After 20 years of tricky negotiations, the EU-Mercosur Agreement was signed in January 2026, with the interim trade agreement being applied just this month. Hailed by the European Commission as “a massive opportunity”, it aims to enhance bilateral trade and investment, lower tariff and non-tariff trade barriers, and promote regulatory alignment between the third- (EU) and sixth- (Mercosur) largest economies globally. Naturally, its implications are numerous, both economically and environmentally, but also in food and agriculture. For these reasons, the Agreement has been highly divisive among EU Member States, with many strongly expressing their concerns and discontent.

For the European Commission, pinning down support has been elusive, with Member States only recently coming to a majority, and one needn’t look far to understand why. Recent events have made the agreement far more attractive by highlighting the risk of supply chain dependencies – the Russian invasion of Ukraine, unpredictable US tariff policies, and now the crisis brewing in the Strait of Hormuz – all of which have created critical supply bottlenecks that have lent themselves to unwanted economic or political leverage. As Europe grapples with these challenges and prepares for an increasingly uncertain geopolitical order, diversification of its supply chains is therefore a crucial measure for dealing with the immensity of these challenges.

For Mercosur, the Agreement is viewed as highly beneficial, with better market access to its second-largest trading partner (in goods), representing a ‘massive opportunity’ indeed. Although some in Mercosur are concerned about the impact it could have on domestic industry given the industrial competitiveness of Europe, many see it only as geopolitically important, but also as a chance to improve their positioning in value chains and crucially, receive formal validation of Mercosur produce. This stamp of approval signals to other markets that Mercosur goods are of high quality, as the EU has some of the highest standards in the world, especially in food.

For the EU, the agreement is undoubtedly controversial as illustrated by the two-decade-long negotiation process. A number of Member States, including France, Poland and Ireland, have vehemently argued against it, citing lenient environmental regulations in Mercosur countries that facilitate considerably lower costs of production, especially in agriculture. From an environmental perspective, many are also concerned that the expansion of industry and agriculture in Mercosur will lead to further deforestation and environmental degradation. These concerns have influenced the negotiations substantially and even today the Agreement is yet to be formally ratified. Despite this, a swelling undercurrent of rising geopolitical tension makes ratification likely to surface in the near future.

The Agreement has garnered a considerable amount of attention not only because of its controversy and lengthy negotiations, but also because of its position: at the intersection of trade, environment and development. Mercosur countries possess some of the last vestiges of untouched wilderness in the world (e.g. the Amazon rainforest). However, just like every economy, it aspires to be globally competitive, and the agreement presents itself as a rising tide that can lift Mercosur boats from their stagnant economic waters. Yet this may entail compromising the extensiveness of its wilderness due to the likely expansion of agriculture and industry associated with increased trade. Conversely, Europe, which has by comparison entirely overexploited its natural environment, is leading the transition towards a cleaner economy through environmental remediation and decarbonisation. The only issue is, how ‘clean’ will it truly be if its supply chains upstream are ‘dirty’? This is a critical question for the EU-Mercosur Agreement as unchecked trade can risk significant environmental costs; as Mercosur is likely to be positioned upstream in EU supply chains, many are concerned its rich natural environment will face even further pressures as a result.

The EU has sought to assuage these concerns through the agreement’s ‘Trade and Sustainable Development’ (TSD) chapter and separately its ‘sustainability impact assessment’ (SIA). However, many remain sceptical of these measures. For instance, the SIA relies on research findings that suggest the intensification of agriculture can reduce the need for expansion (i.e. converting natural ecosystems into agricultural land), proposing that this finding is also applicable in the context of the Agreement. Crucially however, it omits any substantial analysis of the impacts of intensification, which can be significant. Critics of the TSD chapter find that it falls short of the Brundtland definition of sustainable development, highlighting its vagueness and (lack of) enforceability as crucial shortcomings – which is especially concerning as the shadow of climate sceptic and former Brazilian president Jair Bolsonaro continues to cast itself over Brazilian politics – Bolsonaro saw deforestation reach a 15-year high under his presidency. Therefore, if not taken seriously, these measures risk becoming merely cosmetic, and hence, the recent inclusion of new deforestation prevention commitments is highly welcomed.

Proponents of the agreement argue that the TSD chapter promotes the interdependency of economic and environmental objectives, implying they are mutually reinforcing. It is also important to remember the ultimate goal of the agreement: to enhance trade between the two blocs. In theory, this would allow economic conditions in Mercosur to improve, enabling incomes to rise and subsequently, cleaner modes of production and a more sustainable society to flourish. Whether theory can prove consistent in practice, however, is an entirely different story consisting of regulatory implementation, enforcement, civil support and political will.

Overall, there are justified concerns about the adequacy of the agreement’s environmental measures and their ability to counteract potential environmental impacts. This is especially important as Mercosur is extremely rich in biodiversity. Not only South America but the Earth in its entirety cannot afford further biodiversity loss as, unlike the climate, once an ecosystem is destroyed, it is incredibly difficult to restore it to its previous state. However, despite this and the valid concerns of many across society, the reality is that a reconfiguring global order has pushed both the EU and Mercosur into each other’s arms. How ‘green’ this embrace will be, however, depends on the integrity of both to honour the provisions of the agreement.