Executive summary

This report assesses the geopolitical and economic dimensions of the EU-Mercosur trade agreement, with a focus on its implications for EU competitiveness, supply chain security, and global influence. Over the past two decades, the EU has lost trade share in Latin America to China, whose growing presence in the region—particularly in agriculture, infrastructure, and critical minerals—has shifted the balance of power. Simultaneously, the United States has adopted a more protectionist stance, creating gaps in global trade leadership.

The EU-Mercosur agreement aims to re-establish the EU as a relevant economic partner in Latin America by eliminating tariffs on industrial goods, improving access to raw materials, and reinforcing a rules-based trade framework. While the deal offers strategic opportunities, it has also faced strong opposition within the EU, especially from countries with large agricultural sectors concerned about environmental and competitive impacts.

The report analyzes individual EU Member States’ positions, examines the influence of external actors such as China and Russia, and outlines the broader stakes of ratifying the agreement, with particular attention given to the agreement’s impacts on the Baltic States and surrounding nations. Ultimately, the EU-Mercosur deal reflects a broader question: how the European Union will position itself amid growing geopolitical fragmentation and shifting global trade norms, and how will the ratification of the EU trade deal affect the Baltic States?

Introduction and background

Mercosur, short for Mercado Común del Sur (Southern Common Market), is a South American trade bloc established in 1991 by Argentina, Brazil, Paraguay, and Uruguay to foster regional integration through free movement of goods, services, and people. With a combined population of over 270 million and an economic base rooted in agriculture, livestock, and raw materials, Mercosur plays a strategic role in global trade, particularly in commodities such as beef, soy, and iron ore. The European Union (EU) and Mercosur initiated trade negotiations in 1999, aiming to forge closer economic and political ties. Following two decades of protracted negotiations, the two parties reached a political agreement in 2019, promising to eliminate tariffs on over 90% of traded goods, enhance cooperation in areas like intellectual property and public procurement, and integrate both regions more deeply into global value chains. The EU has been especially motivated to finalize the agreement as a way to position itself as a reliable alternative to China, which has significantly expanded its economic influence in Latin America in recent years, and which stands today as Mercosur’s top trading partner. At the same time, rising protectionism from the United States has pushed the EU to diversify its trade relationships and assert more strategic autonomy on the global stage. Thus, on December 6, 2024, in Montevideo, Uruguay, European Commission President Ursula von der Leyen formally announced the conclusion of the long-awaited EU-Mercosur agreement, marking a pivotal moment in EU-Latin America relations. However, the ratification process has been slowed by internal EU opposition, driven by concerns over deforestation in the Amazon, weak enforcement of sustainability commitments, threats to domestic agricultural interests, and a broader rise in protectionist sentiment.

Currently, the text of the agreement is undergoing legal revision and translation in all 24 official EU languages, and from there, the European Commission will pass along suggestions to the European Council for final decisions and conclusions.1 (see the list of references) Per European Commission Directorate-General for Trade and Economic Security Paolo Garzotti, this phase will likely conclude by mid-July. Next, the agreement will make its way to the European Parliament, where it will be debated by Members of the European Parliament (MEPs). Per the EU’s Rules of Procedure, Parliament decides by a single vote to give its consent to the conclusion, renewal, or amendment of an international agreement. Following Parliament’s consent, the Council would be able to adopt a decision to conclude the agreement pursuant to the procedure and voting rules, which Garzotti notes is likely to be approved by the end of 2025.

Right now, the EU-Mercosur Agreement remains in limbo. While the European Commission has continued technical revisions to address environmental and labor-related safeguards, several key EU countries, like France and Austria, have voiced firm opposition to ratifying the deal without stronger guarantees on climate and human rights protections.

Meanwhile, Mercosur members, especially Brazil and Argentina, have expressed frustration over what they perceive as shifting goalposts and economic marginalization. Multiple EU Member States, including Poland, France, and Lithuania, have expressed opposition to advancing the agreement, citing concerns that agricultural imports from Mercosur countries could undermine the competitiveness of their own domestic sectors.

Current political stances

Significant political hurdles still impede the ratification of the EU-Mercosur agreement—chief among them, the challenge of persuading skeptical Member States to align with the supporting coalition by year’s end. In order to ratify the agreement, the deal requires support from 55% of EU Member States representing 65% of the population. France, Ireland, Lithuania, and Poland currently oppose the agreement, citing the potential for unfair agricultural competition from Mercosur countries as their primary concern. Several other nations with reservations—Austria, Belgium, and Romania—may choose to abstain from voting altogether. As such, the position of two major swing states—Italy and Poland—is decisive, considering that together they represent approximately 21.6% of the EU population.2 Italy has shown a mixed stance, with both positive signals and concerns related to fair competition and environmental safeguards. If both Italy and Poland support the agreement, the population threshold would be comfortably met. However, if either abstains or votes against, the deal risks falling short of approval. In turn, the preceding actions of the Baltic States—Estonia, Latvia, and Lithuania—will prove critical moving forward with trade negotiations.

