EU-Mercosur Trade Deal on Trial | Global Finance Magazine
A new dispute over Brazilian exports adds to legal and political uncertainty around the pact.
This article appears in the October issue of Global Finance Magazine.
Just four months into its provisional application, the EU-Mercosur trade deal continues to face increasing pressure, with a new dispute over Brazilian animal products adding to the legal and political uncertainty that has surrounded the agreement since the start of the year.
On Sept. 3, Brussels suspended imports of Brazilian beef, poultry, eggs, honey and other animal products over concerns about compliance with EU rules on antimicrobial use. The measures affect $1.84 billion of Brazilian exports, based on 2025 shipments, and Brazil has signaled that it could respond with reciprocal measures if the dispute isn’t resolved.
In January, even before the deal took effect, the European Parliament asked the EU’s top court to rule on whether the agreement is compatible with the bloc’s treaties, including whether the interim trade agreement could take effect without ratification by all 27 national parliaments.
Poland followed in May, challenging the EU decision that authorized the agreement’s provisional application and seeking to have it suspended while the case is heard.
Both cases remain pending, leaving exporters to price that risk into contracts and investment decisions.
Global law firm White & Case advised companies to account for the possibility that provisional application could be terminated if full ratification fails, including in contractual arrangements, pricing and investment decisions tied to preferential market access.
“I think there is certainly some cost of uncertainty for companies already,” said Reginaldo Nogueira, national director at the Brazilian Institute of Capital Markets. “It’s hard to isolate what comes from the agreement issues.”
Trade Picks Up Despite Uncertainty
Trade between the two regions, meanwhile, has picked up since the agreement took effect.
Brazilian exports to the EU reached $26.9 billion in the first half, up 12.8% from a year earlier, with two-thirds of the increase in May and June, after the deal went live. Italian exports to Mercosur rose 21.1% in May to €745 million, while Brazilian beef exports to the EU reached 87,100 tons in the first eight months, according to the Brazilian Association of Meat Exporting Industries.
The agreement cuts tariffs on European industrial exports, including cars, while giving Mercosur exporters preferential access to the EU market for products such as beef, poultry and ethanol. The European Commission estimates the tariff reductions will save European companies over €4 billion a year.
For the most sensitive agricultural products, however, that access is subject to quotas. Mercosur countries will be able to export 99,000 tons of beef at a 7.5% tariff, while a 180,000-ton poultry quota will move to duty-free treatment over five years. Ethanol will receive a 450,000-ton duty-free quota for industrial use.
The quotas are already proving hard to administer. Mercosur’s four members haven’t agreed on how to divide the 99,000-ton beef quota, with Paraguay pushing for an equal 25% share and Brazil, Argentina and Uruguay favoring a distribution based on historical exports. Talks between the bloc’s foreign ministers in Montevideo on Sept. 2, the day before the import suspension took effect, ended without agreement.
Thomas Monteiro is a contributing writer based in Spain.
