FACTSHEET - Mercosur-European Union Partnership Agreement
THE STRATEGIC IMPORTANCE OF THE AGREEMENT
On December 6, 2024, the leaders of MERCOSUR and the European Union announced in Montevideo the conclusion of negotiations on the Partnership Agreement between MERCOSUR and the European Union. The announcement allows the preparation of the texts of the Agreement for its subsequent signature and ratification.
The result of more than two decades of negotiations, the results achieved by the two regions are transformative from both an economic and political perspective , in addition to reinforcing MERCOSUR as a platform for the international insertion of its Member States.
The Agreement will integrate two of the largest economic blocs in the world. Together, MERCOSUR and the EU bring together around 718 million people and a Gross Domestic Product (GDP) of approximately US$22 trillion. [1] When examined by the volume of trade between the two blocs, it is both the largest trade agreement negotiated by MERCOSUR and one of the largest among those agreed upon by the European Union with trading partners.
Measured by the populations covered together with the size of the economies of the two blocs, the Partnership Agreement between MERCOSUR and the European Union is one of the largest bilateral free trade agreements in the world — in an international context of growing protectionism and commercial unilateralism, this result is a signal in favor of international trade as a factor for economic growth.
For Brazil , the Agreement has strategic value in several ways . The European Union is Brazil's second largest trading partner, with a trade flow of approximately US$ 92 billion in 2023. The Agreement should strengthen the diversification of Brazil's trade partnerships , an asset of strategic nature for the country, in addition to fostering the modernization of the Brazilian industrial park with the integration into the European Union's production chains. Likewise, it is expected that the Agreement will further boost investment flows , which should reinforce the EU's current position as the holder of almost half of the stock of foreign direct investment in Brazil. [2]
The Agreement announced on December 6, 2024 incorporates innovative, balanced commitments that are in line with the challenges of the international economic context:
- The Agreement reflects an international framework in which the role of the State as a driver of growth and promoter of the resilience of national economies is gaining centrality, especially after the COVID-19 pandemic. MERCOSUR and the European Union open up important opportunities for increasing bilateral trade and investment while preserving space for the implementation of public policies in areas such as health, employment, the environment, innovation and family farming.
- MERCOSUR and the European Union recognize that the challenges of sustainable development must be faced by all , bearing in mind the common but differentiated responsibilities of countries. The Agreement includes, in a collaborative and balanced manner, different commitments that aim to effectively reconcile trade with sustainable development . Taking advantage of Brazil's solid sustainability credentials, the Agreement fosters the integration of production chains to advance towards the decarbonization of the economy, in addition to encouraging the granting of favored treatment for foreign trade of sustainable products. The EU also commits to offering an unprecedented cooperation package to support the implementation of the Agreement.
- In order to preserve the gains in access to the European market negotiated by MERCOSUR, the Agreement innovates by establishing a mechanism for rebalancing concessions . With this, the Agreement offers satisfaction to our exporters in the event that internal EU measures compromise the effective use of advantages obtained under the Agreement.
- Brazil made a point of including commitments in the Agreement that guarantee transparency and inclusiveness . Civil society entities, unions, non-governmental organizations, as well as the private sector and representatives of various social segments, have channels to express their voices and monitor the impacts of the Agreement, which may be revised periodically to better serve the interests of society. In addition, there are commitments to ensure that family farmers, local communities and women have effective access to the benefits that the Agreement can generate.
In a global context of growing challenges to the rule of law, social justice and the peaceful resolution of conflicts, the Agreement represents the association between two regions that share common values and interests , such as the defense of democracy, multilateralism and the promotion of human rights. It is an unequivocal sign of the commitment of MERCOSUR and the European Union to the agendas of trade integration and sustainable development, for the benefit of the prosperity of our peoples. The Agreement establishes several mechanisms for political cooperation between the two blocs . These spaces for dialogue will strengthen collaboration between MERCOSUR and the European Union in global debates that contribute to a more just and peaceful international order.
The Agreement also represents a milestone in Brazil's bilateral relations with the European Union , which began in 1960 and reached the level of a strategic partnership in 2007. The establishment of the Strategic Partnership between Brazil and the European Union, the first between the bloc and a Latin American country, enriched the political aspect of bilateral relations, which have traditionally been intense in the economic and commercial spheres.
