Is a Mercosur deal inevitable?

It is now almost an annual event. The proposed Mercosur trade agreement has been in gestation for almost a quarter of a century. Each end-of-year report suggests an imminent conclusion to the trade talks with the South Americans, but to no avail. The urgency for agreeing a Mercosur trade deal has increased considerably since the end of 2024, because of the tariff wars President Trump has engaged in with the European Union and several other countries and trading blocs over the past 12 months. A trade agreement with the Mercosur countries was anticipated to be finally agreed at the EU Council of Ministers meeting December 18 last. Yet again, it was postponed, with Italy in particular, seeking another opportunity to review and refine several tenets of the proposed deal between the EU and four South American countries, most especially those aspects of the tentative trade agreement relating to agricultural goods. France also raised doubts, while the Irish government sat on its hands, presumably hoping that something would turn up to avoid making any decision that would upset someone, somewhere. That’s understandable and good politics, given the recent cost-free derogation extension concession from other EU countries, as well as the need to keep some goodwill in reserve for the coming negotiations over the next Common Agricultural Policy (CAP) budget, most likely culminating in decisions being made during Ireland’s six-month presidency of the EU Council from July next.

Remaining stumbling block

Is there a certain inevitability to a Mercosur agreement in the coming weeks? One of the main stumbling blocks remains the lower production protocols under which Brazilian beef is produced, with poor traceability standards – certainly in comparison to the ‘gestation to beef hook’ traceability and production standards model in place on European Union livestock farms. An own goal was well and truly scored by Brazil last month when artificial hormones were detected in South American beef on sale in Italy. The real threat, as Irish and European beef producers see it, is that if tonnages of South American beef imports into the EU ramp up in the event that an agreement is signed in the early weeks of 2026, they may, over time, have a depressive effect on European-produced beef prices. That potential outcome could be several years down the road, but, even with assurances that a fall in EU beef prices directly linked to South American imports, would be addressed, producers are rightly sceptical that a firm price drop linkage could be made in five or six years time.

Nothing personal, just business

Right now, even with several EU Member States having insisted at the December council meeting on a further postponement into 2026, with a couple of additional reassurances potentially to be negotiated, the Mercosur trade deal seems inevitable. We wrote here 12 months ago that the European Union needed a trade impetus to assist in rejuvenating the EU economy. Twelve months on, a trade agreement that would deliver unfettered access to another 350 million consumers has taken on a renewed urgency. The historical trading affinity with the United States is defunct. Even if/when the Trump-driven tariff imbroglio finally settles down, the cosy economic, political, and philosophical relationships between the US and Europe, in place since World War 2, are no more. We have entered an increasingly antagonistic trading environment, where self-interest trumps economic, social or cultural affinities. To quote that iconic Mafia phrase, ‘it’s nothing personal, just business’; the interests and priorities of the European Union and the United States are diverging and are unlikely to become realigned in any foreseeable timescale.