Factbox-What happens next in EU-Mercosur trade deal saga?

By Philip Blenkinsop and Lucinda Elliott

BRUSSELS/MONTEVIDEO Jan 16 (Reuters) – Top EU officials will travel to Paraguay on Saturday to sign a free trade agreement with South American bloc Mercosur, paving the way for the European Union’s largest ever trade accord after 25 years of negotiations.

But the signature will not mark the end of the long-running saga.

WHAT DOES THE DEAL INCLUDE?

The trade deal would slash tariffs with the goal of expanding goods trade that is evenly split and was worth 111 billion euros in 2024. It has been highly contested within the EU. 

Proponents say the accord is essential to offset business lost to U.S. tariffs and reduce reliance on China by securing access to critical minerals.

Critics, including some European farmers and environmental groups, protest that a deal would lead to a surge of cheap imports of South American commodities, notably beef, and to further deforestation.

The EU and Mercosur countries Argentina, Brazil, Paraguay and Uruguay will in fact sign two agreements rather than one – the Interim Trade Agreement (ITA) covering only trade, and the EU-Mercosur Partnership Agreement (EMPA) encompassing political and sectoral cooperation as well as trade and investment.

PARLIAMENTARY CONSENT

The ITA could in theory enter force after the signature, but convention dictates that this will only happen after consent from the European Parliament. A final vote may only take place in April or May.

The outcome will likely be tight. While a majority of EU me

mber states backed the deal this month, Austria, France, Hungary, Ireland and Poland voted against it, largely over concerns for farmers. Belgium abstained. Lawmakers from those countries could vote against the agreement, with the far-right and hard-left also opposed.

If the EU assembly approves the ITA, it would probably take effect a few months later.

But the broader partnership agreement requires ratification by all EU members – generally meaning clearance by national parliaments and, in the case of Belgium, regional parliaments too. This takes time. The EU-Canada free trade agreement, which was signed in 2016 and entered force provisionally in 2017, is still awaiting ratification by 10 EU members.

The partnership would supersede the ITA if approved.

LEGAL CHALLENGES

A group of 145 EU lawmakers say the EU Court of Justice should give its opinion on aspects of the agreement before the European Parliament can approve it. This could add up to two years of delay, potentially killing the agreement. The EU assembly is set to vote on January 21 on whether to refer the deal to the court.

The lawmaker group complains about the “rebalancing mechanism”, which would allow for example Mercosur countries to demand changes to the agreement if EU policies impact their economic benefit

s. The group says this limits the ability of the EU to set new environmental or public health rules. It also argues that the trade accord should not take effect before full ratification from all EU members.

In 2015, the European Commission referred the EU-Singapore trade agreement to the court, which took almost two years to give its opinion. The EU only subsequently signed the accord and the agreement only took effect in 2019. Parliament could choose to withhold its consent until a court decision, although the EU might still be able to apply the accord on a provisional basis. 

Poland has said it will submit its own complaint if the parliament does not, but this would probably not delay implementation. In October 2017, Belgium referred the EU-Canada free trade agreement to the EU court, with an opinion coming 18 months later. The agreement, though, had already entered force on a provisional basis in September 2017.

MERCOSUR APPROVALS

The agreement must be ratified by parliaments of all Mercosur members. This is expected to be a much smoother process, given most current governments hold workable majorities or can

count on sufficient support. Current summer recesses mean that debate and votes on the agreement will only happen when parliamentary sessions resume from late February or early March.

Uruguay hopes to be the first to secure parliamentary approval, officials said this week. Brazil’s left‑leaning government is also expected to win clearance without major hurdles, given awareness of the impact of the recent U.S. tariff hikes.

However, there are signs of frustration within the bloc over the deal’s slow progress and conditions. “We are not satisfied with the deal,” Paraguay’s foreign minister said on Thursday. “There ar

e conditions, limits to access.”

Bolivia is not party to the deal, but is poised to become a full Mercosur member and its president is due to attend the signing. 

Joining the agreement would not be easy for Bolivia, particularly given its surging deforestation, resulting partly from government-incentivised agricultural expansion. 

The deal includes commitments to fight climate change, including curbs on deforestation.

(Reporting by Philip Blenkinsop in Brussels and Lucinda Elliott in Montevideo; Additional reporting from Alan Charlish in Warsaw, Daniela Desantis in Asuncion, Ricardo Brito in Brasilia; Editing by Aidan Lewis)