The EU-Mercosur trade agreement creates a free trade area and opens up export opportunities

The EU member states and the South American trade bloc – Argentina, Brazil, Paraguay, and Uruguay – have reached an agreement on a partnership agreement after decades of negotiations. This agreement between the EU and the Mercosur countries creates the world’s biggest trading zone, covering approximately 700 million people. This also opens up new opportunities for companies and operators in Tampere region at a time when there are question marks surrounding exports to the US.

The EU is Mercosur’s second-largest goods trading partner, and Mercosur is the EU’s tenth-largest. In 2024, trade between the two blocs was worth over €111 billion, of which €55.2 billion was exports. The Mercosur Agreement aims to further increase this bilateral trade and investment, and to create more predictable regulation in the region. In an era of superpower politics and a volatile international order, the agreement has been justified as a strategic choice. From Brussels’ perspective, the agreement is significant because it strengthens the political, economic and cultural ties between the regions and secures the EU’s presence in the Mercosur countries. It also aims to enhance the EU’s security and defence capabilities, as well as promote the green and digital transition.

Negotiations on a trade agreement between the EU and the Mercosur countries began at the turn of the 21st century. While the negotiations have stalled at times, in 2024 the European Union and the four founding Mercosur countries reached an agreement on a partnership and trade agreement. In September 2025, the European Commission approved proposals for Council decisions on two parallel legislative acts. One of these was the EU-Mercosur Partnership Agreement (EMPA). Alongside political dialogue and a commitment to cooperation, the EMPA contains trade and investment provisions which will only come into full effect once the agreement has been ratified. In the meantime, the interim Trade Agreement (ITA) will remain in force. The ITA only covers trade matters so that the benefits of the negotiated trade commitments can be reaped as soon as possible.

The latest step towards an agreement was taken on 9 January 2026, when the majority of EU countries approved the EMPA and iTa agreements. France, Ireland, Hungary and Poland opposed the agreements. The European Union and Mercosur signed the agreements on 17 January 2026 in Paraguay. The European Parliament is now discussing the agreement during its plenary week in Strasbourg. MEPs will decide whether to request an opinion from the European Court of Justice on the compatibility of the EU-Mercosur agreements with the EU Treaties. Parliament will vote on the agreement later. The parliamentary vote on the agreement is expected to be very close.

Trade Agreement: competitiveness and businesses

The agreement promotes trade and investment on both sides. Estimates suggest that eliminating high Mercosur tariffs would allow EU companies to save over four billion euros in customs duties each year. The Commission predicts that EU exports to the Mercosur could increase by up to 39 percent by 2040. The agreement will also diversify and secure supply chains.

The EU is not self-sufficient in critical raw materials. The EU’s Critical Raw Materials Act aims to ensure a diverse, secure and sustainable supply of these materials for EU industry and the Mercosur countries are significant producers of many of them. The Mercosur Agreement reduces tariffs on these resources and products derived from them, which encourages exports from Mercosur countries to the EU. Lower costs increase competitiveness.

Simplifying tariff procedures and eliminating customs duties will boost exports. Until now, Mercosur countries have protected their markets with complex customs procedures and other measures. The agreement will allow EU firms to compete for public contracts on an equal footing with Mercosur companies.

For Finland, this means growing markets for the forestry, paper industries and for various technologies (such as machinery, optical and medical equipment), and transportation technology. Other growing markets include energy solutions and services, such as telecommunications and tourism. Finland’s total exports to Mercosur countries was 823 million euro per year. Service exports amount to 212 million euro per year (2023), and agricultural exports amount approximately 92,000 € in 2024. Tariff on exports have been 55% at their highest. 94 percent of exporters have been small businesses. Small businesses often face challenges when exporting their products outside the EU due to additional costs and administrative procedures. The agreement aims to remove these barriers.

Agriculture

The removal of tariffs and the clarification and increased predictability of food safety procedures promote the interests of the agriculture and forestry sectors. The agreement also aims to protect unique and sensitive EU products. Access to the EU market for certain agricultural products (such as beef and poultry), will be restricted by phased-in quotas, and Mercosur beef will always be subject to tariffs.

The trade agreement upholds the EU’s strict food safety, animal health, and plant health requirements. The EU has announced measures to strengthen control over imported food. The EU is setting up a €6.3 billion fund to counteract any adverse effects on EU farmers and agricultural markets, which are unlikely. Just before the trade agreement was approved, European agricultural lobbyists secured concessions from the European Commission, the effects of which will also be reflected in the negotiations on the future multiannual financial framework (MFF).

Sustainable development

The agreement includes the Paris Climate Agreement, as well as the obligation to implement other intergovernmental environmental agreements. These include the Convention on Biological Diversity, and agreements that regulate trade in endangered species and banned chemicals. It also includes measures to halt deforestation. The goal is to offer products that are not associated with deforestation. This is particularly important for the Amazon region. Trading in illegally harvested timber and other illegally produced goods is prohibited.

The agreement texts mention the principle of non-regression, under which the parties undertake not to weaken environmental or labor standards to attract investment. The Trade and Sustainable Development chapter of the agreement is subject to a specific dispute settlement procedure. If the EU or a Mercosur country believes the other is not complying with the rules, it can request formal consultations with the government.

Times of unstable trade policy

The agreement is being finalized at a critical moment. Trade relations between the EU and the US are unstable, and transatlantic relations are at their most difficult point in decades. In response to the EU’s support for Greenland, President Donald Trump is threatening the EU with new tariffs. EU leaders are considering their own response, which was also discussed today in parliament.

In this situation, trade with other countries and regions is becoming increasingly valuable, and the agreement with South American countries specifically promotes this. For companies in Finland and Tampere region, the agreement opens new opportunities at a time when exports to the United States are in question.