EU Trade Developments: Mercosur and India

• On January 17, 2026, the EU and the founding States of Mercosur (Argentina, Brazil, Paraguay and Uruguay) signed a landmark trade agreement (“EU-Mercosur Agreement”) that, if implemented, would create one of the world’s largest free trade areas, covering approximately 700 million consumers across 31 countries.
• Tariff cuts on industrial goods under the EU-Mercosur Agreement could save EU firms over €4 billion per year in customs duties, with significant benefits for EU exports of cars, machinery, clothing and pharmaceuticals.
• The deal would also expand opportunities for EU companies by (i) allowing them to bid on government contracts on an equal footing with local companies; and (ii) enhancing access to critical raw materials (e.g., nickel, copper, aluminum, steel or titanium) through elimination of taxes and customs duties.
• On January 21, 2026, the European Parliament passed a resolution to request an opinion from the Court of Justice of the European Union (“CJEU”) on whether the EU-Mercosur Agreement is compatible with EU law. This step may delay the EU’s ratification process for an extended period (potentially up to 18 months). However, if at least one Mercosur State agrees, the EU may provisionally apply most of the trade measures of the EU-Mercosur Agreement pending the CJEU opinion (as early as March 2026).
• On January 27, 2026, the EU and India concluded negotiations on a comprehensive free trade agreement (“FTA”). EU Commission President von der Leyen described the agreement as the “mother of all deals,” creating a free trade zone of approximately two billion people. The parties will now advance their respective internal approval procedures for the FTA’s entry into force.
• Under the FTA, India will progressively eliminate or reduce tariffs on 96.6% of EU exports, notably on cars (currently 110%), machinery and electrical equipment (currently up to 44%), chemicals (currently up to 22%), iron and steel (currently up to 22%), pharmaceuticals (currently 11%), and aircraft and spacecraft (currently up to 11%).
• In light of these developments, companies should (i) identify which goods, services or projects would most benefit from the various trade measures; and (ii) closely monitor political and legal developments that may affect implementation of the agreements.

Background

On January 17, 2026, the European Union (“EU”) and the founding States of the Common Market of the South (“Mercosur”) (Argentina, Brazil, Paraguay and Uruguay) signed a comprehensive trade agreement comprising two legal instruments: (i) the EU-Mercosur Partnership Agreement (“EMPA”); and (ii) the EU-Mercosur Interim Trade Agreement (“ITA”) (the EMPA and the ITA together, the “EU-Mercosur Agreement”).

Negotiated over more than 25 years, the EU-Mercosur Agreement is intended to deepen trade and economic cooperation between the two blocs by progressively eliminating tariffs and other trade restrictions that have represented a significant cost for cross-border trade and investment. EU companies currently exporting to Mercosur face high tariffs, burdensome customs procedures, licensing requirements and complex technical regulations.

What the EU-Mercosur Agreement Means for Businesses

The EU-Mercosur Agreement covers:

• Tariff reduction or elimination on goods. Progressive reduction and, in many cases, elimination of tariffs on goods originating from each party, including for cars and car parts, apparel, spirits, machinery, chemicals and pharmaceuticals.
• Services and investment liberalization. Improved market access for EU and Mercosur companies to sell their services through a local establishment or on a cross-border basis, particularly in financial services, telecommunications, maritime transport and postal services.
• Technical barriers to trade. Removing unnecessary local technical regulations relating to product requirements, including by application of international standards.
• Customs procedures. Increased transparency and simplification of customs procedures, including through electronic processing of customs documentation.
• Public procurement access. Possibility for companies from each party to bid in covered public tenders on an equal footing with local companies. EU companies will be the first non-Mercosur companies able to compete in public tenders in Mercosur.
• Competition law enforcement. Requirements for each party to enforce competition rules on cartels, abuse of a dominant position and anti-competitive mergers.
• State subsidies. Enhanced transparency regarding the use of state subsidies to address potentially distortive effects.
• State-owned companies. Obligations for each party to ensure that state-owned enterprises act in accordance with commercial considerations in their purchases and sales of goods or services.
• Trade remedies. Preservation of each party’s right to impose anti-dumping and countervailing measures where imports are unfairly priced (dumped) or subsidized. Additionally, each party may apply “safeguard” measures (including temporary re-introduction of tariffs or other measures) where increased imports from the other party cause (or threaten to cause) serious injury to domestic producers.

Implementation – Next Steps

Entry into Force

Both the EMPA and the ITA will enter into force on the first day of the month following the date on which the parties have notified each other in writing of the completion of their respective internal approval procedures, e.g., ratification.[1] As it relates to the EU parties, the EMPA would require ratification by each of the 27 EU Member States before it can enter into force, while the ITA will follow a lighter process, requiring only European Parliament consent.

In a major development, on January 21, 2026, the European Parliament passed – by a narrow majority – a resolution to request an opinion from the Court of Justice of the European Union (“CJEU”) on whether the EU-Mercosur Agreement is compatible with EU law.[2] This step may delay the EU’s ratification process for an extended period (potentially up to 18 months). The European Parliament’s move also reflects continued opposition to the deal from certain EU goods producers, in particular from the agricultural sector. If the CJEU delivers an adverse opinion, the EU-Mercosur Agreement could not enter into force unless it is amended in a manner consistent with the CJEU’s opinion.

Provisional Application

EU law allows the provisional application of an international agreement pending its entry into force,[3] and the ITA and the EMPA (for certain provisions) expressly provide for that possibility. The EU may therefore apply the ITA and certain provisions of the EMPA on a provisional basis pending the CJEU’s opinion and the European Parliament’s consent process, provided that at least one Mercosur State agrees to apply the agreement on this basis. Although the political sensitivity surrounding the agreement makes the scope and timing of any provisional application uncertain, press reports citing EU officials suggest that provisional application could take effect as early as March 2026, which could bring forward immediate effects on EU and Mercosur companies pending conclusion of the outstanding formalities. EU Commission President von der Leyen has stated that “[t]here is a clear interest that we ensure that the benefits of this agreement apply as soon as possible.” Provisional application will ultimately remain a matter of political discretion.

On January 27, 2026, the EU and India concluded negotiations on a landmark free trade agreement (“FTA”) that would create a free trade zone of approximately two billion people. EU Commission President von der Leyen described the FTA as the “mother of all deals.” Prime Minister Modi of India also emphasized its scale as “the largest Free Trade Agreement in [India’s] history,” and expects it to “facilitate access to the European market for [Indian] farmers and small industries, create opportunities in manufacturing, and strengthen cooperation in our services sectors.”

India will progressively eliminate or reduce tariffs on 96.6% of EU exports, notably on cars (currently 110%), machinery and electrical equipment (currently up to 44%), chemicals (currently up to 22%), iron and steel (currently up to 22%), pharmaceuticals (currently 11%), and aircraft and spacecraft (currently up to 11%). The FTA also provides privileged access for EU services suppliers, notably in financial services and maritime transport, and contains provisions to facilitate trade (including customs simplification).

As next steps, the negotiated draft texts will soon be published, and the parties will now advance their respective internal approval procedures for the FTA’s entry into force.

In light of these developments, companies should (i) identify which goods, services or projects would be most affected by the various trade measures; and (ii) closely monitor political and legal developments that may affect implementation of the agreements.

S&C is closely tracking developments, and our team is available should you have any questions regarding EU trade agreements.