Sustainability and protectionism are challenges for the Mercosur-EU agreement.

By Paula Wojcikiewicz Almeida and Pedro Henrique Lavinas Ortman

After months of negotiations, the European Commission presented its final proposal for the partnership agreement between the European Union and Mercosur to the council. Under negotiation since 1999, the agreement was finalized in December 2024 and represents a historic step forward in the integration between two of the world's largest economic groups. The agreement will create the largest free trade area ever established, encompassing a market of over 700 million consumers, and will deepen relations between Brazil and the EU Member States.

The European Commission's decision was to divide the agreement into two parts: a comprehensive EU-Mercosur partnership agreement, which includes the political and cooperation pillars, and a provisional trade agreement, which covers only trade issues. The comprehensive EU-Mercosur partnership agreement must be ratified by all parliaments of the 27 EU member states. The provisional trade agreement, which covers only matters within the exclusive competence of the EU, will be adopted through a ratification process within the EU itself, involving the European Parliament and the Council.

In the EU, critics of the agreement cited risks to agriculture, public health, and the environment. To address these concerns and ensure the agreement's viability, the European Commission outlined additional protective measures. A strengthening of bilateral safeguards was proposed—trade mechanisms that protect the most sensitive EU products against a harmful increase in imports—through the issuance of EU regulations that will operationalize these safeguards at the internal level within the Union.

Furthermore, other measures were announced, such as the creation of a task force to strengthen import controls and the provision of financial support for farmers, one of the main demands within the EU. On this topic, among the main measures, the possibility of the Commission conducting an investigation stands out if there is an increase of more than 10% in annual imports of a product and the respective import prices are at least 10% lower than the prices of the same product or a competing product in the EU. In such cases, the EU may suspend the agreed tariff reduction or even revert to the basic tariff applied to other countries.

Controversy in Brazil

Although, according to the EU, Mercosur countries will be kept fully informed about the progress of these measures, some of them have already caused controversy among Brazilian producers. In particular, the clause that provides for the possibility of investigation has already been criticized by sectors of Brazilian agriculture, who consider it excessive and harmful to Brazilian commodities, especially the animal protein sector.

From this perspective, however, the trade agreement with Mercosur may raise some questions about sustainability. In order to accelerate negotiations with the Mercosur countries, a "rebalancing" clause was included in Article 21.4, paragraph b), which provides for the possibility of signatory countries to activate the general dispute resolution mechanism on issues involving an allegation by one party that a measure applied by the other party nullifies or substantially impairs any benefit due to it under the agreement, negatively affecting trade between the parties, regardless of whether such a measure conflicts with the provisions of the agreement.

This mechanism is unusual because, as a rule, in free trade agreements negotiated by the EU, sustainability issues, such as those concerning EU environmental standards, are dealt with exclusively within the framework of the trade and sustainable development section, through its own rules, and do not include provisions relating to temporary measures or sanctions. Thus, by arguing that measures such as EU environmental standards have a detrimental impact on trade, the EU admits the possibility that they may be challenged within the framework of the general dispute settlement mechanism, which may provide for compensation for Mercosur countries affected by standards that have trade implications, such as the EUDR. For this reason, critics have stated that this agreement would be "a step backward" in terms of environmental responsibility.

EU-US agreement

Recently, however, the EU reached a trade agreement that raises not only sustainability but also commercial questions. At the end of August 2024, the European Commission and the United States released a joint statement of intent entitled “Joint Statement on a United States–European Union framework on an agreement on reciprocal, fair and balanced trade.” This is a non-binding commitment, the main terms of which establish that the US commits to applying a 15% tariff or the Most-Favoured Nation (MFN) tariff to all EU products. In return, the EU stated that it intends to eliminate all tariffs on US industrial products, grant preferential access to the European market to certain sectors, and purchase $750 billion worth of natural gas, oil, and nuclear energy products by 2028, among other commitments.

Although the agreement with the US does not stipulate immediate obligations for the European Union, EU member states have been the target of numerous criticisms for being considered unbalanced, largely favoring US interests. Furthermore, the EU has committed to assessing the impact of the EUDR on US exporters and addressing their concerns, as well as promising to provide more flexibility in the application of the CBAM and to work to ensure that the CSDDD does not impose undue restrictions on trade between the US and the EU. Thus, critics have pointed out that the agreement with the US contradicts EU environmental policies and compromises the bloc's climate ambitions by encouraging the purchase of fossil fuels and loosening the environmental regulatory framework that the EU has been building in recent years.

Therefore, the international context of increasing protectionism and tariff threats seems to have given new impetus to the conclusion of the Mercosur-EU agreement. This agreement is a key part of the EU's strategy to diversify its trade relations and strengthen economic and political ties with other partners, offering the EU the opportunity to conclude a trade agreement that has the potential to bring real gains to both parties, with benefits stemming from reciprocal trade liberalization.

As the European Commission itself stated, one of the main achievements of the agreement is that it sends a clear message to the world that the EU and Mercosur, two of the world's largest economies, reject protectionism and are open to trade and business based on fair rules and high standards.

Originally posted on 14/10/2025 at Conjur: Sustentabilidade e protecionismo são desafios do Mercosul-UE