After 25 Years Mercosur Agreement Reached: Austria Torn Between Export Euphoria and Farmers' Fears
After a quarter of a century of negotiations, the European Union has paved the way for the world's largest free trade agreement. While Austrian industry is calling it a “historic milestone,” the agricultural sector is bitterly disappointed.
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Photo action of the platform Anders Handeln in front of the Ministry of Economy. / Picture: © Attac Austria / Elisabeth Blum / Flickr Attribution (CC BY-SA 2.0, https://creativecommons.org/licenses/by-sa/2.0/)
It is a diplomatic marathon that is now entering the home stretch: the future free trade zone between the EU and the Mercosur countries (Brazil, Argentina, Paraguay, and Uruguay) will encompass 700 million people. It is no coincidence that the agreement is being reached at this particular moment. Geopolitical pressure from the trade policy of the US under President Donald Trump and the strengthening of China in South America have forced the EU states to act quickly.
The economy: A liberating blow for exports
For the Austrian Chamber of Commerce (WKÖ) and the Federation of Austrian Industries (IV), the agreement is the answer to the current recession. Customs duties worth around 4 billion euros will be eliminated annually. Austrian exporters of auto parts (previously 35% customs duty), machinery, and pharmaceuticals will benefit massively. Experts from the EU Commission estimate that exports to the Mercosur region could increase by up to 39 percent. For the green transition, the agreement secures access to critical raw materials such as lithium (for electric car batteries), copper, and niobium.
“For our export-oriented industry in particular, this is a slap in the face of stagnation,” emphasizes IV President Georg Knill. He sees it as a means of securing the livelihoods of 1.2 million jobs in Austria.
Agriculture: “Farmers' alienation policy”
In stark contrast to this is the mood in the domestic agricultural sector. Minister Norbert Totschnig and the Farmers' Union warn of a flood of cheap imports produced under standards that have long been banned in the EU.
Although the EU Commission has put together a protection package that provides for the immediate reactivation of tariffs in the event of market disruptions (import increases of more than 8%), LKÖ President Josef Moosbrugger remains skeptical. He describes the concessions as “without substance.” The concern is that South American beef, poultry, and sugar could undercut domestic family farms in terms of price.
What happened behind the scenes
Behind the scenes in the Brussels negotiating rooms, dramatic scenes unfolded until the very end in order to break the resistance of influential EU states such as France and Italy, as Politico reports. A decisive lever in this was the so-called “45 billion euro promise.” The EU Commission responded to the massive farmer protests with an unprecedented budget maneuver: starting in 2028, farmers will have early access to funds that were originally intended as a crisis reserve for later years. This “adjustment aid” is intended to cushion the competitive disadvantage vis-à-vis the large-scale agricultural structures of South America. Italy was also able to push through a tightening of the safeguard clauses: the threshold for automatic import stops on sensitive goods was lowered from an original eight percent to just five percent price reduction.
At the same time, the ecological regulations, the “Additional Instrument,” have been massively tightened. It obliges the Mercosur countries to strictly comply with the Paris Climate Agreement. In particular, the monitoring of deforestation in the Amazon is now subject to a strict monitoring regime, whereby violations can theoretically even lead to trade sanctions—a concession to environmental concerns within the EU.
In Austria, this complex agreement has led to a remarkable political balancing act. While NEOS leader Beate Meinl-Reisinger celebrates the agreement as an existential “guarantee of survival for prosperity” and a necessary step in a shifting world order, FPÖ leader Herbert Kickl describes the breakthrough as a “black day” and a “death blow” for domestic agriculture. The situation is particularly precarious within the ÖVP: here, worlds collide as the Economic Association cheers the export turbo, while the Farmers' Association warns of the ruin of domestic farms.
This conflict is also reflected in the economic forecast for 2026. While mechanical engineering is poised for a boom due to the elimination of import tariffs, which previously stood at up to 20 percent, and the pharmaceutical industry is also benefiting from simplified approval procedures and the elimination of 14 percent tariffs, the situation for beef producers remains critical. They face overwhelming competition from Brazil, even though quotas limit imports to around 1.6 percent of EU consumption. However, the protection of geographical indications remains a ray of hope for domestic agriculture: products such as “Tiroler Bergkäse” (Tyrolean mountain cheese) now also enjoy legal exclusivity in South America, which prevents counterfeiting.
The Mercosur Agreement is much more than a trade agreement—it is a geopolitical statement by the EU to the US and China. For Austria, it means walking a tightrope: the export engine is getting much-needed fuel, but the price could be a profound change in the domestic agricultural structure.
Following today's signing, the agreement still needs to be confirmed by the European Parliament. In Austria, the debate on ratification of the political section (EMPA) will keep Parliament busy for months to come.