After more than 25 years of negotiations, the European Union (EU) and the Mercosur countries have reached and signed one of the world’s most ambitious trade agreements. The EU–Mercosur Free Trade Agreement (Agreement) is not only economically significant, but also politically emblematic for a commitment to rules‑based trade at a time of geopolitical fragmentation.
- Political and Economic Importance
The Agreement creates a free trade area covering more than 770 million consumers across Europe and South America, representing around 25% of global GDP. Mercosur comprises Argentina, Brazil, Paraguay and Uruguay, while the EU acts as a single party.
From an economic perspective, the agreement is the EU’s largest trade deal ever concluded. Mercosur is already the EU’s largest trading partner in Latin America and a key destination for EU exports of machinery, vehicles, chemicals and pharmaceuticals, while the EU is Mercosur’s second‑largest trading partner overall, after China.
Politically, the agreement has strong geostrategic relevance. It contributes to supply chain diversification and reduced dependency on a limited number of global suppliers. At the same time, it sends a signal that large‑scale multilateral trade liberalization remains possible despite growing protectionism worldwide.
- Ratification Status
The Agreement is structured in two parts:
- the EU–Mercosur Partnership Agreement (EMPA), covering political dialogue, cooperation on sustainable development, and trade (goods, services, investment, public procurement);
- the Interim Trade Agreement (iTA), covering tariff reductions/eliminations, rules of origin, customs, services, and public procurement (essentially the “trade part” of the EMPA).
The Mercosur-side ratification has been finalized: Uruguay and Argentina completed approval on 26 February 2026; Brazil followed in March/April 2026, and Paraguay completed the process in March 2026. Even though Bolivia is now a Mercosur State Party, it is not a signatory to the Agreement, because the negotiations were concluded before Bolivia’s accession to Mercosur.
From an EU perspective, the EMPA is subject to ratification by all 27 EU Member States, whereas the iTA can be adopted through an EU-only ratification process (i.e. approval by the European Council and the European Parliament). On 21 January 2026, the European Parliament decided to request the European Court of Justice to assess whether the Agreement is in conformity with the EU treaties. The legal basis of the EMPA and the iTA will now be reviewed by the European Court of Justice. The European Parliament will continue its examination of the texts, while awaiting the opinion of the European Court of Justice. Only then, Parliament will be able to vote to grant consent (or not) to the Agreement.
Irrespective of the review by the European Court of Justice, the iTA will start being provisionally applied by 1 May 2026. The provisional application activates:
Tariff reductions,
Preferential rules of origin,
Customs and trade‑facilitation provisions,
Core market‑access commitments.
The iTA will cease to apply once the full EMPA enters into force.
- Core Content of the EU Mercosur Agreement
The Agreement covers the following pillars:
Tariff Elimination: The Agreement eliminates duties on over 90% of goods, phasing them out over 10–15 years.
Services and Procurement: The Agreement eases barriers for service providers (e.g. telecommunications, financial services) and opens public procurement markets for EU firms, particularly in Brazil.
Sustainability and Environment: The Agreement includes commitments to tackle deforestation, implement sustainable forest management, and uphold labor rights.
- Outlook
The provisional application of the iTA moves the Agreement from negotiation into practice, delivering immediate economic benefits. It reflects a pragmatic shift towards advancing trade integration even as legal uncertainties persist. Whether this approach builds momentum for full ratification or triggers opposition will depend on how tangible the benefits prove in the near term. For now, it appears that the provisional application tries to balance economic urgency with institutional constraints.
- How to benefit? Baker McKenzie’s recommendations
The Agreement represents a material commercial opportunity, but only if companies translate the Agreement into operational readiness.
In practice, benefiting from the Agreement requires:
- Product‑level eligibility confirmation (i.e. is your product included in Annex 2 iTA?);
- Defensible rules‑of‑origin analysis (i.e. does your product qualify as “originating” under the applicable preferential rules of origin);
- REX‑compliant self‑certification (and internal updates where already registered);
- Robust supplier and origin documentation (e.g. updated supplier declaration); and
- Aligned customs, systems, and governance frameworks.
Companies that rely on the agreement without these preparations expose themselves to compliance risk rather than capturing sustainable tariff savings. Baker & McKenzie’s global customs and trade team will further monitor and outline the EU-Mercosur agreement and its importance for businesses in more detail in consecutive blog posts.
