MILAN — After over 25 years of discussions, the council representing European member states authorized the signing of a trade deal with Mercosur that could potentially create the world’s biggest free-trade area.
In a statement, the European Commission said Friday that the EU Council representing its member states adopted two key decisions approving the EU-Mercosur Partnership Agreement and the Interim Trade Agreement between the EU and Mercosur. Mercosur is the South American bloc that includes Argentina, Brazil, Paraguay and Uruguay.
The European Commission said both agreements will require the consent of the European Parliament, though the interim agreement does not require ratification and will remain in effect until the official trade agreement is ratified. Trade to Mercosur has long been limited due in large part to steep tariffs. The Brazilian market, for example, has until now, been highly protected with an applied customs averaging duty of 13.5 percent, according to the European Commission.
Under the interim agreement, tariff reductions and removal of barriers to cross-border trade in services will begin in the near-term to open access to new markets for a wide range of goods across agriculture, automotive, pharmaceuticals and chemicals.
Mercosur Is Crucial for Luxury
Since U.S. President Donald Trump imposed sweeping tariffs on foreign goods, luxury firms across fashion and design have been banking on a reprieve that hinged on the swift approval of the crucial European Union deal with Mercosur. This deal, for which talks commenced in 1999, covers a market of over 700 million consumers.
The European Commission has said that the main goal of the deal is to increase bilateral trade and investment and lower tariff and non-tariff trade barriers — notably for the sort of small and medium-sized companies that are the backbone of European luxury, agriculture and services companies. The commission also said that the deal could save EU companies 4 billion euros’ worth of export duties a year.
Ornare is a Brazilian design company that has a European hub in Milan.
DSL Studio
In Italy, fashion and design leaders have said the deal was key amid an ongoing slowdown due in part to China’s declining appetite for European luxury goods and the industry losing loyal customers over rising prices.
“Swiftly bringing the Free Trade Agreement between the European Union and the Mercosur countries to a conclusion is a strategic priority for the entire European industry and, in particular, for Italy’s textile–clothing–fashion value chain,” Italy’s industrial federation Confindustria Moda said in an emailed statement to WWD in December, adding that it is a key step in ensuring the sector’s growth amid a challenging macroeconomic situation.
Mercosur’s Impact on the Economy
The EU is Mercosur’s second-largest partner in trade in goods, accounting for almost 17 percent of Mercosur’s total trade in 2024. The EU’s trade with Mercosur was worth over 111 billion euros in 2024. In 2023 (the most recent year for which there is available data) trade in services between the EU and Mercosur was worth over 42 billion euros.
“These agreements will create new opportunities for businesses on both sides, while ensuring robust safeguards for our most sensitive sectors and a fair, sustainable framework for trade,” said Michael Damianos, Cyprus’ minister for energy, commerce and industry.
Opposition Remains
Countries like Italy were reluctant to sign the deal due to concerns over the protection of European farmers, who have expressed concerns about a potential flood of cheap imports.
France‘s President Emmanuel Macron has said France would “firmly oppose” the European Union forcing through a trade deal with the South American bloc. A report from Euro News said that France, Poland, Austria, Hungary, and Ireland were among the nations that voted against the agreement, while Belgium abstained.
Louis Vuitton shoe factory in Venice, Italy.
Footwear News
Following Friday’s decisions, the European Commission said that the EU and its Mercosur partners will proceed with the signature of the agreements.
The trade agreement will fully enter into force once all EU member states and Mercosur parties have completed ratification. The interim agreement will remain in effect until it is superseded by the entry into force of the full partnership agreement.