An agreement aimed at creating one of the world’s largest free trade zones, reducing customs duties for EU businesses by a total value of more than €4 Billion, were initialed last December. The negotiations, which were initially broken off in 2019 and then resumed in 2023, were, in fact, finally concluded in Brussels on December 6, 2024, and now the agreement signed by the parties will have to be translated into all EU languages for subsequent ratification.

This is a particularly significant achievement in a context, such as the current one, of a general return to protectionism and is aimed at bringing about a major reduction in administrative costs for small and medium-sized businesses.

Mercosur is a large market for EU exports, with 56 billion euros in goods exported in 2023 and 28 billion euros in services in 2022. In fact, the EU is Mercosur’s second largest trading partner, after China and before the United States, and accounts for 16.9 percent of Mercosur’s total trade in 2023. Mercosur is the EU’s tenth largest partner in goods trade. EU companies have enormous potential to export even more to this large market of more than 273 million people.

However, Mercosur economies are currently highly protected, and European companies face many trade barriers to exporting to these countries-from high import duties to onerous procedures, as well as regulations and technical standards that differ from international ones-which has so far made it difficult for them to compete on fair terms.

The initialed agreement will eliminate import duties on more than 91 percent of EU goods exported to Mercosur. Duties for some products will be liberalized over longer periods to allow companies in Mercosur countries to adjust. Just to give an idea, current Mercosur tariffs for Leather Shoes, as well as Clothing, are 35 percent, while for Machinery they are 14-20 percent and up to 18 percent for Chemicals.

Until now, Mercosur was also the only major Latin American trading partner with which the EU did not have a preferential trade agreement. Concluding an agreement with Mercosur countries will further extend preferential access to EU exporters and strengthen Italy’s political ties with Latin American countries.

Moreover, compared to the first agreement in 2019, the new EU-Mercosur agreement is one of the most ambitious agreements in terms of sustainability because it incorporates the Paris Climate Agreement, a concrete commitment to reduce deforestation, and clear environmental and social sustainability constraints among its founding elements. This agreement will reflect the EU’s latest standards on trade and sustainable development and will even go beyond agreements such as the EU-Chile Agreement or the EU-Canada Comprehensive Economic and Trade Agreement (CETA).

In addition to the text negotiated in 2019, the new agreement will make the Paris Agreement an essential element of EU-Mercosur relations. This will ensure that the agreement can be suspended if either party seriously violates the Paris Agreement or decides to leave it. It will also ensure concrete commitments to halt deforestation after 2030, in line with national contributions determined under the Paris Agreement.

A €1.8 billion fund of EU support will facilitate mutually beneficial actions for a just green and digital transition in Mercosur countries, as part of the Global Gateway. This will ensure the development of local industries, equipping Mercosur countries with the industrial capacities needed to meet future challenges.