In December 2024, the European Union and four Mercosur nations—Argentina, Brazil, Paraguay, and Uruguay—achieved a political agreement for a groundbreaking partnership. If the opposition of certain key countries stops, the agreement might be approved and implemented starting 2026, bringing massive changes in Europe’s food imports, exports, and in the activity of the food importers operating on both sides of the deal.
About Mercosur
The Mercosur trade bloc consists of Argentina, Brazil, Paraguay, and Uruguay, and is one of the most significant economic partnerships in the world. Established in 1991, Mercosur’s primary goal is to reduce trade barriers and to promote free trade between member states. The total population of the Mercosur countries is 273 million and the bloc’s economy is the 6th largest in the world, with a GDP of 2.2 trillion EUR. More than 30 million European businesses export to the South American countries and the value of the exports reached 84 billion last year.
The EU-Mercosur Trade Agreement: An Overview
After 20 years of negotiations, the European Union and Mercosur announced a major trade agreement aimed at reducing tariffs on goods and services exchanged between the two regions. While not yet fully ratified, the deal is set to open significant opportunities but also create major challenges, especially in the agricultural and food sectors.
Under the agreement, Mercosur countries will gain greater access to European markets for beef, poultry, sugar, and ethanol, among others — products in which they have a comparative advantage.
European exporters will see reduced tariffs on processed foods, dairy products, and alcoholic beverages sold to Mercosur countries.
Impact on European Food Imports and Food Production
Increased Availability of Affordable Products
Mercosur countries are some of the world’s largest agricultural exporters. For example, Brazil is a leading producer of beef, poultry, and soybeans while Argentina is renowned for high-quality beef and wine.
As tariffs decrease, European food importers will gain access to a wider range of low-cost, high-volume products, which could result in lower prices for consumers. The agreement provides an opportunity to diversify sources of imported food. This is particularly important given global disruptions in food supply chains caused by events like the COVID-19 pandemic and the war in Ukraine.
Pressure on European Farmers
The influx of cheaper agricultural products from Mercosur could challenge European farmers. This has sparked concerns among farming unions and policymakers about the impact on local agriculture.
Mercosur countries like Brazil and Argentina are major agricultural exporters with lower production costs compared to the EU countries. The reduction of tariffs under the deal could result in an influx of cheaper agricultural products, such as beef, poultry, and sugar, which may negatively impact European farmers’ prices and profits.
Small-scale farmers in Europe, who already face tight profit margins, could struggle to compete with these lower-cost imports because Mercosur products are often produced under less stringent regulations, which creates a perceived “unfair playing field.” This could put pressure on EU farmers to lower their costs or risk losing market share. The most affected sectors would be: meat – beef, poultry, pork, sugar, and dairy.
Quality and Standards
European consumers are highly conscious of food quality and sustainability. Mercosur’s relaxed environmental and labor standards have raised concerns about products such as Brazilian beef, which has been linked to deforestation in the Amazon. European food importers will need to address these issues by carefully selecting suppliers and ensuring adherence to EU standards.
Specialized Imports
Beyond bulk commodities, Mercosur countries offer specialty and niche products, such as Argentine wines, Paraguayan yerba mate, and Brazilian tropical fruits. These items can help importers diversify their offerings and tap into growing consumer interest in exotic and international foods.
While the Mercosur-EU trade deal offers opportunities for increased trade and market access, with the potential to reshape Europe’s food supply chain, fostering greater integration and collaboration between these two regions, it also poses significant risks to European farmers in several key sectors. To mitigate these challenges, the EU may need to implement protective measures, such as quotas, subsidies, or stricter sustainability requirements for imports. It remains to be seen what the fate of the Mercosur – EU deal will be, as many EU countries, including France, Austria, Ireland, and Poland are against it, and Argentina’s president, Javier Milei, recently announced that he would be willing to leave the Mercosur bloc if a better deal with the U.S. would emerge.