The global geopolitical changes that have occurred over the past three or four years, especially with the arrival of President Trump at the helm of the US administration in his second term, could not fail to bring about geoeconomic changes and a reformatting of global economic groupings. In particular, the philosophy implemented by President Trump, “America First,” the new tariff policy introduced in line with this philosophy, and the ideas aimed at reforming many international institutions that appear to have fallen into a state of “hibernation,” have served as a driving force for rapid, major and significant changes in the economy and international trade.

Therefore, the EU–MERCOSUR agreement does not emerge on empty economic, political or social ground. On the contrary, it is part of a broader wave of free trade agreements that have marked recent decades and have profoundly changed the way the global economy functions, especially under current conditions.

In this context, every new free trade agreement is evaluated not only for its potential economic benefits, but also for its social, environmental and political impact. The questions that arise today are more complex than they were twenty years ago: Who wins? Who loses? Are standards protected? Is economic sovereignty strengthened or weakened? And, above all, is free trade still an acceptable political project for democratic societies? It is in this climate and within this mixed experience that the EU–MERCOSUR agreement must be read. Because, in essence, we are not dealing with just another trade pact, but with a new test for what could be called the second generation of free trade agreements—agreements that regulate not only tariffs, but also services, investments, standards, the environment and the very relationship between the economy and politics.

The EU–MERCOSUR agreement should also be read as an indirect response to a new era, in which trade is no longer just about economics, tariffs are also used as instruments of diplomatic pressure, and economic security has replaced the optimism of globalization. The EU–MERCOSUR agreement is situated precisely within this dynamic. It is an attempt to keep alive the idea that trade can be regulated, institutionalized and used to build long-term relationships, even in a world where this is no longer seemingly guaranteed. Europe and South America have thus concluded one of the largest interregional agreements ever attempted.

However, the importance of the EU–MERCOSUR agreement cannot be measured by trade statistics alone. At its core, it is a political document: it reflects shifts in power relations, competing models of development, and the difficult coexistence between economic globalization and geopolitical and geoeconomic rivalry. Viewed more deeply, this agreement represents a way of understanding how international economic relations are being reshaped in an era marked by strategic competition, environmental constraints and domestic political backlash against economic openness. For the EU, it is a means of maintaining global influence through trade and rules; for South American countries, it is an attempt to diversify partners and avoid dependence on a single center of economic power.

The negotiations began in 1999, at a time that today appears to belong to a very different historical era. The post–Cold War order was relatively stable, faith in multilateralism was strong, and regional trade agreements were viewed as building blocks of an increasingly open global economy.

From the outset, however, the negotiations revealed the limits of this optimistic vision. The EU’s demand for access to services, industrial goods and public procurement clashed with MERCOSUR’s insistence on opening agricultural markets. These clashes reflected deeper structural asymmetries between a highly regulated, industrialized European economy with high standards and South American economies still heavily dependent on agricultural and raw material exports.

Over time, the international context changed radically. The global financial crisis, the rise of China, the resurgence of great-power rivalry and growing scepticism toward free trade transformed the political environment in which the agreement was being negotiated. The political agreement reached in 2019 was quickly engulfed in debates over climate change, deforestation and the EU’s normative identity as a global environmental actor. The long delay until the final signature in 2026 was not a sign of hesitation, but rather the result of a profound recalibration to new global conditions: trade has now become a matter of economic security, competition for influence and risk management.

WHAT THE AGREEMENT FORESEES AND SIGNALIZES

Formally, the EU–MERCOSUR agreement aims to eliminate tariffs on more than 90 percent of goods traded between the two blocs, often through long transition periods. European exporters gain improved access for vehicles, machinery, chemicals, pharmaceuticals, wine and dairy products. In turn, MERCOSUR exporters gain preferential access for beef, poultry, sugar, ethanol, soybeans and minerals.

But the real importance of the agreement lies less in its tariff schedules and more in its institutional depth. Like most contemporary agreements, it regulates services, investment, public procurement, competition and intellectual property rights, and promotes regulatory convergence in areas such as sanitary and phytosanitary standards.

In terms of international relations, this represents an expression of regulatory power. The EU, in particular, uses trade agreements as instruments to export its regulatory model, influencing how production and exchange are organized beyond its borders. In practice, this means that many South American companies will need to adapt their products and procedures to European standards, which may increase quality and market access, but may also generate additional costs and reinforce dependence on a set of rules defined outside the region.

