals, and pulp on the other.

Despite these potential gains, the agreement has exposed sharp fractures within the EU. On 9 January a qualified majority of 21 out of 27 member states approved the signing, with Austria, France, Hungary, Ireland, and Poland voting against it, and Belgium abstaining. This qualified majority allowed the deal to proceed without unanimous consent, but it highlighted widespread unease over cheap South American agricultural imports threatening European farmers and potential risks to Amazon deforestation.

EU-Mercosur pact springs to life, thorn in the side of Trump’s Donroe doctrine

France has been the most outspoken opponent, with President Emmanuel Macron declaring on 8 January that Paris would vote “against” the accord, citing near-unanimous rejection across the French political spectrum – from far-left to far-right – and intense pressure from agricultural unions.

French farmers have mounted massive protests, including tractor blockades near landmarks like the Eiffel Tower and Arc de Triomphe, expressing deep frustration and feelings of abandonment. Macron has argued that the deal’s economic benefits for France and the EU would be “limited,” while vowing to push for stronger safeguards for farmers.

The controversy has even fueled domestic political instability, with opposition parties filing no-confidence motions against the government.

The ratification road ahead remains fraught with challenges. The agreement requires approval from the European Parliament, where MEPs are deeply split along national lines, and a majority is far from guaranteed. Critics, including environmental groups, have raised concerns over a “rebalancing mechanism” that could limit the EU’s ability to introduce new environmental or health regulations without compensation to Mercosur partners. Some lawmakers are pushing for the accord not to take effect until full ratification by all parties, and there is talk of a potential challenge before the European Court of Justice that could delay or complicate the process for months.

On the Mercosur side, ratification by the national legislatures of Argentina, Brazil, Paraguay, and Uruguay is expected to be smoother, with options for provisional bilateral application as approvals come in. Still, the deal’s future hinges heavily on navigating the EU’s internal opposition, especially from France and farmer-backed groups.

The signing occurs against a backdrop of heightened global trade strains, including recent U.S. tariff threats on European nations. EU leaders hope the pact will diversify markets and strengthen ties with Latin America, but with ratification uncertainties looming – and France’s resolute stance underscoring the bloc’s struggles to reconcile economic ambitions with domestic protections – the story of the EU-Mercosur deal is far from over.

With agencies.

Caption: (L-R) Panamanian President Raul Mulino, Bolivian President Rodrigo Paz, European Council President Antonio Costa, European Commission President Ursula von der Leyen, Paraguayan President Santiago Pena, Argentine President Javier Milei, Uruguayan President Yamandu Orsi, and Brazilian Foreign Minister Mauro Vieira pose during the signing of the free trade agreement between the European Union and the Mercosur countries, Asuncion, Paraguay, 17 January 2026. The signing of this historic agreement will create one of the world’s largest integrated trade zones, encompassing 720 million people, after 26 years of negotiations. EPA/Juan Pablo Pino