2 days ago

Lucy Hookerand

Rachel Clun,business reporters

The EU has reached a free trade agreement with South American countries, 25 years after talks began and despite opposition from farmers in several European countries.

The deal with the Mercosur trading bloc - which includes Brazil, Argentina, Paraguay and Uruguay - will require the approval of the European parliament within the next few months

Brazil's President Luiz Inacio Lula da Silva hailed it as a "historic day for multilateralism" after the four South American countries put the final touches to the deal in Brussels.

It comes against the backdrop of US President Donald Trump's tariffs on countries around the world and his recent military intervention in Venezuela.

The EU heralded what will be its largest free trade accord to date as a "win-win", although critics have argued that cheap imports may undercut European farmers in products including beef, poultry and sugar.

"In an international scenario of growing protectionism and unilateralism, the agreement is a signal in favour of international trade as a driver of economic growth, with benefits for both blocs," President Lula posted on X.

EU Commission President Ursula von der Leyen said the deal will "bring meaningful benefits to consumers and businesses, on both sides".

Farmers in several countries in Europe held last-ditch protests against the deal, with marches and demonstrations using tractors in France and Belgium.

"There is a lot of pain," Judy Peeters, a representative for a Belgian young farmers' group, told AFP at a protest on a motorway south of Brussels. "There is a lot of anger."

Von der Leyen said the Commission had listened to the concerns of farmers, and had acted on them including through introducing "robust safeguards" to protect their livelihoods in the agreement.

As well as boosting trade and political ties, the European Commission said the deal would help fight climate change, through commitments to halt deforestation and ensure a "reliable" flow of raw materials, critical for the global green transition.

The Commission expects the deal to save local companies €4bn ($4.7bn, £3.5bn) a year in export duties.

South American countries boast deposits of gold, copper and some of the critical minerals required for renewable and battery technology.

Cecilia Malmström, a former European commissioner for trade who led EU trade negotiations for five years, told World Business Express on BBC World Service that parts of the trade agreement could be suspended if Mercosur countries failed to stick to their commitments around environmental protection.

"[This agreement] is also a very strong geopolitical signal today to other powers who do not appreciate rule-based trade in the same way as we do," she said.

On Friday afternoon a broad majority of EU member states confirmed their support for the free trade agreement, but it will still require approval from the European Parliament before it can take effect.

Jack Allen-Reynolds, deputy chief Euro-zone economist for Capital Economics, said voting was expected to be close in the parliament.

However, he said the larger issue was how much of an impact the deal would have, and pointed to the Commission's own estimate that it would raise EU economic output by just 0.05%.

"The bigger point though is that even if the agreement is eventually implemented, it will be macroeconomically insignificant," he said.

"And because it will be phased in over 15 years, these benefits won't arrive until 2040 at the earliest."