For the MERCOSUR countries—namely Brazil, Argentina, Paraguay and Uruguay—alignment with EU standards offers access and credibility, but also raises concerns regarding the autonomy of public policies. This tension between access and autonomy is a recurring theme in North–South trade relations and lies at the heart of the political debate surrounding this agreement.

WINNERS AND LOSERS WITHIN THE EUROPEAN UNION

Although European leaders have presented the agreement as a strategic and economic success, few trade agreements have exposed such deep internal divisions within the EU. The reason is simple: while the agreement promises significant benefits for the EU as a whole, the costs and benefits are distributed very unevenly across countries, sectors and social groups.

a) Overall EU gains: market, rules and positioning

From a macroeconomic perspective, the EU stands to gain considerably. MERCOSUR represents a market of more than 260 million consumers, with growing demand for industrial goods, services, infrastructure and technology. Tariff reductions, often by double-digit margins, increase the competitiveness of European exports against rivals from China and the United States, especially in sectors where Europe maintains a comparative advantage. For the EU, however, the agreement is also a long-term instrument, as it secures market access, establishes regulatory frameworks—for standards, services and investment—and positions Europe more firmly in South America at a time when global rivals are expanding their presence. In a world where trade is increasingly politicized, agreements of this kind also function as indirect industrial policies: they open export opportunities while simultaneously shaping the standards that govern competition.

b) Main winners

Germany is among the main beneficiaries. German industry, particularly in vehicles, machinery, electrical equipment and chemicals, has long viewed South America as a market with high potential but significant tariff barriers. The agreement substantially reduces these barriers and strengthens the position of German companies already operating in Brazil and Argentina. Beyond exports, Germany benefits from greater legal certainty for investments and improved access to public procurement, especially in infrastructure and energy projects where European firms are highly competitive. Strategically, Berlin also benefits from market diversification and from Europe’s stronger position in a region where China’s industrial presence has expanded rapidly.

France and Italy represent a more ambivalent but economically significant case. On the one hand, they benefit from the opening of markets for high-value agricultural products such as wines, cheeses, spirits and olive oil, as well as goods protected by geographical indications. These are sectors in which the EU produces high-quality products and where branding, standards and origin generate higher returns. On the other hand, industrial exporters in transport, equipment, pharmaceuticals and technology benefit from tariff reductions and regulatory harmonization. These gains, however, coexist with strong domestic opposition from farmers, particularly in the meat and poultry sectors.

Spain and Portugal are among the most enthusiastic supporters of the agreement, as they benefit not only from trade in goods but especially from services and investment. Banks, energy companies, infrastructure firms and telecommunications operators have long-standing ties and a consolidated presence in Latin America. The opening of services markets and enhanced investment protection give them a direct advantage. For Madrid and Lisbon, the agreement also reinforces their role as bridges between Europe and Latin America.

The Netherlands benefits not only as an exporting economy, but also as a European logistics hub. If trade flows increase, Dutch ports and logistics infrastructure benefit directly.

Sweden, the Czech Republic and Austria benefit through export industries integrated into European production chains, meaning that even when the final export originates in another country, parts and components are produced in these economies. Here, an important effect emerges: the benefit is not measured only in the final export, but across the entire European industrial chain.

c) Losers and political resistance

The most obvious losers are European farmers, especially in the beef, poultry and sugar sectors. Although imports are subject to quotas and transition periods, the fear of competition from lower-cost producers and different regulatory standards carries significant political weight. Agriculture occupies a special place in European politics, linked to food security, territorial cohesion and national identity. For this reason, farmers’ opposition has a much greater political impact than the sector’s share of GDP. In many countries, farmers and rural areas are also carriers of strong political symbolism: they represent the future of the territory, tradition and self-sufficiency. This makes the conflict not only economic, but also cultural and political.

In a sense, the battle over this agreement is a battle over the European model: Europe as an industrial and regulatory exporting power, or Europe as a space that protects producers and territory from the effects of globalization?

Beyond the economy, the EU–MERCOSUR agreement must also address environmental concerns and should be viewed as a strategic instrument. From a realist perspective, the agreement serves the EU in maintaining influence in a strategic region where the United States and China are competing ever more strongly and openly. This agreement also tells us something essential about the world we live in today: trade is no longer merely an economic issue. It is about power in the political sense, identity, strategy, and the attempt to govern globalization under conditions far more volatile than those imagined a quarter of a century ago. / Panorama

*Academician Prof. Dr Anastas Angjeli is an economy expert, former MP and Finance Minister, founder and president of the Mediterranean University of Albania