13 January 2026 – After 25 years of negotiations, the Mercosur-EU free trade agreement is nearing completion – but now, of all times, a new dispute is looming. While the EU promises duty-free access to steel, it is simultaneously preparing drastic protective measures. This contradictory trade policy on the part of the EU could jeopardise the agreement even before it is ratified.
The Mercosur-EU Free Trade Agreement and EU Steel Tariffs
The European Union is currently exerting considerable political pressure to finally conclude the free trade agreement (FTA) with the Mercosur countries – Argentina, Brazil, Paraguay, and Uruguay – after around 25 years of negotiations. This is by no means a foregone conclusion: within the EU, significant differences remain, particularly regarding the treatment of agricultural products and the concrete design of the agreement.
Most recently, the Member States nevertheless agreed on a compromise and a at least provisional agreement – despite the fact that the European Parliament had not yet adopted a formal resolution at that point.
European Parliament Insists on Its Role
This approach met with clear reservations in the European Parliament. Concerns grew that the Commission and the Council might provisionally apply the agreement without waiting for parliamentary approval. The reaction from Bernd Lange, Chair of the International Trade Committee (INTA), was correspondingly explicit. He made it “crystal clear” that the Council and the Commission must obtain the Parliament’s consent before any provisional application.
Unratified Agreements and New Trade Conflicts
However, the agreement is far from settled not only on the European side. The Mercosur countries have also not yet ratified it. Whether ratification will be achieved at all in light of the EU’s parallel plans in steel trade remains an open question.
Specifically, the EU plans to significantly tighten its existing steel safeguard measures with a steel tariff successor. In addition to further reductions in import quotas, a substantial increase in tariffs is being considered. These plans raise fundamental questions about the credibility and coherence of EU trade policy – particularly in the context of an agreement that is intended to guarantee free market access.
Free Trade on Paper – Tariffs in Practice?
Free trade agreements typically aim to dismantle tariffs and other trade barriers. The Mercosur agreement follows this principle as well: for steel products, it provides for an import tariff of 0%.
At the same time, however, the Commission is planning to raise steel tariffs across the EU to as much as 50% – irrespective of origin. This would also affect countries that should, under a free trade agreement, be contractually protected from such measures.
Bilateral Safeguards as a Political Loophole
To resolve this contradiction, the Commission intends to rely on so-called bilateral safeguard clauses contained in existing and future FTAs. A corresponding provision can be found in the Commission’s current proposal. These clauses allow temporary protective measures to be imposed in the event of market disruption – even against FTA partners.
One detail of the Mercosur treaty texts is particularly sensitive: unlike classic safeguard measures under the World Trade Organization (WTO), the Mercosur drafts do not provide for mandatory compensation, for example in the form of tariff-rate quotas if bilateral safeguards are imposed. Such compensation mechanisms would, by contrast, have to be offered by the EU to major third countries without a free trade agreement.
Political Risk for the Mercosur Agreement
This creates a significant political dilemma for the Mercosur countries. On the one hand, the EU promises permanent duty-free access for steel under the agreement. On the other hand, shortly after ratification it could effectively reintroduce high tariffs through safeguard measures – without any obligation to provide compensation.
It is easy to see that such an approach would meet with strong resistance among parts of the South American partners. The risk is real that precisely this constellation could further undermine the already fragile support for the agreement – possibly even before it enters into force.
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