This article was the Topic of the Week in the newsletter for Week 38 in 2025.

On 3 September 2025, the EU Commission initiated the long-overdue ratification of the trade agreement with the Mercosur bloc. Negotiations between the EU and Brazil, Argentina, Uruguay, and Paraguay began in the 1990s and successfully concluded in 2019. However, due to prolonged renegotiations, businesses have been unable to capitalise on the "first mover" advantage in South America – and nations like China have outpaced Europe. Given the need for resources and energy supply, the German government should push for the swift ratification of this agreement to fortify and deepen economic relations. This opens attractive market opportunities for internationally networked German firms.

Market Opening and Reduction of Trade Barriers

The EU-Mercosur Agreement promises German firms significantly easier access to Latin American markets: Over the coming years, nearly all tariffs on trade with these economically protectionist countries are set to be abolished. Additionally, the agreement proposes an expansion of market access for the trade in services, opening public procurement markets, simplifying regulatory cooperation, and granting legal protection to approximately 350 traditional European specialties – including Swabian dumplings and Bavarian beer – within the Mercosur region. 

A specific chapter focuses on ensuring that small and medium-sized enterprises (SMEs) also benefit from the advantages. Over 8,500 German businesses already export to Mercosur nations, with 74 percent being SMEs. However, 85 percent of European exports to this market of over 260 million consumers remain subject to tariffs, creating annual costs of approximately four billion euros for German and European businesses. Many companies view this trade pact as a major opportunity.

Diversification in Times of Global Trade Conflicts 

Given worldwide trade conflicts and the erosion of the World Trade Organization, Germany requires closer trade ties with geopolitically significant partners like Mercosur. Delays in ratification risk the loss of vital market opportunities – larger competing nations are already active in South America. 

The German government should advocate for swift approval of the deal in the EU Council. Similarly, the European Parliament should expedite its ratification, as an immediate implementation would provide companies with much-needed legal and planning certainty for business in South America. 

Europe can already build upon intense economic ties: Germany's trade volume with Mercosur exceeded 26 billion euros in 2024, and direct investments there reached over 35 billion euros in 2023. According to EU figures, German exports to the region support nearly 250,000 jobs domestically. Furthermore, the Brazilian city of São Paulo is one of the largest locations worldwide for German industry. Exceptional market opportunities for German companies exist in sectors such as mechanical engineering, automotive, and food – industries where Mercosur nations impose notably high tariffs.

Practical Implementation – Long-Term Perspective 

The success of this agreement hinges on its practical implementation. Key points include clear, harmonised rules for product origin, a comprehensive EU online tool for these rules, and standardised evidence within the agreement's framework. Additionally, the digitisation of customs processes should be accelerated, and the EU customs tariff simplified. These measures would particularly benefit SMEs and facilitate trade. 

Moreover, the agreement contains binding sustainability regulations. All partners commit to effective implementation of the Paris Climate Accord. Strengthened economic ties between Germany and Latin America will also boost joint efforts in environmental and climate matters.

German businesses have maintained a presence in Mercosur nations for over 100 years, supported by the German Chambers of Commerce Abroad (AHKs). Through long-term involvement, they sustain tens of thousands of jobs and contribute to the region's sustainable development via dual education programmes modelled after German standards. The EU-Mercosur Agreement now provides an opportunity to extend this engagement and deepen the partnership between Europe and South America.