France remains in stark opposition to the trade deal, even as Brazilian President Luiz Inacio Lula da Silva traveled to Paris in early June to urge French President Emmanuel Macron to support the accord. Macron argues that the deal as it stands would hurt French and European farmers by forcing them to compete with South American producers who are not held to the same agricultural standards. Macron notes that the text of the agreement could be improved with the insertion of mirror clauses, which Garzotti of the European Commission holds as impractical and costly.3 Regardless, on June 17th, France’s Agriculture Minister Annie Genevard announced that an “additional protocol” to the EU-Mercosur trade deal, including additional safeguards for agriculture, is under discussion to secure Paris’s—and potentially Warsaw’s—support for the agreement.4 Germany, Europe’s largest economy, remains a strong proponent of the EU-Mercosur deal. The country stands to benefit more than most EU Member States from the agreement, particularly due to its large industrial base and strong export orientation. Germany relies heavily on global markets for its automotive, machinery, and chemical sectors—three industries that are central to the Mercosur agreement. German carmakers, who have faced years of sluggish growth and increased competition from both Chinese Electric Vehicles (EVs) and American firms, are especially eager to access Mercosur’s markets. Currently, passenger cars exported to Mercosur countries face tariffs of up to 35%, which has significantly limited German automotive competitiveness in the region.5 The EU-Mercosur agreement would phase out these tariffs, potentially revitalizing exports at a time when domestic and European demand remains weak.

This is particularly crucial for Germany’s Mittelstand—the country’s small and medium-sized industrial suppliers, many of whom are deeply integrated into automotive and machinery supply chains and are struggling with slowing orders and rising costs. Similarly, Germany’s chemical industry is eyeing Mercosur markets as growth opportunities amid tightening environmental regulations and cost pressures at home. The EU-Mercosur deal would remove tariffs of up to 18% on chemical exports, making it easier for German firms to expand abroad while preserving their global market share.

Poland’s stance on the EU-Mercosur agreement is shaped largely by the interests of its powerful agricultural sector, which accounts for over 3% of national GDP and employs around 10% of the workforce, among the highest shares in the EU.6 Just a few days before the signing of the agreement in December, Polish Prime Minister Donald Tusk announced that “Poland will not accept… the free trade agreement with the South American countries… in this form,” noting “concern for Polish farmers and food security.“7 This comes as the nation’s farmers have voiced reservations about being undercut by Mercosur producers who operate under significantly looser environmental, labor, and animal welfare standards. Moreover, at the June 23rd Committee on Foreign Affairs (AFET) hearing on the geopolitical aspects of the EU-Mercosur agreement, Polish MEP Grzegorz Braun—of the far-right party Confederation of the Polish Crown, and a fourth-place finisher in Poland’s 2025 presidential election—expressed strong indignation at the accord. Addressing the committee, Braun said: “[With this deal] you make it impossible for agriculture in my country to compete. Then you come with the idea of inviting everybody from all around—from Ukraine, from South America—to sell anything they want… obviously cheaper, because they don’t have to meet these irrational rules… And today, to make me more interested, you add that this is how you’ll fight Russia, and Iran, and China…The European Union has to be overthrown.”8

While newly elected Polish President Karol Nawrocki has yet to comment publicly regarding the EU-Mercosur deal, it appears unlikely that he will come out in support of such an accord. Nawrocki, a right-wing populist with ‘Poland-First’ values, holds a strong base with Polish farmers and remains skeptical of what he sees as far-reaching EU policy, making him an improbable proponent of a comprehensive international trade deal.9 Nevertheless, Garzotti surmises that Nawrocki’s June victory will have little impact on getting the EU-Mercosur deal ratified by December, especially considering the President’s largely symbolic role in Poland.

In December, Lithuanian Minister of Agriculture Ignas Hofmanas announced the country’s condemnation of the trade deal, saying to reporters, “Our agricultural sector is especially affected when it comes to meat, poultry, and beef. Since we grow most of our agricultural produce and export a significant share, I don’t think this agreement offers us any opportunity.”10 Since December, Vilnius has not publicly altered its stance on the EU-Mercosur deal.

Latvia is the only Baltic nation to endorse the EU-Mercosur agreement. The day the accord was signed in Montevideo, Latvian MEP Inese Vaidere highlighted that “[The] agreement simplifies exports, reduces tariffs and sets standards, leading to significant job opportunities and economic growth in Europe,” noting further that the deal is “…good news for consumers, economic growth and jobs in Europe and also in Latvia. It is essential at a time when we want to diversify supply chains to ensure the EU’s strategic autonomy and when trade with the US is likely to become more difficult.”11 In April, Latvian State Secretary Andžejs Viļumsons met with Argentine Ambassador Carlos Federico Mascias in Riga, where Viļumsons voiced support for signing the EU-Mercosur deal quickly, highlighting the potential for new trade opportunities between Latvia and Latin America.12

That said, while members of Latvia’s agricultural sector have not publicly voiced opposition to the deal, the Latvian Ministry of Agriculture (MOA) expressed reservations in a statement to the Baltic Security Foundation. The Ministry warned that “Latvian farmers may face an indirect negative impact from increasing imports of… products from Mercosur,” which could “reduce the competitiveness and outlet possibilities for Latvian producers.” As such, the Ministry emphasized the need for the European Commission to monitor market developments closely, enforce strict SPS (sanitary and phytosanitary) controls, and apply a safeguard clause if necessary.13 This response suggests that, despite Latvia’s general support for the agreement, concerns over long-term competitiveness in agriculture persist, highlighting the kind of behind-the-scenes pressure that may shape how the deal is implemented at the EU level.

