EU and Mercosur sign historic trade pact in Paraguay after 25 years of talks

The European Union and South American bloc Mercosur have signed a long-awaited free trade agreement in Paraguay, opening the way for what would become the EU’s largest-ever trade deal.

Top officials from both blocs signed the agreement on Saturday (16 January) in Asunción, following 25 years of negotiations. The pact now requires approval from the European Parliament and ratification by the national legislatures of Argentina, Brazil, Paraguay and Uruguay.

European Commission President Ursula von der Leyen and European Council President António Costa attended the signing ceremony alongside the presidents of Mercosur member states. Brazilian President Luiz Inácio Lula da Silva did not attend, sending his foreign minister instead.

The agreement aims to lower tariffs and expand trade between the two regions, which together represent a market of around 700 million people. Trade between the EU and Mercosur reached 111 billion euros in 2024, with EU exports dominated by machinery, chemicals and transport equipment, while Mercosur exports largely consist of agricultural products, minerals, wood pulp and paper.

The deal cleared a key hurdle last week after gaining backing from most EU member states, despite opposition from some European farmers and environmental groups, who warn of increased imports of low-cost agricultural goods and a potential rise in deforestation.

Speaking after the signing, von der Leyen said the agreement would create the largest free trade zone in the world, describing it as a choice in favour of cooperation over protectionism.

Costa said the pact would help both blocs navigate growing global uncertainty while strengthening economic security.

Mercosur officials have previously raised concerns over certain regulatory aspects of the agreement. However, Lula said on Friday (15 January) that the deal would unlock new opportunities and stimulate trade and investment on both sides.

Brazil’s government said the agreement reflects efforts to diversify export markets, noting that the country is also pursuing trade talks with the United Arab Emirates, Canada and Vietnam, while expanding a tariff-preference pact with India.

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