The conclusion of the Partnership Agreement also represents unequivocal proof that MERCOSUR is the appropriate platform for its Member States, negotiating jointly, to obtain better conditions for insertion in the global market .
The Agreement certainly brings important commercial results for Brazil, Argentina, Paraguay and Uruguay in terms of access to the European market and attracting investment. However, the commitments jointly undertaken by MERCOSUR should deepen economic integration among the bloc's partners, among other things by strengthening regional institutions such as the Common External Tariff . It is also expected that the Partnership Agreement with the European Union will accelerate a virtuous cycle of international insertion for MERCOSUR , since the preferential access obtained by the European bloc could increase the interest of third-party partners in negotiating understandings with MERCOSUR.
Under the guidance of President Lula, since 2023 the Brazilian government has been committed to ensuring that the negotiations produce a balanced result, taking into account Brazil's interests and concerns , such as industrial development, sustainability, and space for public policies in strategic areas such as public health and technology and innovation. Brazil's interests were addressed in a context in which the European Union, in 2023, presented MERCOSUR with new demands in the environmental area, which led to a negotiation in which both blocs proposed adjustments and additions in relation to the so-called “pre-agreement” of 2019. The 2024 announcement marks the definitive conclusion of the bi-regional negotiation , which marks a difference in relation to the “political” declaration released in June 2019, when pending issues of negotiation still persisted.
Between 2023 and the final conclusion of negotiations in 2024, representatives of the two blocs held seven in-person negotiating rounds, all in Brasília. These meetings were accompanied, during this period, by numerous in-person and virtual meetings between chief negotiators of the two blocs and technical negotiators. High-level political support for the conclusion of the Agreement was reiterated in the six meetings that President Lula had with the President of the European Commission, Ursula von der Leyen, since June 2023. Brazil is expected to host the Brazil-EU Summit in 2025.
The adjustments made to the Agreement, through negotiations carried out in 2023 and 2024, in addition to bringing greater balance to sustainability commitments, will help ensure that Brazil can leverage public interest policies and strengthen national industry — while providing economic opportunities for the entire spectrum of society.
II. THE 10-POINT BRASILIA PACKAGE: HIGHLIGHTS OF THE 2023-2024 NEGOTIATIONS
The announcement on December 6, 2024 marks the definitive conclusion of negotiations on the Partnership Agreement between MERCOSUR and the European Union. Unlike the “political agreement” announced in 2019, when texts remained subject to negotiation, all chapters are currently negotiated.
The negotiation phase that began in 2023 took place in a different political and economic context, marked by the experience of the pandemic, the worsening of the climate crisis and the intensification of geopolitical tensions, elements that offered a new backdrop for the negotiations. In addition, President Lula's government understood that it was necessary to make specific adjustments to the terms negotiated in 2019 in order to make the Agreement more favorable to Brazilian interests.
Negotiations resumed in 2023 focused on:
- draft new texts for topics that both sides agreed to incorporate into the Agreement, especially in the areas of trade and sustainable development, concession rebalancing mechanism, cooperation and review of the Agreement;
- adapt terms that had been previously agreed upon in order to make the Agreement more suited to the current political and economic framework, specifically in the areas of government procurement, vehicle trade, export of critical minerals and copyright;
- conclude the negotiation of issues that remained open since 2019, specifically in the areas of geographical indications and rules on the implementation of the Agreement.
While this section highlights the main points agreed in the negotiation phase that began in 2023, the following section presents the elements of the Agreement that have not undergone modifications since 2019, in particular the market access concessions for agricultural products exported by MERCOSUR.
1. New Annex to the Chapter on Trade and Sustainable Development, reinforcing the commitment of both sides to the environmental, social and economic agenda . With a view to promoting international trade and, at the same time, contributing to sustainable development, MERCOSUR and the European Union negotiated an Annex to the Chapter on Trade and Sustainable Development. While reinforcing their environmental commitments, the Parties reject unnecessary barriers to trade. The Annex includes provisions on multilateral environmental and labor regimes; the relationship between trade, investment and sustainable development; trade and women’s empowerment; and cooperation.