Estonia has yet to express an official opinion on the EU-Mercosur deal. While Estonia’s farming sector is significantly smaller than those of its Baltic neighbors, potentially reducing the risk of domestic pushback, it remains unclear whether Estonian MEPs will abstain from voting when the deal reaches Parliament. For now, proponents of the accord are not counting on support from Tallinn.

Economic and political intersections

As usual, certain aspects of the EU-Mercosur agreement have experienced heightened politicization, including several less consequential issues. As noted previously, four EU Member States—France, Ireland, Lithuania, and Poland—have publicly opposed the deal, all noting concerns for their respective agricultural sectors. However, it appears that such unease may have been amplified in the media, which is due in part to the institutional strength of European agricultural interests. This development, of course, is unsurprising to observers of the European political landscape, who have noted an increase in both the frequency and political salience of farmers' protests in recent years. The EU-Mercosur deal proves no exception. In Poland, farmers took to the streets across the country in January to protest various “dictates from Brussels,” including the signing of the previous month’s accord in Montevideo.14 Protests were reported in 23 locations across the country, the largest of which—attracting over 50 tractors—took place in the northern city of Elbląg, situated at the heart of one of Poland’s major agricultural regions. Protesters were accompanied by a large figure of the Grim Reaper, symbolising the death of Polish agriculture, while others waved banners containing anti-EU imagery, including some calling for “Polexit” from the bloc. Lithuania, the Baltic’s largest agricultural economy, is no stranger to protests of this sort, either. Last January, over 5,000 farmers driving more than 500 tractors took to the streets of Vilnius to protest a policy unrelated to the EU-Mercosur deal. A smaller but sizable coalition also plans to occupy space in front of the Seimas at the end of June in protest of Personal Income Tax (PIT) and State Social Insurance (SSI) laws, as well as road taxation.15 Such events speak to the organization of agricultural interests in the region and across the continent, spurred by administrative entities like the European Rural Parliament, a non-EU affiliated institution which aims to strengthen the voice of rural communities in Europe and ensure their interests are reflected in national and European policies.16

Prior to being appointed Lithuania’s Minister of Agriculture, Hofmanas, a notable critic of the EU-Mercosur deal, served as a farmer for 15 years and then as chairman for the Lithuanian Agricultural Council, a non-governmental organization that represents and protects the interests of Lithuanian farmers.17 Today, Hofmanas serves under the Nemunas Dawn party, which some critics label as right-wing populist. The party, however, identifies as center-left, citing its economic policies focused on protecting rural and agricultural interests. Regardless, keeping Lithuania’s agricultural sector at bay is a key concern of Nemunas Dawn and other members of the current Lithuanian coalition, considering the political strength of the country’s shrinking but mighty farming sector, a common sentiment echoed by leaders around Europe, including Nawrocki in Poland.

The number of farms and farming-related employment in the EU has been steadily declining for decades, dropping by over 30% and 37% respectively in the past 15 years.18 This trend is especially evident in rural areas of Poland and Lithuania, where farm numbers have fallen by over 30% in recent years.19 Similar patterns appear across the region: Latvia has seen a 17% decrease, and Estonia a 25% drop.20 Compounding the issue are demographic challenges: Latvia and Lithuania have the highest rates of depopulation in the world, with Latvia losing 18% and Lithuania 17% of their populations between 2000 and 2017, while rural regions are experiencing the fastest decline.21

