While the United States, since Donald Trump took office, has regarded tariffs as a cure-all for enforcing its trade policy interests and solving the country’s economic problems, the EU continues to pursue free trade. The recently negotiated agreements with India and the Mercosur states (Brazil, Argentina, Uruguay, Paraguay) open up large markets. The EU-India free trade area, covering more than 2 billion people, will even surpass the EU-Mercosur area, with around 715 million people. The agreements are at different stages of ratification. We take a look at the current state:
EU-Mercosur FTA
The wrangling over the Mercosur agreement made it into the daily press over the past few weeks. Media coverage referred to the lengthy negotiation period of more than 20 years, since the European Council had already authorised the Commission to open negotiations back in September 1999. What was often left unmentioned was that this period was marked by numerous interruptions. Various EU member states had had reservations from the outset about opening their markets to South American agricultural products such as beef and sugar. The Mercosur states, in turn, were concerned that their industrial sectors would be unable to compete with European imports of machinery and motor vehicles. All the greater, then, was the relief among everyone involved, and within the business community, when the political agreement on the deal was announced on St Nicholas Day 2024.
The agreement between the EU and Mercosur, referred to as a “Partnership Agreement,” in short EMPA, comprises a political and cooperation part and a trade part. In order to bring the trade part, which is important for the economy, into force more quickly, this part was adopted as a separate Interim Trade Agreement (ITA). The advantage is that the EU has exclusive competence in the field of trade policy (Article 3(1)(e) TFEU), and the ratification process therefore also falls within the EU’s exclusive competence. Its entry into force accordingly depends only on the approval of the legislative bodies involved, the European Council and the European Parliament. The Partnership Agreement, by contrast, has to go through the legislative processes in the individual member states, which experience shows to be an extremely lengthy process. The ITA is to lapse once the Partnership Agreement enters into force, that, at least, is the plan. After the member states gave their approval in the Council and the two agreements were signed on 17 January 2026, Brussels considered itself on the home straight towards a prompt entry into force, at least of the trade part/interim agreement (ITA).
Disillusionment followed, however, on 21 January 2026, when a narrow majority of members of the European Parliament (334 to 324) voted in favour of having the compatibility of the EMPA and the ITA with EU law reviewed by the Court of Justice of the European Union. The detailed grounds for the referral to the CJEU can be found in the decision of the MEPs. The CJEU’s review will postpone entry into force for the time being, and a duration of proceedings of two years would not be unusual. As a purely legal matter, the Council has the option of adopting a decision that the ITA trade agreement may be applied provisionally (Article 218(5) TFEU). The decisions in which the Council came out in favour of the provisional application of the trade part/interim agreement were approved by it on 9 January 2026 (see the draft decisions of 10 December 2025 (12442/25) and 8 January 2026 (12417/25, REV 1)). The date of provisional application must be published in the Official Journal of the EU. Whether the route of provisional application will actually be pursued in parallel with the CJEU proceedings is currently unclear and politically sensitive, since substantial reservations about the agreement persist in EU states with a high share of agricultural exports, such as France.
It would have been such an important signal against growing protectionism worldwide to bring this agreement into application quickly. Considerable concessions had already been made to the agreement’s critics within the EU by adopting a separate EU regulation intended to provide a safeguard mechanism for cases in which imports from the Mercosur states threaten to cause serious injury within the EU. This was intended to protect sensitive sectors such as agriculture. The regulation lays down the conditions under which the EU may temporarily suspend the tariff preferences provided for agricultural products (poultry, beef, eggs, citrus fruit, sugar) where a sharp increase in such imports harms EU producers. The European Parliament approved this regulation on 10 February; the regulation is to apply from the entry into force of the interim agreement. The agreement itself also contains safeguard mechanisms, in that import quotas were agreed for sensitive agricultural products.
The text of the interim agreement, in the version submitted to the Council and Parliament for approval, can be viewed on the EU’s website. As a first step, the interim agreement already provides for the elimination of tariffs on 90% of all duties levied on EU goods imported into the Mercosur area. The remaining tariffs are to be phased out gradually. The agreement would be a boon for the automotive industry, which currently faces tariffs of 35%. Other sectors benefiting from the tariff concessions include mechanical engineering, the chemical industry, clothing, and also agricultural goods such as wine. Prompt gains from tariff-reduced imports into this important market would have been good for German and European industry. For now, this opportunity has been postponed.
For practice, it should be noted that the Mercosur states may not yet be listed on a supplier’s declaration!
We will keep you informed of further developments!
EU-India FTA
By comparison, the negotiations on a free trade agreement between the EU and India were ultimately concluded relatively smoothly, even though these negotiations too had been suspended for a time. Shortly after the “voting drama” over the Mercosur agreement in the European Parliament, the conclusion of the negotiations on the free trade agreement between the EU and India was announced on 27 January 2026. Tariffs on 96.6% of EU goods exported to India are to be abolished or reduced. The tariff cuts are expected to save around €4 billion a year in duties on European products. The automotive industry will also benefit in relation to India: tariffs on cars are to be reduced in stages from a hefty 110% to as low as 10%, while tariffs on car parts are to be eliminated entirely over a period of 5 to 10 years. Sectors such as mechanical engineering, the chemical industry, and pharmaceuticals will likewise benefit from the tariff reductions.
In India’s case, the sensitive issue of the agricultural sector was avoided by excluding products such as beef, chicken, rice, and sugar from the tariff reductions. Nevertheless, the currently high tariffs on imports of certain agricultural goods into India are to be reduced or abolished (for example wine: from 150% to 75%/20%; olive oil: from 45% to 0% within 5 years, see https://germany.representation.ec.europa.eu/news/eu-und-indien-beschliessen-freihandelsabkommen-2026-01-27_de).
As usual, the ratification process for the agreement will still take some time. The negotiated texts still have to undergo legal review and be translated into all official EU languages. After signature, the European Parliament must approve the agreement; Mercosur has shown that this step does not necessarily proceed smoothly. India, by contrast, has concluded its previous agreements swiftly, since ratification by its parliament is not required there.
The negotiated texts are to be published shortly. It remains to be seen exactly how the simplified proof-of-origin procedure will be structured and what precise requirements will apply to providing such proof. According to a memo from the EU Commission, it is envisaged that exporters will upload a self-certified statement on origin to a portal, enabling the customs authorities of the importing country to carry out verification.
What other developments are there in free trade?
The EU continues to advance free trade with other countries and regions: negotiations on an economic partnership agreement with Indonesia (CEPA) have also been concluded. The negotiated texts, which are not yet final and reflect the state as of 23 September 2025, have already been published on the Commission’s website for information purposes.
In addition, the EU is currently negotiating free trade agreements with Malaysia, the Philippines, Australia, and the United Arab Emirates. An overview of the state of negotiations with individual countries and regions is available from the EU at https://policy.trade.ec.europa.eu/eu-trade-relationships-country-and-region/negotiations-and-agreements_en.
We will keep you informed of further developments!
