On 17th January, the EU and South American bloc Mercosur top officials signed a free trade agreement in the country of Paraguay, and this agreement will see the European Union enter into the biggest trade agreement ever, after 25 years of negotiation.

The accord, which is intended to reduce the tariffs and increase the trade between the two regions, will now have to be approved by the European Parliament and ratified by the legislations of members of Mercosur, such as Argentina, Brazil, Paraguay, and Uruguay.

In addition to the presidents of Mercosur countries, European Commission President Ursula von der Leyen and European Council President Antonio Costa attended the ceremony on Saturday, although the Brazilian president, Luiz Inacio Lula da Silva, did not attend but was represented by a foreign minister.

European Concerns with Low-End Imports

Most European countries gave the green light to the deal last week, although farmers and environmentalists are apprehensive of the challenges they will face due to the influx of cheap South American goods and the rise in deforestation.

Prior to the signing, Asuncion von der Leyen, who visited Lula, stated that the agreement would establish the biggest free trade zone in the world.

“This agreement conveys a very strong message to the world. It is an apparent and conscious decision. We prefer fair trade to tariffs. This is a long-term, fruitful collaboration, not solitude, as we prefer on Saturday.”

Under the condition of not being allowed to buy Greenland, the U.S. President Donald Trump threatened to progressively add tariffs on eight European countries on the morning of the ceremony.

According to Costa, “this deal will assist both our blocs to navigate through an ever-turbulent political landscape without compromising our values, and will be a real milestone in strengthening our economic security.”

Although Mercosur officials have been echoing some of the regulations within the pact, Lula confirmed on Friday in Rio de Janeiro that it will open up more opportunities and spur more trade and investments between the two parties.

The government of Brazil made the announcement that this deal represents the actions of Lula in terms of expansion and diversification of markets, and South America is also negotiating with the United Arab Emirates, Canada, and Vietnam, as well as the expansion of a tariff-preference agreement with India.

In 2024, trade between the EU and Mercosur, which covers a market of 700 million people, achieved a value of 111 billion euros. The exports of the European Union are mostly in the form of machinery, chemical products, and transport equipment, whereas Mercosur exports are concentrated in agricultural goods, minerals, wood pulp, and paper.