It is key to understand that these trends are interconnected. Today, the European farming sector—and in particular, those of Lithuania and Poland—faces mounting pressures from declining farm numbers, increasingly demanding environmental regulations, and a slow but steady erosion of its traditional foundations—all of which are fueling calls for stronger protective policies. It is also crucial to recognize that Lithuania and Poland—both former Soviet republics, and neighbors to Kaliningrad, Russian-aligned Belarus, and, in Poland’s case, Ukraine—retain a vivid memory of Soviet occupation and feel the impact of the war in Ukraine especially deeply. Therefore, agriculture is viewed by farmers and non-farmers alike as a tool of national security; protecting the sector is key to sovereignty. Agricultural self-sufficiency is increasingly viewed as a matter of national resilience—particularly in times of crisis—offering a safeguard against overreliance on external sources for essential resources. Such feelings are amplified in the Baltics, where states like Lithuania, compared to larger nations like Poland, hold less bargaining power in the EU and remain especially vulnerable to Russian interference. In turn, the Ministers of Agriculture of Estonia, Latvia, and Lithuania convened in April to sign a joint declaration calling for additional funding through the Common Agricultural Policy (CAP) in the wake of Russian aggression in Ukraine. In the declaration, the ministers note “the EU’s Eastern border regions’ rural areas particular vulnerability due to Russia’s war of aggression against Ukraine” and the need to provide “strong and separate EU Common Agricultural Policy (CAP) for the agri-food sector that is ensuring its primary objective of food production and food sovereignty under the current pressure of geopolitical tensions.”22 Given this firm stance by the Baltic States—alongside recent joint calls from Tallinn, Riga, and Vilnius to “significantly increase assistance to Ukraine—political, economic, humanitarian, military—all types of assistance”—it is essential to consider the historical and political contexts shaping current strategy towards EU, Mercosur, and beyond.23 Moreover, because of the Baltics’ physical closeness and lingering historical memory of Russian occupation, policy regarding the ongoing conflict in Ukraine will likely shape regional reactions towards the EU-Mercosur deal. This also opens the door to further speculation about the positions of Estonia, Latvia, and Lithuania regarding the ratification of the EU-Mercosur agreement. While Latvia has publicly affirmed its support, recent signals—including the joint statement from the Baltic Ministries of Agriculture—suggest that Riga, like Vilnius, could potentially reconsider its stance. While Estonia has not yet taken an official position, growing pressure from domestic agricultural interests could influence how MEPs from all three Baltic States ultimately vote on the accord.

Energy

For the Baltic States, the stakes of the EU-Mercosur deal are particularly high, tied to a broader strategy of reducing strategic dependencies and cutting residual economic links to Russia. With Russian drones crashing in the Latvian countryside, undersea cables in the Baltic Sea mysteriously severed, and some experts warning of a possible near-term invasion, it’s no surprise that leaders in Tallinn, Riga, and Vilnius remain deeply committed to distancing themselves from Russian interests.24

Prior to the invasion of Ukraine, the Baltics as a whole still acquired an estimated 74% of their total natural gas from Russia.25 However, in a slew of preceding actions against Moscow, Lithuania was the first country in Europe to halt imports of Russian gas on April 1st, 2022, with Estonia and Latvia immediately following suit.26 In turn, European benchmark prices for natural gas rose on average by 163% in 2022. Research by the European Central Bank has estimated that the 2023 gas shock added as much as two percentage points to inflation, making it the single largest component of that year’s inflation shock.27 While natural gas imports were cut off quickly, the Baltics—arguably the region’s most vocal critics of Russian aggression—remained connected to Russia’s power grid long after gaining independence from the Soviet Union in 1991. In 2018, the Baltics formally committed to disconnecting from the Russian energy grid and, in February of this year, completed the long-awaited switch to the European grid—a move accelerated by Russia’s 2022 invasion of Ukraine.28 Since 2022, under the REPowerEU Plan, the EU has cut its Russian gas imports from 45% to 19%. Still, the transition is ongoing: Russian gas, oil, and nuclear energy continue to play key roles in the EU energy mix, with a full phase-out of Russian gas planned by 2027.29 In 2024, Norway was the top supplier of gas to the EU, providing over 33% of all gas imports. Russia remained the second largest supplier, followed by the United States and Algeria, among others.30 As a result, the EU—particularly the Baltic States—is seeking new energy sources to maintain energy independence and overall security, with a continued focus on reducing reliance on Russia.

Noting these points, it is crucial to recognize the role that Mercosur can play in the ongoing EU energy transition. European reliance on fossil fuels has generally decreased with time, due to the rise of renewable energy. That said, in 2022, the EU’s reliance on fossil fuels for its overall energy supply stood at 70.9%, an increase from 2021’s 69.9%.31 Russian fossil fuel imports in the EU from 2022 to 2023 went from 21% to 4% for oil and petroleum products, 24% to 14% for natural gas, and 23% to 1% for solid fossil fuels, thanks to EU sanctions on oil and coal from Russia. However, Russian gas imports registered a 19% year-over-year increase in 2024 compared to 2023.32 At the same time, Latin American oil exports to Europe have begun to make a modest contribution to European energy security. The volume of Brazilian crude being shipped to European ports has increased substantially since February 2022, and its share has risen to 3%, compared with 1.9% in 2021. Moving forward, Latin America is poised to make a modest but not insignificant contribution to European efforts to diversify away from Russian fossil imports.33 For the Baltics specifically—three states without an abundance of fossil fuels—this aspect of the EU-Mercosur deal is critical, even as the region gradually transitions towards renewable energy. The addition of South American fossil fuels to the European market demonstrates future avenues for collaboration between the two regions, especially as reliance on Russian energy diminishes.

