EU-Mercosur trade deal likely to enter provisional application in March

The EU-Mercosur free trade agreement is likely to be applied on a provisional basis as soon as March once a Mercosur country completes ratification, an EU diplomat said on Jan. 22, adding "that will probably be Paraguay in March." The announcement comes amid a fresh legal challenge after European lawmakers referred the pact to the European Court of Justice, a move that could extend final ratification by up to two years.

The agreement, signed on Saturday after 25 years of talks, binds the European Union and four Mercosur members—Brazil, Argentina, Paraguay and Uruguay—in what officials describe as the EU's largest-ever trade pact. Provisional application would allow selected parts of the treaty to take effect before every national parliament has completed ratification, enabling tariff reductions and market access to begin while legal and parliamentary processes continue.

Provisional application is not without risk. The European Parliament retains the power to annul provisional measures at a later date, and domestic political opposition could translate into motions to rescind implementation or legal challenges before the ECJ. The referral to the EU's top court, driven by concern among some lawmakers and civil society groups, represents a significant procedural hurdle that could slow the deal's final entry into force even if provisional steps are taken.

Political reaction has been immediate and polarized. Germany's Chancellor Friedrich Merz, speaking at the World Economic Forum in Davos, voiced regret at the parliament's referral and warned it was "another obstacle" but insisted the deal remains essential, saying "But rest assured: We will not be stopped. The Mercosur deal is fair and balanced. There is no alternative to it if we want to have higher growth in Europe." In contrast, critics led by France maintain that the pact risks increasing imports of cheap beef, sugar and poultry and undercutting domestic farmers. French government spokesperson Maud Brégeon told CNews TV that "If (European Commission President) Ursula von der Leyen, the European Union, were to force through a provisional application, given the vote that took place in Strasbourg, it would constitute a form of democratic violation."

The domestic stakes are tangible: farmers' unions in France mobilized with tractor protests in Strasbourg on Jan. 20, underscoring the political volatility in key member states. Businesses in Germany and other EU markets have expressed dismay at the prospect of delay, worried that slower European market access will cede advantages to competitors amid a fractious global trading environment. Supporters argue the pact is necessary to recoup business lost to U.S. tariff policies and to reduce overreliance on China for strategic imports.

The European Commission has said it will engage with member states and lawmakers before deciding whether to trigger provisional application. If Brussels moves forward, it will need to specify which parts will be applied and the legal basis for doing so, balancing the economic incentive of earlier implementation against the political risk of further alienating agricultural constituencies and parliamentarians.

Key variables to watch in coming weeks include confirmation of Paraguay's ratification timetable, any formal Commission decision on provisional application, the ECJ's interpretation of the referral, and fresh domestic responses in France, Germany and other member states. How Brussels navigates those variables will determine whether the pact starts to reshape trade flows from March or remains mired in a protracted legal and political process.