The free trade agreement between the EU and the Mercosur bloc (Argentina, Brazil, Bolivia, Paraguay, Uruguay) has just cleared the final hurdle among EU governments and is now heading for formal signature and ratification. It is important to examine its development, since its rocky path may offer insights into the India–EU FTA, now in the final stages.
What is happening?
On 9 January 2026, a qualified majority of EU member states approved the agreement, ending more than 25 years of negotiations.
The deal is due to be formally signed in Paraguay this week, after which it still requires approval by the European Parliament before entry into force.
France, Austria, Hungary, Ireland and Poland opposed the decision, and Belgium abstained. The agreement moved forward anyway because they could not form a blocking minority.
What does the deal entail?
The agreement will progressively remove tariffs on around 91% of EU exports to Mercosur and 92–93% of Mercosur exports to the EU, making it one of the EU’s largest tariff‑cutting deals.
EU exports benefiting from tariff cuts include machinery, chemicals, automobiles and their parts, pharmaceuticals, with the European Commission estimating annual savings of over €4–4.5 billion in duties.
Mercosur gains greater access for agricultural and agri‑processed products such as beef, poultry, sugar, ethanol and fruit juices, with duty‑free quotas for some EU dairy exports
Current EU–Mercosur goods trade is about €111 billion a year. The deal removes or reduces high existing Mercosur tariffs, which range from 15% to 35% on EU industrial goods and many food products, opening a large South American market for European goods.
Why the backlash?
There are two main issues here. The first is that farming groups and several governments, especially France, argue the deal will bring in cheaper beef, poultry and sugar that could undercut EU farmers, fuelling protests and road blockades in several nations.
The second issue pertains to environmental concerns. Civil‑society groups warn that the agreement could accelerate deforestation in the Amazon, and increased imports of forest‑risk commodities could clash with the EU Deforestation Regulation (EUDR), potentially creating legal and trade disputes.
Why is the deal happening now?
Talks accelerated in the last few years because geopolitical incentives shifted on both sides. Lula’s return to Brazil reopened political space, and the EU sought to rescue the deal with an additional sustainability instrument rather than rewrite the core text.
The deal dragged on for over two decades because of deep structural clashes over agriculture, industrial protection, and climate standards. Negotiations launched in 1999 but were slowed by successive protectionist governments in Brazil and Argentina, worried about de‑industrialisation.
The EU increasingly framed Mercosur as a strategic agreement to diversify away from over‑reliance on China, making it a priority in its broader “de‑risking” agenda.
What might happen next?
Ratification is still uncertain: the deal must clear the European Parliament and then national parliaments in both the EU and Mercosur, with potential for “provisional application” of the trade pillar.
Alternatively, Parliament or the courts could stall or reject the package, or attach conditions that effectively force a reopening of sensitive chapters, leading to partial implementation, long limbo, or the de facto burial of the agreement.
How might this impact the India-EU FTA?
Mercosur’s backlash makes it politically costly for the EU to sign an India FTA with anything that looks weaker on climate, forests or labour; this likely means stronger enforcement language, review clauses and possibly side instruments. The political mood in Brussels, however, is more favourable, as India is framed as a priority partner.
EU actors will seek credible, enforceable provisions on biodiversity, labour, due diligence, and supply‑chain transparency. India will need to design energy‑transition and standards‑cooperation chapters that address European Parliament expectations to avoid a similar ratification trap.
Further, the precedent of splitting an agreement and adding a separate “sustainability instrument” makes it more likely the EU will reserve the option of additional side instruments or interpretative declarations to reassure domestic constituencies.
| Feature | EU–Mercosur | India-EU |
|---|---|---|
| Baseline Bilateral Goods Trade | €111 billion/year (EU exports €50bn; imports €61bn) | €120billion (EU exports €48.8bn; imports €71.3bn) |
| Status (Jan 2026) | Negotiations closed; text agreed; signature and ratification pending | Talks in “final phase”, aim to conclude around 2025–26; text not final |
| Structure | Association Agreement (political, cooperation, trade); trade pillar implemented via a separate treaty | Stand-alone FTA, plus separate Investment Protection Agreement and GI agreement |
Structurally, the EU–Mercosur is a major association deal split into two parts: a fast-track trade section (tariffs/services, approved only by the EU Parliament) and a slower political/cooperation section requiring all 27 EU countries’ parliaments. India–EU keeps it simpler with one main trade deal plus separate side agreements for investment and speciality products, avoiding extra national votes where possible. This makes Mercosur trickier to ratify, while India–EU aims for quicker EU-level sign-off.
The EU–Mercosur agreement took over twenty-six years to inch toward completion. The India–EU deal, however, is unlikely to face a similarly protracted timeline. Differences in trade structure, coupled with greater political willingness within the EU, suggest a more favourable negotiating environment. Crucially, the tariff wars initiated during the Trump era have provided an unlikely boost, pushing both India and Europe to recognise the necessity of closer economic cooperation in a fragmenting global order.