Still, many in the EU have raised concerns about the Latin American fossil fuel industry, citing unease with environmental degradation in South America. In the June 24th EU Parliament Hearing by the Committee on International Trade (INTA) regarding the The EU-Mercosur agreement, numerous MEPs—from nations beyond Poland and Lithuania—raised issue with allegedly exploitative labor and environmental practices in the Latin American farming and energy sectors, including Belgian MEP Bricmont of the Greens who urged members of the committee to “consider those not at the table.”34 This pushback comes in the wake of the signing of the EU-Latin American Energy Organisation (OLADE) memorandum from May, which noted a commitment to reduce methane emissions across various sectors, including agriculture, fossil fuels, and transport within Latin America.35 Furthermore, an issue has been raised regarding the limitations of Latin American infrastructure in supplying fossil fuels to Europe, as Latin America’s liquefied natural gas (LNG) market remains underdeveloped and is primarily geared towards US seasonal imports. Given the technical complexity and investment requirements of exporting LNG, only Peru and Trinidad and Tobago—non-Mercosur members—have infrastructure and production capacity to supply the European market as of 2023. That said, Argentina and Brazil have significant potential for LNG exports due to abundant natural gas reserves in Vaca Muerta and Santos. While challenges such as regulatory hurdles, financing, and political stability remain, it is possible that the ratification of an EU-Mercosur agreement could help speed up the process, providing reduced barriers to financing and cooperation between Argentina, Brazil, and the EU.36

Meanwhile, both the EU and Mercosur are actively transitioning away from fossil fuels and have publicly committed to developing renewable energy sources. In this way, Mercosur proves a role model for Europe and the Baltics, considering that Uruguay and Paraguay have almost 100% green electric grids, while Brazil’s is 85% green, levels much higher than the EU’s 39%.37 The Baltic States continue to outperform the EU average in renewable energy use, positioning themselves as emerging leaders in hydropower, wind, and solar energy. In 2023, Latvia—widely recognized as an EU frontrunner in renewable energy—saw a 59% drop in average electricity prices compared to 2022. That same year, 77.6% of Latvia’s electricity was generated from renewable sources, and 88.3% of its total electricity consumption was met through local generation, with Estonia and Lithuania reporting similar achievements.38 Renewable energy development lies at the heart of the Baltic energy security strategies.

Lithuania, in particular, has set a bold target: to achieve 100% renewable electricity by 2050, underscoring the region’s commitment to clean energy independence.39 The accord, which the EU notes embodies a shared commitment to sustainable development and will serve to promote the green transition, would prove a valuable avenue for collaboration between the Baltics and South America in terms of renewable energy development, allowing for technology transfer via tariff reduction, along with the opening of regulatory cooperation channels.40 For the Baltics, the ratification of the agreement could unlock a new region filled with green energy expertise, helping in its push for energy independence and a future more secure from the Russian threat.

Latin America holds abundant reserves of critical minerals like lithium and ammonia that are key to Europe’s energy and agriculture sectors. For the Baltic States, this is especially important as they work to reduce dependence on Russia and strengthen strategic supply chains. In particular, lithium is one of the 34 critical raw materials listed by the EU under the Critical Raw Materials Act, and a key component in the EU’s quest to ditch fossil fuels and switch to clean energy.41 Because Argentina and Brazil are major producers of lithium, the EU-Mercosur agreement could help the EU secure an efficient, reliable, and sustainable flow of the raw materials that are critical for the clean transition and for the EU’s strategic autonomy more widely.42 Furthermore, the Baltics are rapidly expanding renewable energy, especially wind and solar. But renewables need battery storage to be reliable. Access to lithium enables the development of local storage solutions, reducing the need for Russian gas or other fossil fuel backups, crucial to regional energy independence.

Still, opponents argue that the South American lithium supply chain has its faults and should not be strongly considered in the European energy transition. During the June 23rd AFET Hearing in Brussels, Thomas Waitz, Austrian MEP representing the Greens, noted, “You talked about lithium. We have a lot of lithium in the European Union. Why are we not digging it in the European Union? Because the environmental impacts are heavy and we don’t want to see them in our backyard. But we are okay if this happens across the pond. How can we secure that the sourcing of resources is happening in uh, let’s say, a sensible way. Also with respect of social rights, of indigenous rights, of workers rights. So, for me the question is not do we need this agreement, but what can we still do to ensure that it seriously works not only for the EU but also for Brazilian economy and farmers.”

Defense

The European Union imported 5.34 million tons of iron and steel products from Russia in 2024. Despite the sanctions, Russian producers continue to generate significant revenues from exports to the EU, with the amount exceeding €2.5 billion last year. Key to this trade relationship is pig iron, a raw material essential to steel production and critical to defense manufacturing.

