MONTEVIDEO, Uruguay (AP) — The European Union on Friday finalized a blockbuster free trade agreement with Brazil, Argentina and three other South American nations in the Mercosur trade alliance, a long-awaited breakthrough despite fierce opposition from France that caps a quarter-century of on-off negotiations.
The accord would create a market of over 700 million people, nearly 25% of the world’s gross domestic product, and save businesses an estimated 4 billion euros ($4.26 billion) in duties each year.
From Uruguay, the host of the Mercosur summit, European Commission President Ursula von der Leyen hailed the deal — which would create one of the largest free trade zones in the world — as a “truly historic milestone” at a time when global protectionism is on the rise.
Provided it is ratified, the deal promises benefits especially to European manufacturers and South American farmers, slashing red tape and removing tariffs on products like Italian wine, Argentine steak, Brazilian oranges and German Volkswagens.
“This agreement is not just an economic opportunity, it is a political necessity,” said von der Leyen, who negotiated the agreement on behalf of the 27 EU member countries. As talks approached the finish line, von der Leyen traveled to Uruguay’s capital of Montevideo on Thursday for the gathering of the Mercosur nations.
In addition to the region’s biggest economies, Brazil and Argentina, the trade alliance also includes Uruguay, Paraguay and, newly, Bolivia.
The deal represents the first big trade pact for the Mercosur group, which in the past had only managed to conclude free-trade deals with Egypt, Israel and Singapore.
But all 27 EU member countries must endorse the agreement for it to enter force. Complete ratification will take time, and will not be easy.
France leads a group of member countries that still oppose the pact. President Emmanuel Macron, mindful of his country’s vocal and powerful farming lobby, has previously described the deal on the table as unacceptable and disastrous for French farmers and industry.
It’s unclear whether his objections — shared by Poland, Austria and the Netherlands — have been addressed in the agreement finalized on Friday.
In remarks addressing her “fellow Europeans,” and perhaps especially French skeptics, von der Leyen promised the accord would boost some 60,000 companies that export to the Mercosur region.
“This will create huge business opportunities,” von der Leyen said, mentioning “reduced tariffs, simpler customs procedures and preferential access to some critical raw materials.”
“And to our farmers,” she added, “we have heard you listen to your concerns, and we are acting on them. This agreement includes robust safeguards to protect your livelihoods.”
Germany, with its huge car industry, Spain and other member states that have pushed hard for the agreement for years praised the announcement.
“An important obstacle to the agreement has been overcome,” German Chancellor Olaf Scholz wrote on social media platform X, saying the deal would create “more growth and competitiveness.”
Spanish Prime Minister Pedro Sánchez called the agreement “an unprecedented economic bridge between Europe and Latin America.”
He said Spain would work hard to ensure the agreement is approved “because trade openness with our Latin American friends will make us all more prosperous and resilient.”
Mercosur nations are excited about selling more beef and agricultural products in the EU. But farming communities in Europe have balked at the prospect of cheap food imports from South America, claiming they would damage competition and lower safety standards in the bloc.
A massive European farmers’ protest movement has gripped the continent for much of the past year. Environmental groups, including Greenpeace, warn it could accelerate deforestation in the Amazon and increase the use of harmful pesticides.
The deal is the product of 25 years of painstaking negotiations, dating back to a Mercosur summit in Rio de Janeiro in 1999. Talks repeatedly fell apart over differences in economic priorities, regulatory standards and agricultural policies. Protectionist tendencies in various administrations on both sides of the Atlantic also upended hopes of a quick deal.
Momentum picked up in 2016, as former President Donald Trump imposed stiff tariffs on Europe and market-friendly leaders championing free trade took over the notoriously closed economies of Argentina and Brazil. In June 2019, negotiators announced a deal that included provisions for tariff reductions and commitments to environmental standards.
But new obstacles — including the election of populist former President Jair Bolsonaro of Brazil, the biggest of the five Mercosur members, and European concerns over deforestation in the Amazon — soon scuttled those plans.
Since returning to power in 2023, left-wing President Luiz Inácio Lula da Silva, Bolsonaro’s successor, accelerated talks with the bloc even while raising concerns about protection for the Brazilian auto industry.
Lula on Friday hailed the agreement as an important victory.
“The deal establishes spaces for dialogue that will allow greater coordination between the two regions on these and other issues,” his office said. “In addition to the expected economic and commercial gains, Mercosur and the European Union share common values and interests.”
President Javier Milei of Argentina, a libertarian economist elected a year ago on a vow to overhaul the crisis-stricken economy with free-market principles, has also supported the deal previously opposed by his left-wing predecessor.
The pact must also be endorsed by the European Parliament, but that step is not expected to be controversial.
Senior lawmakers immediately welcomed the announcement, saying that it “marks a significant milestone in advancing interregional cooperation between the European Union and Mercosur.”
But some aren’t popping the champagne quite yet. The deal’s ratification could take years if past EU trade agreements are any indication.
The EU and Canada signed a pact, formally known as the Comprehensive Economic and Trade Agreement, or CETA, in late 2016 and the approval process has lumbered along since then. Germany’s parliament only formally signed off two years ago, and the French Senate rejected it in March this year, sending it back to France’s lower house of parliament for further discussion.
“Anyone with any memory is skeptical,” said Brian Winter, a vice president at the New York-based Americas Society/Council of the Americas. “They have trotted out leaders and declared victory and celebrated and yet there always seems to be a hitch.”
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DeBre reported from Buenos Aires, Argentina. Associated Press writers Mauricio Savarese in São Paulo, David Biller in Rio de Janeiro and Lorne cook in Brussels contributed to this report.
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