In the Annex, MERCOSUR and the EU agreed on a series of commitments to protect the environment and promote decent work. Cooperation is expected in the implementation of relevant multilateral agreements, such as the United Nations Framework Convention on Climate Change (UNFCCC), the Paris Agreement, the Convention on Biological Diversity (CBD) and Conventions of the International Labour Organization (ILO). MERCOSUR and the EU also agreed to adopt actions to promote sustainable products in bi-regional trade, fostering opportunities for small producers, cooperatives, indigenous peoples and local communities. The new Annex also includes a section dedicated to the promotion of sustainable value chains for the energy transition. Furthermore, for the first time, a MERCOSUR trade agreement will include provisions on trade and women's empowerment, with a view to fostering cooperation and the exchange of best practices in policies that promote women's participation in international trade.
2. Commitment to a cooperative approach regarding domestic sustainable measures that impact trade. In the new Trade and Sustainable Development Annex, the EU committed to using data from MERCOSUR authorities to assess the compatibility of imports from MERCOSUR with compliance requirements established by European bloc legislation. This commitment is a recognition of the quality of the data produced by institutions of MERCOSUR countries for the implementation of European legislation. The Parties also recognized that environmental measures that impact trade must be consistent with World Trade Organization (WTO) Agreements, must not constitute a disguised restriction on trade, and must be based on technical and scientific information. The Parties agreed that the new negotiated Annex does not imply an endorsement of the environmental requirements adopted by either side, reserving, in this context, their rights under the WTO.
3. Government Procurement as an instrument of industrial policy and economic development. Given the recognition of the importance of government procurement as an instrument for economic and industrial development, the chapter on Government Procurement was the subject of renegotiation between MERCOSUR and the EU in the negotiation phase that began in 2023. Brazil proposed adjustments to the terms that had been discussed in the past, with a view to preserving the use of the State's purchasing power as a tool of the new Brazilian industrial policy. Among the adjustments promoted, it is worth highlighting the complete exclusion of purchases made by the Unified Health System; the preservation of the possibility of technological orders, an important policy for fostering innovation; the elimination of time restrictions on the use of technological and commercial offsets; the maintenance of space for policies to encourage micro and small businesses and family farming; and the preservation of margins of preference for national products and services.
4. Automotive sector with tariff elimination over a longer period. With new technological routes to enable the energy transition, the automotive sector is undergoing a major transformation worldwide. In this scenario, and given the importance of the sector for Brazil, MERCOSUR negotiated more flexible conditions for tariff reductions for electrified vehicles and vehicles with new technologies, even those not yet commercially available. In this negotiation stage, MERCOSUR highlighted certain vehicles from the schedule applicable to combustion vehicles, previously defined as tariff elimination in 15 years. For electrified vehicles, the tariff elimination will now take place in 18 years. For hydrogen vehicles, the period will be 25 years, with a 6-year grace period. For new technologies, 30 years, with a 6-year grace period. Until this negotiation stage, no tariff elimination schedule was longer than 15 years.
5. Creation of an investment safeguard for the automotive sector. An unprecedented safeguard mechanism was established to preserve and expand automotive investments. Should there be an increase in European imports that cause harm to the industry, Brazil may suspend the tariff reduction schedule for the entire sector or resume the rate applicable to other sources (currently 35%) for a period of 3 years, renewable for another 2 years, without the need to offer compensation to the European Union. The assessment will take into account parameters such as the level of employment, sales and production volumes, installed capacity and degree of capacity utilization in the automotive sector. This automotive investment safeguard is more easily actionable than the general safeguard provided for in the Agreement.
6. Adoption of flexibility for public policies on critical minerals. Starting with the 2023-2024 renegotiation, Brazil guarantees the right to apply restrictions on exports of critical minerals if it deems it appropriate, for example, to stimulate value addition in the country. If Brazil were to adopt an export tax on these products (which is not the case today), the rate applicable to the EU must be lower than that levied on other destinations, and may not exceed 25%. The pre-agreement adopted in 2019 prohibited any incidence of export duties on trade between Brazil and the European Union.