Despite existing EU sanctions, imports of Russian pig iron surged by 23% year-over-year in early 2025, largely due to global supply constraints and elevated prices in alternative markets. In 2024, Latvia specifically imported 147,72 thousand tons of pig iron from Russia, a 43.1%

year-over-year increase. Despite sanctions, EU imports of other iron and steel products from Russia rose by 28% year-over-year in Q1, driven by Direct Reduced Iron (DRI) and other semi-finished steel products. Notably, in total, Russian DRI supplies to the EU accounted for about 40% of all DRI imports to the bloc, raising serious concerns for the credibility and resilience of the European defense sector.43 Not only does this dependence undermine the effectiveness of sanctions imposed in response to Russia’s aggression against Ukraine, but it also creates a strategic contradiction: while the EU supplies military and logistical support to Kyiv, it simultaneously sources critical materials from the very state it aims to deter. Mercosur remains a top global producer of iron and steel products, offering potential refuge to the EU as it searches for new sources of critical goods in the wake of Russian aggression. Notably, Brazil produces 36% of the world’s pig iron and remains a growing partner of the EU in this sector.44 The country is also expanding its DRI production abilities, which could help the EU with its renewable energy transition, though development on the Brazilian side is still needed. Mercosur remains a top global exporter of iron ore as well—and with a reduction in tariffs brought on by the ratification of the EU-Mercosur deal, a partnership between the two blocs would be integral in helping the EU end its sanctions-evading reliance on Russia.45

Agriculture

For the Baltic States, the stakes of the EU-Mercosur deal go beyond energy, touching sectors like agriculture and rural development. Although Lithuania stopped purchasing Russian gas in 2022, ammonia produced from Russia continues to be imported into the country, as there is no EU ban on such imports. In parallel, the EU continues to rely on Russia for specific critical raw materials like palladium, titanium, and nickel, which are essential for aerospace, electronics, and green technologies, even as Lithuania’s Minister of Economy and Innovation previously stated that “any economic ties with Russia should be viewed extremely negatively, even if they are technically legal.” Nonetheless, between early 2022 and the end of Q1 of 2025, Lithuania imported €157.3 million worth of Russian-made ammonia.46 Notably, between 2020 and 2025, well over 90% of all ammonia imported into Lithuania was of Russian origin, representing a general trend in the region, as exports of mineral fertilizers from Russia to the EU increased by 43% year-over-year in 2024.47 This reliance proves a significant weak spot for regional food security, as ammonia is among the most vital products in the chemical industry, serving as a key raw material for critical agricultural fertilizers. Moreover, this is not simply a threat for the Baltic States, but for Mercosur as well, considering that Russia supplies over 30% of mineral and potash fertilizers to Mercosur countries, giving it outsized influence over Latin America’s food production systems.48

Regardless, internal strife in the Lithuanian Parliament has raised questions about the country’s commitment to cutting all ties with Moscow, no matter how severe. Earlier this month, Lithuania’s parliament opened debate on legislation that would allow the country to impose national-level economic sanctions on Russia and Belarus should the European Union fail to extend its bloc-wide measures.49 The law, which passed comfortably, was introduced by Foreign Minister Kęstutis Budrys, who warned that divisions within the EU over sanctioning Moscow and Minsk risk weakening the bloc’s response to Russia’s ongoing war in Ukraine. Nevertheless, the majority of the Nemunas Dawn party’s 19 representatives in the Seimas voted against the proposed extension of sanctions, objecting to the inclusion of agricultural products and animal feed in the import ban.50 Ammonia—still heavily imported from Russia—was left out of the measure. Hofmanas maintained his support for the ban, highlighting that Lithuania has the moral right to impose it.

The issue of where to source ammonia if not from Russia remains salient. Today, the majority of Russian ammonia is purchased by Lithuanian nitrogen fertilizer manufacturer Achema. Achema notes that there are no operational ammonia terminals in the Baltic States, making it impossible to source ammonia from the U.S. or other alternative suppliers.51 According to Achema’s Head of Communications, the company was forced to purchase Russian ammonia to fulfill contractual obligations to clients. Contrary to Achema’s statement, though, there are numerous ammonia terminals in the region—including a Latvian port in Ventspils and another in Sillamäe, Estonia, along with several in Poland and Finland, demonstrating that the Baltics can transition away from Russian ammonia.52

The EU-Mercosur partnership could open new avenues for Baltic access to alternative ammonia supplies, particularly from Latin America’s expanding clean ammonia sector. In 2023, the Netherlands signed a deal with Brazilian renewable energy developer Casa dos Ventos to receive 2.2 million tonnes of ammonia annually via the Port of Rotterdam starting in 2026.53 That same year, European Commission President Ursula von der Leyen announced an agreement enabling shipments of Brazilian ammonia from Piauí to the Port of Krk in Croatia—positioning Brazil as a rising supplier for southeastern Europe.54 Meanwhile, in Paraguay, a new heads of terms agreement secured the long-term supply of calcium ammonium nitrate (CAN) needed to produce electrolytic hydrogen, ammonia, and ultimately fertilizer.55 These developments highlight Latin America’s growing role in Europe’s ammonia supply chain, offering the Baltic States new partnership opportunities as they reduce reliance on Russian inputs.

