Between Geopolitics and Political Economy: The European Union–Mercosur Negotiation
by Nicolás Pose-Ferraro (Assistant Professor of International Studies at the Universidad de la República, Uruguay)
Since 2023, there have been renewed efforts to conclude the long-awaited European Union (EU)–Mercosur preferential trade agreement (PTA), including a 2024 successful renegotiation of the 2019 ‘agreement in principle’ between both parties. However, the agreement’s completion remains uncertain. What is driving these efforts? What threatens its conclusion?
In a recently published JCMS article, I explore the reasons for the latest push to conclude the agreement, as well as the reasons for the challenges it faces.
A geopolitical boost, but enough?
I show that a marked reduction in opposition from Mercosur’s expected distributional losers—namely, the manufacturing industry—combined with increased geopolitical incentives in the EU to conclude a deal, created conditions conducive to renegotiation. This, in turn, allowed the European Commission (EC) to address and reduce opposition from EU-based environmental civil society organizations (CSOs), ultimately paving the way for an understanding between the EC and Mercosur. However, the EU continues to face domestic political economy constraints, particularly due to the influence of distributional losers from the PTA—namely, agricultural producers—who retain the capacity to sway key actors within the EU’s decision-making process. This ongoing resistance continues to pose challenges to the agreement’s ratification. In this way, I highlight the current tension between a geopolitically-driven trade initiative of the EU and the EU’s domestic political economy constraints derived from the distributional effects of a PTA.
The article contributes to the literature on the EU–Mercosur negotiations in two main ways. First, it highlights the substantial reduction in Mercosur’s domestic political economy constraints to reaching an agreement. Second—and centrally—it highlights that the 2024 updated agreement ratification is still uncertain, despite the EU’s recent geopolitical push and the inclusion of stronger environmental commitments in the revised text.
At the theoretical level, the case study seeks to contribute to current debates on the increasing role of geopolitics in shaping trade agreements and flows as it adds the nuance that domestic political economy constraints may counteract geopolitically-driven initiatives.
The negotiation in three stages
My analysis is organized around three pre-specified stages: (1) the negotiation process that led to the ‘agreement in principle’ (2016 to mid-2019); (2) the paralysis within the EU (mid-2019 to 2022); and (3) the renegotiation that led to an updated agreement with an uncertain prospect (2023–2024).
During Stage 1, I found a marked reduction in the opposition of Mercosur’s distributional losers. This, coupled with the European Commission’s relative insulation from agricultural influence, low levels of politicization (in contrast to initiatives like CETA and TTIP), and high geopolitical incentives arising from the protectionist turn in U.S. trade policy under the Trump administration and the United Kingdom’s exit from the EU, culminated in the 2019 agreement.
In contrast, during Stage 2, much of this changed. The agreement now had to be approved by the EU Council and ratified by the European Parliament (EP), thus opening new veto points through which opposing EU agricultural producers could exert influence. In addition, the Brazilian government’s management of the Amazon wildfires, which involved denying climate change and blaming ‘global elites’ in a narrative inspired by Trump’s position, led to greater environmental CSO opposition to the deal. The result was the formation of an opposing agrarian–environmental coalition, which secured the approval of symbolic motions against the deal in the EP and several national parliaments of EU members.
So, what changed during Stage 3? ‘Increasing geopolitical challenges,’ in the words of the EC and the High Representative of the Union, such as the consolidation of the US/EU–China systemic rivalry, rising concern about the strategic implications of economic interdependence that followed COVID-19 and Russia’s invasion of Ukraine, the longstanding crisis of the multilateral trading system, and the threat to transatlantic ties represented by an eventual return of Donald Trump to the U.S. presidency (confirmed in November 2024), combined to increase the geopolitical attractiveness of a deal with Mercosur.
However, as opposition within the EU remained high, the EC undertook a renegotiation with Mercosur. Its aim was to reinforce the deal’s environmental commitments, thereby appeasing opposing environmental CSOs. In exchange, the EC accepted several key demands from Mercosur. Specifically, it agreed to Brazil’s demand to exclude its health sector from the Public Procurement chapter—a point it had insisted on including in the 2019 agreement. The EC also accepted to extend the transition period for the removal of Mercosur’s tariffs on industrial goods like electric vehicles, agreeing to periods exceeding 15 years, a duration it had explicitly rejected in the past. Furthermore, it accepted the inclusion of a ‘rebalancing mechanism’ designed to compensate Mercosur countries should forthcoming European Green Deal legislation undermine their market-access gains from the PTA.
The described trade-off led to an updated agreement, which was announced in December 2024. However, ratification in the EU is far from guaranteed. While the inclusion of newer binding commitments linked to the Paris Agreement as a result of the renegotiation did appease environmental CSO opposition, agricultural producers continue to be mobilized against the deal and find in countries like France and Poland a voice to express their opposition at the EU Council. Whether these countries may be able to form a ‘blocking minority’ at the Council to prevent its approval is still an open question.
In any case, the analysis illustrates that the Mercosur agreement is in the middle of a clash between geopolitical incentives and domestic political economy constraints.
Dr. Nicolás Pose-Ferraro is Assistant Professor of International Studies at the Universidad de la República (Uruguay) and member of Uruguay’s National Researchers System. His research focuses on the political economy of trade negotiations and the processes of trade policy preference formation within business associations in Mercosur countries.