7. Creation of a Mechanism to Rebalance the Agreement to prevent unilateral measures from jeopardizing negotiated trade concessions . In an unprecedented move, a mechanism has now been established to prevent unilateral measures by the Parties from jeopardizing the balance established in the Agreement, since such measures have the potential to jeopardize negotiated trade concessions and unbalance the agreed outcome. Following the 2019 “political agreement,” the European Union adopted legislation that, depending on how it is implemented, could disrupt the balance reflected in the 2019 understanding on those issues that were not renegotiated in the stage that began in 2023. This is the case, for example, of the quotas offered by the EU for the export of meat from MERCOSUR, which were not reopened in the 2023 stage.
It was established that arbitration will determine whether there has been a breach of the commitments made and to what extent, regardless of whether or not the Agreement has been violated. If this is the case, the party that restricted trade must offer trade compensation (market opening) to the other side. If there is no agreement on compensation, there is a right to “retaliation” (suspension of benefits provided for in the Agreement), in the amount defined in arbitration, with a view to reestablishing the balance of the Agreement.
8. Civil society, trade unions and business organizations entitled to participate in the review of the Agreement. Based on the package negotiated in 2023-2024, the process of reviewing the implementation of the Agreement becomes more inclusive. The review, which aims to assess the impacts of the Agreement on employment, investment and trade between the Parties, should consider the views and recommendations of civil society actors, such as NGOs, business and employers’ organizations, social movements and trade unions. The periodic review of the impacts of the Agreement may lead the governments of the Parties to negotiate amendments to the text.
9. Resources for cooperation to support MERCOSUR countries in benefiting from the Agreement. Together with the conclusion of the Agreement, the EU will offer a package to support MERCOSUR countries in implementing the Agreement, particularly in its trade aspects, taking into account the particular importance of supporting the most vulnerable sectors. This commitment is linked to the conclusion of a Cooperation Protocol, under which MERCOSUR and the European Union will collaborate to define the priorities of the programs to be supported.
10. Conclusion of pending issues from the 2019 negotiations . The 2023-2024 negotiation phase also enabled the conclusion of issues that were still open in 2019, such as Geographical Indications, for example for wines . During this phase, disciplines were negotiated that delimit the rights of holders of Geographical Indications, among others those that safeguard, in MERCOSUR countries, the previous users of European geographical names that will be protected by the Agreement.
III. THE MERCOSUR-EUROPEAN UNION PARTNERSHIP AGREEMENT
The chapter on Trade in Goods includes a broad commitment to tariff liberalization in industrial and agricultural sectors, respecting the specificities of each market.
The offer made by MERCOSUR encompasses broad tariff liberalization, with baskets of products subject to immediate or linear tariff reduction over periods ranging from 4, 8, 10 and 15 years. This offer covers approximately 91% of goods and 85% of the value of Brazilian imports of products from the European Union. Only a very small portion of goods are subject to quotas or other non-tariff treatments, while the list of exclusions represents approximately 9% of goods and 8% of the total value of imports. For the automotive sector, special conditions were negotiated for electrified vehicles, hydrogen-powered vehicles and new technologies, with tariff reduction periods of 18, 25 and 30 years, respectively.
On the other hand, the European Union's offer presents an even broader scope of liberalization, with baskets of products that will have immediate or linear tariff reductions over periods of 4, 7, 8, 10 and 12 years. These products correspond to approximately 95% of the goods and 92% of the value of European imports of Brazilian goods. Products subject to quotas or non-tariff treatments represent approximately 3% of the goods and 5% of the value imported by the European Union, with these treatments being applied mainly to items from the agricultural and agribusiness sectors. This approach reflects the balance sought between opening markets and protecting sectors that are sensitive to both parties.