Another key concern is grain production, a particularly sensitive issue for farmers in Lithuania and Poland, driven by the influx of grain from both Russia and Ukraine. In Poland, farmers are especially alarmed by what they see as a surge in Ukrainian imports into the EU market, enabled by the liberalization of trade with Ukraine in early 2022. This influx entered without restriction, disrupted domestic markets, and prompted Polish companies to purchase cheaper Ukrainian grain—grain that, according to protesting farmers, does not meet the same high standards required within the EU. For Polish farmers, the EU-Mercosur deal signals a repeat of this problem: easier access to European markets for grain and other agricultural products from countries not bound by EU regulations. While EU farmers must comply with strict standards on quality, animal welfare, and environmental sustainability—raising production costs—producers in Mercosur countries face different requirements. This imbalance could potentially create risks of unfair competition and the pushing down of prices for domestic farmers already under strain.

Farmers in Lithuania note that their concerns lie with the influx of Russian grain into the EU instead of Ukrainian grain. As the EU has not put sanctions on Russian food products, some farmers claim that the influx of Russian grain lowers the prices of their exports. In particular, in early 2024, Lithuanian MEP Bronis Ropė argued that large quantities of Russian grain were able to enter the EU through both Latvia and Lithuania, causing grain prices in Lithuania to fall by a third.56 By that December, Hofmanas signed a memorandum of understanding with his Ukrainian counterpart, Vitaliy Koval, “based on which Russian grain transiting the port of Klaipeda will be checked for origin,” the text says. The purpose of the check is to make sure that it does not originate from the territories of Ukraine occupied by Russia.57 Since, Latvia has banned the import of Russian grain, but Lithuania has not followed suit, leaving Lithuanian farmers frustrated once again.58

While regulatory standards and grain imports remain key points of contention in the EU-Mercosur debate, one consideration is especially important for European farmers, particularly those in Lithuania and Poland: the agreement also opens access to new export markets at a time when such opportunities are urgently needed. Although Brazil is a prominent global player in agricultural production, the country still faces structural challenges when it comes to wheat. Climate constraints, rising domestic demand, falling domestic grain production, and a dependence on imports shape the core dynamics of Brazil’s wheat economy.59 Today, Brazil is among the world’s top 10 importers of grain, relying particularly on Argentina, which has been responsible for more than 80% of Brazil’s imports.60 This opens the door for imports from the EU to the Mercosur bloc, particularly in terms of grain. While many have raised concerns about the influx of South American grain into the European market, it is key to note that Poland, Latvia, and Lithuania all currently outpace Mercosur’s leading wheat producer, Argentina.61

Moreover, Lithuania today is looking to diversify its grain exports, shifting from Eastern markets to new territories in Africa and South America in response to global changes spurred by Russian aggression in Ukraine and political realignment. Today, over two-thirds of Lithuania’s grain production is exported, with wheat and rapeseed being the dominant crops. The focus on quality has been a defining feature of Lithuanian grain exports, with the country known for its uniform, high-quality wheat. Additionally, Lithuania’s advanced logistical infrastructure ensures the efficient transport of grain to global markets. In recent months, the Lithuanian grain market made its first sales to Mexico and Canada with hopes to reach Mercosur power Brazil soon, thanks to a phytosanitary certificates agreement launched in 2025.62 In short, the EU-Mercosur agreement could provide a crucial platform for Lithuanian and potentially Polish wheat to stand competitive on the world market, helping reinvigorate a struggling grain sector in Poland and the Baltics.

China

Over the past two decades, the EU has steadily lost ground to China in its trade relationship with Mercosur. In 2000, the EU was Mercosur’s top trading partner, accounting for over 31% of the region’s trade. By 2023, however, that share had declined to just 15%, while China’s share rose to 24%, firmly establishing it as Mercosur’s largest trading partner by a significant margin. This shift has been especially pronounced in key export sectors: China now absorbs nearly 70% of Mercosur’s soybean exports, over 60% of its iron ore, and a dominant share of its beef exports. While EU-Mercosur trade remains meaningful—totaling around $117 billion in 2023—its growth has stagnated. In contrast, China’s trade volume with Mercosur has ballooned to €157 billion.63 The EU not only trails China in export volumes but also has a trade deficit with the region, while China enjoys a significant surplus. These figures reflect both the growing assertiveness of Chinese economic diplomacy in Latin America and the EU’s waning influence in a region it once dominated.

Beyond Latin America, the EU’s struggle to compete with China’s expanding global trade influence is increasingly visible. China surpassed the U.S. as the EU’s largest goods trading partner in 2020, with bilateral trade reaching over €850 billion in 2023.64 However, this relationship is marked by asymmetry: the EU runs a persistent trade deficit with China, largely due to high volumes of Chinese electronics, machinery, and manufactured goods entering European markets. At the same time, China has strategically deepened its presence in Eastern and Southeastern Europe through initiatives like the Belt and Road and the now-faltering “16+1” framework, targeting infrastructure, energy, and digital sectors in countries from Hungary to Serbia. While some EU Member States have grown wary of Chinese investment and are pushing for decoupling policies in regards to Beijing, others remain receptive, creating fragmentation within the bloc. In turn, the EU has struggled to offer a unified economic alternative, and its slower decision-making has limited its ability to project influence with the same speed or scale. This broader pattern of Chinese ascendancy, paired with internal EU tensions, underscores the EU’s interest in reviving trade initiatives like the Mercosur agreement.

