EU–Mercosur deal: a subtle tradeoff in growth,emissions and global cooperation

Summary

The EU–Mercosur agreement awaits ratification amid agricultural and environmental concerns. OeNB simulations suggest that enhanced trade would deliver only modest economic gains for both regions. By 2040, the EU’s GDP would be just slightly higher, with greater gains in Mercosur, and minor effects on jobs and inflation. Emissions could also rise marginally: less so in the EU than in Mercosur. But would closer Mercosur–China cooperation be better for the environment? Beyond the numbers, the deal signals commitment to global cooperation, secures critical raw materials for Europe’s green transition and supports Mercosur’s sustainable development.

Highlights

Economic impact modest yet positive 
Our simulations show that the EU–Mercosur agreement would deliver only moderate GDP growth effects of 0.02% to 0.06% by 2040. However, the growth impact is significantly higher during the first 15 years of the deal’s implementation. Trade volumes may also expand more rapidly in Mercosur than in the EU. 

Environmental costs depend on policy enforcement 
By 2040, we project greenhouse gas emissions to be 0.8% higher in Mercosur and 0.1% higher in the EU compared to a non-deal scenario. This is mainly due to agricultural expansion for beef and soy production in Brazil. The extent of the impact will depend on the enforcement of sustainability clauses and environmental policies, such as forest conservation. 

Strategic relevance remains high 
Despite limited economic benefits, the EU–Mercosur agreement could secure Europe’s access to critical raw materials for its green transition and promote sustainable development in the Mercosur region financially. It also signals a commitment to global cooperation, which is an essential factor for advancing climate policies.