EU agricultural supply
Product | Treatment |
Beef | 99 thousand tons carcass weight, 55% chilled and 45% frozen, with an intraquota of 7.5% and increasing volume in 6 stages. Hilton quota (10 thousand tons): intraquota will increase from 20% to 0% upon entry into force of the agreement |
Poultry meat | 180 thousand tons carcass weight, zero intraquota, 50% with bone and 50% boneless and increasing volume in 6 stages |
Pork | 25 thousand tons, intraquota of 83 euros/ton and increasing volume in 6 stages |
Sugar | 180 thousand tons, zero intra-quota at the entry into force of the agreement. Specific quota for Paraguay of 10 thousand tons, with zero intra-quota |
Ethanol | 450,000 tonnes of industrial ethanol, zero intra-quota at the entry into force of the agreement. 200,000 tonnes of ethanol for other uses (including fuel), intra-quota with 1/3 of the European tariff applied (6.4 or 3.4 euros/hectoliter), increasing volume in 6 stages |
Rice | 60 thousand tons, zero intraquota at entry into force, increasing volume in 6 stages |
Mel | 45 thousand tons, zero intraquota at entry into force, increasing volume in 6 stages |
Corn and Sorghum | 1 million tonnes, zero intra-quota at entry into force of the agreement, increasing volume in 6 stages |
Orange juice | 7 and 10 year tax relief and 50% preference margin |
Liquor | Bottles of less than 2 liters will have their trade liberalized in 4 years. Bulk cachaça will have a quota of 2,400 tons with zero intraquota and increasing volume in 5 years. Currently, cachaça pays a rate of approximately 8%. |
Cheeses | 30 thousand tons with increasing volume and decreasing intraquota in 10 years (exclusion of mozzarella) |
Yogurt | 50% preference margin |
Butter | 30% preference margin |
Fruits | Fruits such as avocados, lemons, limes, melons and watermelons, table grapes and apples will not be subject to quotas and will have their tariffs completely eliminated. |
The Rules of Origin chapter defines modern criteria that ensure that trade benefits are enjoyed by the parties, with flexibilities for specific sectors, such as textiles. It also provides for the adoption of self-certification to reduce costs and bureaucracy.
The Trade Facilitation chapter aims to reduce costs and simplify processes related to import and export, with an emphasis on transparency, electronic systems and mutual recognition of authorized operators.
The Technical Barriers to Trade (TBT) chapter promotes good regulatory practices to avoid unnecessary barriers, encouraging the use of international standards and public consultations for greater predictability and integration between blocs.
The Sanitary and Phytosanitary Measures (SPS) chapter facilitates agricultural trade, promoting transparency and predictability with systems such as pre-listing and regionalization procedures for products of animal origin. The Agreement preserves the high standards of food production in MERCOSUR and the European Union.
The Dialogues chapter establishes mechanisms for technical cooperation between the blocs on topics such as animal welfare, agricultural biotechnology and antimicrobial resistance, promoting the exchange of information and regulatory harmonization.
The Trade Defense chapter reaffirms the rights to apply anti-dumping and countervailing measures in accordance with WTO rules, ensuring protection against unfair trade practices.
The Bilateral Safeguards chapter allows domestic industries to be protected from import surges resulting from trade liberalization. The chapter now has a specific mechanism for the automotive sector, with a view to preserving and promoting investment.
The Services and Investments chapter expands transparency and legal certainty for investors and service providers, respecting regulatory sovereignty in sensitive areas and promoting the modernization of domestic regulations.
The Government Procurement chapter guarantees preferential access to the European public market for MERCOSUR companies and vice versa. Brazil's specific commitments take into account its interest in preserving space for public policy in the areas of industrial development, public health, technology and innovation, small and medium-sized enterprises and small rural producers.
The Intellectual Property chapter consolidates international protection standards and reinforces the recognition of geographical indications, such as “Cachaça” and “Canastra”, strengthening the Brazilian brand in Europe. Importantly, the chapter does not change the patent rules that were agreed upon within the WTO, an important requirement for the formulation of health policies in Brazil.
The Small and Medium-sized Enterprises chapter promotes specific actions to facilitate their integration into global chains, such as training programs, partnerships and participation in public tenders.
The Competition Defense chapter reaffirms the commitment to combat anticompetitive practices, promoting cooperation between bloc authorities to strengthen regulatory institutions.
The Subsidies chapter establishes rules to ensure transparency and prevent market distortions.
The State-Owned Enterprises chapter seeks a balance between commercial criteria and public objectives, ensuring that state-owned enterprises can operate flexibly to fulfill functions of national interest.
The Trade and Sustainable Development chapter , which now has a new Annex (see previous section), reaffirms multilateral commitments such as the Paris Agreement and the 2030 Agenda, integrating sustainability into trade relations and promoting sustainable production chains. It also includes commitments to prevent environmental arguments from being used to justify unnecessary barriers to trade.
