Finance
EU states back record South America trade accord after 25 years
Published by Global Banking & Finance Review®
Posted on January 9, 2026
4 min readLast updated: January 20, 2026
Global Banking & Finance Review®
Company
Published by Global Banking & Finance Review®
Posted on January 9, 2026
4 min readLast updated: January 20, 2026
The EU has approved a landmark trade deal with Mercosur, aiming to reduce tariffs and boost economic growth, despite opposition from some EU farmers.
By Philip Blenkinsop
BRUSSELS, Jan 9 (Reuters) - EU states gave the go-ahead on Friday for the bloc to sign its largest free trade accord with the South American group Mercosur, more than 25 years after talks began, following months of wrangling to secure enough support.
With U.S. President Donald Trump shaking up global trade, the European Commission and countries such as Germany and Spain argue the deal will help offset business lost from U.S. import tariffs, and reduce reliance on China by securing access to critical minerals.
Brazilian President Luiz Inacio Lula da Silva hailed the EU's clearance as a "historic day for multilateralism".
"In an international scenario of growing protectionism and unilateralism, the agreement is a signal in favour of international trade as a driver of economic growth, with benefits for both blocs," he posted on X.
Opponents led by France, the European Union's largest agricultural producer, say the agreement will jack up imports of cheap food products, including beef, poultry and sugar, undercutting domestic farmers.
FARMERS MARCH, BLOCK HIGHWAYS
Farmers have launched protests across the EU, blocking highways in France and Belgium and marching in Poland on Friday.
France voted against the deal - but a sufficient majority of EU members backed the accord.
An EU diplomat and Poland's agriculture minister said that 21 countries supported the agreement, with Austria, France, Hungary, Ireland and Poland against and Belgium abstaining. A minimum of 15 countries representing 65% of the bloc's total population was required for approval.
German Chancellor Friedrich Merz hailed Friday's vote as a "milestone" and said the deal would be good for Germany and for Europe.
"But 25 years of negotiations is too long. It's vital that the next free trade agreements are concluded swiftly," he said in a statement.
The approval clears the way for Commission President Ursula von der Leyen to sign the agreement with Mercosur partners - Argentina, Brazil, Paraguay and Uruguay - in Asuncion. Argentina's Foreign Ministry said the signing ceremony would take place on January 17.
The European Parliament will also need to approve the accord, finally concluded a year ago, before it can enter into force.
FRANCE SAYS THE BATTLE IS NOT OVER
The free trade agreement is set to be the European Union's biggest in terms of tariff reduction, removing 4 billion euros ($4.66 billion) of duties on its exports. The Mercosur countries have high tariffs, such as 35% on car parts, 28% on dairy products and 27% on wines.
The EU and Mercosur will hope to expand evenly split goods trade worth 111 billion euros in 2024. EU exports are dominated by machinery, chemicals and transport equipment, and Mercosur's are focused on agricultural products, minerals, pulp and paper.
To win over deal sceptics, the European Commission has put in place safeguards that can suspend imports of sensitive farm produce. It has strengthened import controls, notably regarding pesticide residues, established a crisis fund, accelerated support for farmers, and has pledged to cut import duties on fertilisers.
The concessions were not enough to convince Poland or France, but Italy shifted from a 'no' in December to a 'yes' on Friday, swinging the overall balance.
"It seems to me the balance that has been found is sustainable," Italian Prime Minister Giorgia Meloni told a press conference.
Mathilde Panot, lower house chief of the far-left France Unbowed party, said on X that France had been "humiliated" by Brussels and on the world stage.
French far-right and far-left parties are set to launch no-confidence motions in the government over the likely approval.
French Agriculture Minister Annie Genevard has said the battle is not over and has pledged to fight for a rejection by the EU assembly, where the vote could be tight. European environmental groups also oppose the accord, saying commodities shipped to Europe will often come from deforested land.
"The simple truth is that this unpopular deal is a disaster for the Amazon rainforest and no progressive MEP that is committed to forest protection should ever support it," Greenpeace EU campaigner Lis Cunha said.
German Social Democrat Bernd Lange, the chair of parliament's trade committee, expressed confidence that the deal would be passed, with a final vote most likely in April or May.
($1 = 0.8587 euros)
(Reporting by Philip Blenkinsop, additional reporting by Charlotte Van Campenhout, Inti Landauro, Kuba Stezycki and Alan Charlish, Giselda Vagnoni, Manuela Andreoni, Lucinda ElliotEditing by Gareth Jones, Toby Chopra, Andrew Heavens, Rod Nickel)
The European Commission is the executive branch of the European Union responsible for proposing legislation, implementing decisions, and managing the day-to-day operations of the EU.
Mercosur is a South American trade bloc established to promote free trade and economic integration among its member countries, including Argentina, Brazil, Paraguay, and Uruguay.
The European Parliament is the legislative body of the European Union, responsible for debating and passing European laws, including trade agreements.
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