A turning point for Europe: The promise and challenges of the Mercosur deal 

“The treaty shows that Europe is still capable of shaping globalization rather than merely reacting to it,” says Juan Moscoso del Prado, senior fellow at Esade’s Center for Global Economy and Geopolitics (EsadeGeo). 

The agreement offers a clear alternative to the dominant trade models promoted by the world’s two largest economic powers, the US and China. Instead of confrontation, coercion, or unilateral pressure, the EU–Mercosur treaty is built on cooperation, shared rules, and mutual commitments. “It’s a model based on fairer relationships, value creation on both sides, and technology transfer, rather than on zero-sum competition,” says Moscoso. 

However, in a setback for the deal, the European Parliament has decided to pause final approval while awaiting checks from the European Court of Justice to verify if it complies with EU treaty rules. This could delay the EU Parliament’s ability to ratify the deal for a year or more, although the EU Commission says it could implement the new deal provisionally until the court provides its opinion.  

The treaty was meant to demonstrate that the EU’s institutional architecture, often criticized for being slow or fragmented, can still deliver outcomes in line with the broader European interest, even in a difficult political context. But ongoing legal and political hurdles are hindering progress. 

Which EU industries stand to benefit? 

The benefits and challenges of the treaty will not be felt evenly across sectors. European industries that are well-positioned to benefit from improved access to Mercosur markets include the automotive, chemical, and pharmaceutical industries, as well as manufacturers of machinery, components, and capital goods. These sectors are likely to enjoy opportunities for exports, investment, and the expansion of European value chains. 

While trade liberalization generates adjustment costs, over time, European industries adapt and become more competitive

High value-added agri-food industries also stand to gain. “Europe is home to the world’s leading agri-food sector,” says Moscoso. The treaty could open the door to new demand in Mercosur countries for products with strong branding and high standards. Spain, in particular, has a significant presence in this segment. 

On the flip side, competitive pressure is likely for the beef, poultry, sugar, and rice sectors, which are more exposed to imports from Mercosur countries. This doesn’t necessarily equate to economic losses. The EU reports that while trade liberalization tends to generate adjustment costs, historical experience shows that, over time, European industries adapt and become more competitive, especially when supported by appropriate policy measures. 

Farmers’ protests: Understandable fears, built-in protections 

Protests from EU farmers in France, Ireland, and Poland, have caused debate around the fairness of the treaty. Are producers outside the EU subject to the same environmental, sanitary, or labour standards? If not, this could lead to unfair competition and lower prices. 

However, the agreement incorporates a range of mechanisms designed precisely to address these fears. “Safeguard clauses, now embedded in EU regulation, allow for temporary suspensions of trade preferences if import volumes become too high or prices fall too sharply,” explains Moscoso. 

The treaty also establishes commitments to align production standards and strengthen consumer protections. European geographical indications receive additional protection, reinforcing the value of origin-based agri-food products. Further support for farmers comes in the form of 45 billion euros during the adjustment phase, under the Common Agricultural Policy. 

The treaty should rebalance commercial relationships in Latin America, an alternative from China and the US models

History indicates little need for concern. When Spain joined the European Community, the primary sector was opposed to the idea, but 40 years later, Spain’s per capita income has doubled, and both the Spanish and European agri-food industries are among the most competitive in the world. In 2024, the EU recorded an agri-food trade surplus of 63 billion euros. 

Latin America between China, the US, and Europe 

The EU–Mercosur treaty isn’t only about Europe. The agreement should rebalance commercial relationships in Latin America. Instead of China’s excessive control and the US’s extractive model, the EU–Mercosur treaty offers an alternative grounded in shared values and institutional cooperation. 

Together, the EU and Mercosur form the world’s largest free trade area, encompassing around 700 million people. Economically, Moscoso emphasizes that “the agreement is expected to generate higher growth on both sides than would be possible without it, translating into gains in income and welfare”.  

The EU’s position as Mercosur’s second-largest trading partner will be reinforced, accounting for 16.8 percent of Mercosur’s total trade. 

Aside from trade flows, the agreement strengthens political ties between two regions that share democratic traditions and regulatory approaches. It also complements the EU’s Global Gateway program, which links trade to investment in infrastructure, technology, and local capacities.  

According to Moscoso, the agreement “introduces a broader approach to trade, incorporating environmental, health, labour, and deforestation standards, and tying commercial exchange to investment in local capacities based on commonly agreed principles.” 

How will consumers be affected? 

Latin American consumers in Mercosur countries are expected to benefit from price reductions due to lower tariffs, and a wider choice of European goods, according to the European Commission’s Sustainability Impact Assessment. The most conservative estimate predicts a decline in the consumer price index of around 0.4 percent to 1.5 percent, depending on the country. 

European consumers are more likely to experience a modest overall price impact. Increased competition and availability may lead to price reductions in certain product sectors, but not universally. More crucially, recent studies from the European Parliament indicate small but positive increases in real wages and overall welfare gains for European households. These enhancements in purchasing power suggest that, overall, the agreement provides net benefits to consumers, even if the distribution of gains varies across different sectors. 

Mercosur’s impact on Spain 

The benefits for Spain parallel the benefits for the rest of Europe. The agreement will be a boon for sectors that export manufactured goods, chemicals and industrial products. Similarly, businesses providing services linked to corporate presence and business expansion will also see opportunities. 

In agri-food, the greatest potential lies in high-value-added products.  

The main risks will be for agricultural operators who struggle to reduce costs, especially where Mercosur producers are highly competitive. However, the safeguard regulation is intended to mitigate this risk. 

Trade as a test of Europe’s global role 

If the EU-Mercosur treaty overcomes the current political hurdle and eventually goes ahead, it will serve as more than just a trade agreement. This is Europe’s opportunity to show that it can define how it engages with the rest of the world on trade during an era of uncertainty. It would also set an example that trade agreements can be based on openness, standards and sustainability, while still supporting economic growth.