The Transparency chapter promotes good regulatory practices by requiring public consultations, impact assessments and periodic review of measures, ensuring predictability in trade.
The Exceptions chapter provides safeguards to protect safety, health, the environment and culture, allowing the adoption of exceptional measures as long as they are proportionate and non-discriminatory.
The Dispute Resolution chapter defines dispute resolution mechanisms, with initial consultations and the possibility of arbitration, ensuring compliance with obligations. The chapter now has a section dedicated to preserving the balance of the agreement, regardless of violation of the agreed terms (see section above).
IV. NEXT STEPS
Negotiations on the Partnership Agreement between MERCOSUR and the European Union are now fully concluded.
The parties reached a consensus on all texts, whether on the topics subject to reopening or on those pending issues that persisted since 2019. The conclusion of the negotiations, however, does not produce immediate legal effects, which only occur with the signing and entry into force of the Agreement.
MERCOSUR and the European Union will now begin preparing the texts of the Agreement for its signature and entry into force. This process involves:
(i) Legal review: The process of legal review of the Agreement, aimed at ensuring consistency, harmony and linguistic and structural correctness of the texts of the Agreement, is advanced.
(ii) Translation: Once the legal review is complete, the Agreement will be translated from English into the 23 official languages of the European Union and the 2 official languages of MERCOSUR, including Portuguese.
(iii) Signing: The signing, in which the parties formally express their acceptance of the Agreement, will take place after the legal review and translations of the Agreement have been completed.
(iv) Internalization: Following the signature, the parties will forward the Agreement to the respective internal approval processes. In Brazil, this process involves the Executive and Legislative Branches, through approval by the National Congress.
(v) Ratification: The parties notify the completion of their respective internal procedures and confirm, through ratification, their commitment to comply with the Agreement.
(vi) Entry into force: The Agreement will enter into force and, therefore, produce legal effects on the first day of the month following notification of the completion of internal procedures. Since the Partnership Agreement between MERCOSUR and the European Union establishes the possibility of bilateral validity, it would be sufficient for the European Union and Brazil – or any other MERCOSUR country – to have completed the ratification process for its entry into force bilaterally between such parties.
V. BRAZIL-EU IN NUMBERS
European Union (sources: World Bank and Eurostat – 2023)
- 27 countries
- Population of 449 million inhabitants
- GDP of 18.3 trillion dollars
- Exports of goods worth US$2.56 trillion to the world
- World's $2.52 trillion in goods imports
Brazil-European Union Trade
- The European Union is Brazil's second largest trading partner
- In 2023, the bilateral trade flow, of US$ 92 billion, represented 16% of our foreign trade.
Brazil exported US$46.3 billion to the European Union in 2023
- Animal feed - 11.6%
- Metal ores and scrap - 9.8%
- Coffee, tea, cocoa, spices - 7.8%
- Oil seeds and fruits - 6.4%
- Iron and steel - 4.6%
- Vegetables and fruits - 4.5%
- Pulp and paper waste - 3.4%
- Meat and meat preparations - 2.5%
- Tobacco and its manufactures - 2.2%
Brazil imported US$45.4 billion from the European Union in 2023
- Pharmaceutical and medicinal products - 14.7%
- Machinery in general and industrial equipment - 9.9%
- Road vehicles - 8.2%
- Oil, petroleum products - 6.8%
- Power generation machinery and equipment - 6.1%
- Organic chemicals - 5.5%
- Specialized machines and equipment for certain industries - 5.3%
- Electrical machines and appliances - 4.7%
- Materials and chemicals - 3.6%
- Iron and steel - 3.4%
VI – ESTIMATED IMPACTS - Simulation of the effects of the Mercosur – EU Trade Agreement for Brazil
Estimated percentage deviations for the year 2044; values in reais consider the base year of 2023
o Positive effect of 0.34% (R$ 37 billion) on GDP
o 0.76% increase in investment (R$ 13.6 billion)
o 0.56% reduction in consumer price levels
o 0.42% increase in real wages
o Impact of 2.46% (R$ 42.1 billion) on total imports
o Impact of 2.65% (R$ 52.1 billion) on total exports
Estimated impacts are based on recursive dynamic general equilibrium (GTAP-RD) simulation results.
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