While China’s trade with Mercosur is concentrated in commodities like soy, iron ore, and beef, the EU’s trade profile with the region is more diversified, yet comparatively less dominant. In 2023, the EU imported over €12 billion in crude oil from Mercosur, primarily from Brazil, making up 22% of the region’s total oil exports. Other key imports include coffee ($3.4 billion, 46% of Mercosur’s total coffee exports) and copper ore, of which the EU accounted for a striking 72%.65 On the export side, the EU mainly sells high-value industrial goods to Mercosur: vehicles, auto parts, pharmaceuticals, chemicals, and machinery, many of which currently face tariffs ranging from 14% to 35%.66 The proposed EU-Mercosur agreement would eliminate most of these tariffs over a roughly 15-year period, significantly enhancing EU competitiveness in these sectors. Although crude oil already enters the EU tariff-free, the agreement would ease restrictions on processed fuels, strategic raw materials like lithium and manganese, and energy transition technologies, facilitating deeper industrial and energy ties. Overall, the trade relationship reflects a broad but not absolute pattern: Mercosur primarily exports natural resources, while the EU predominantly supplies advanced industrial goods. Without the agreement, the EU might risk continuing to lose ground to China, whose foothold in both imports and exports has become increasingly dominant across the Mercosur bloc.

Emerging connections

Beyond energy, agriculture, and trade, the EU-Mercosur deal may carry broader strategic significance for the Baltics—some of which is already beginning to emerge. Just a month after the agreement was signed in Montevideo, Latvian airline airBaltic and Uruguayan startup SUA Líneas Aéreas signed a Memorandum of Understanding outlining cooperation. The deal includes the wet lease of up to five Airbus A220-300 aircraft, as well as collaboration on operational setup, pilot training, IT systems, sustainability, and knowledge exchange. While neither airline has explicitly linked the timing of the partnership to the EU-Mercosur agreement, the announcement points to a potential deepening of ties between the Baltic region and Latin America in sectors beyond traditional trade.67

Moreover, Estonia’s e-Residency program continues to deepen the Baltic region’s ties with Latin America, reflecting a broader trend of nontraditional diplomacy and tech-driven engagement. In 2024, the program saw a record 4,818 new companies established by e-residents—marking a 5% increase from the previous year—and contributed over €66 million in taxes and fees to the Estonian economy. Together, these developments signal a maturing relationship between the Baltics and Latin America—one built not only on traditional trade or diplomacy, but on innovation, entrepreneurship, and strategic partnerships.68 As the Baltic States continue to emerge as leaders in the tech sphere—particularly in response to growing cyber threats from Russia—the region is well positioned to serve as a valuable partner for Latin American countries, including those in Mercosur, as they seek to strengthen their own digital resilience amid increasing Russian and Chinese activity.

Remaining concerns

That said, critics of the deal argue that its implementation poses significant risks to both the EU and Mercosur, including potential threats to democratic governance on both sides of the Atlantic. During the AFET hearing in Brussels, MEP Thomas Waitz challenged the committee, pointedly asking, “Are you still sure we share the same values with the government in Argentina?”69 His remark referred to the far-right, populist administration of President Javier Milei, known for its opposition to climate action and LGBTQ+ rights, and which earlier this year threatened to withdraw Argentina from the Paris Climate Accord. Collaboration with governments like Milei’s, opponents argue, may send the wrong message to an already fragmented EU, which in recent years has struggled to rein in democratic backsliding by leaders like Orbán in Hungary and the rise of far-right, populist sentiment across the continent.

Other concerns relate particularly to climate change and deforestation in both Europe and South America, from the impacts of increased trade on pollution levels to differing environmental standards across countries. Critics of the EU-Mercosur deal urge its proponents to consider the deal’s potential adverse effects on Native communities in the Mercosur sphere, the economic harm the deal could have on small-scale farmers, and serious concerns over deforestation in the Amazon, among others. In response to EU demands, the agreement includes binding sustainability provisions, with mechanisms allowing for the suspension of trade preferences if environmental commitments are not upheld, although this may prove difficult to implement from across the pond and at home, as businesses in the EU fight to keep up with their South American counterparts.

Potential consessions

Taken together, these considerations highlight the need to carefully assess how the EU-Mercosur agreement may evolve going forward, and what specific concessions Member States such as Lithuania and Poland may seek in response to the deal’s ratification. Fleischhauer and Regazzoni highlight that “Some Member States appear to be exploiting the Mercosur negotiations to extract concessions in other major EU policy files… in upcoming CAP Strategic Plans in exchange for softening their stance on the trade agreement… Countries such as France, Italy, and Poland, among the largest recipients of CAP funds… may push for compensatory mechanisms within the CAP, such as higher direct payments, rural development funding, or stricter sustainability standards for imports.”70 The strong opposition voiced by Polish and Lithuanian agricultural sectors in recent months—alongside the Baltic States’ joint call for reinforced protections under the CAP—suggests that countries in the region will likely leverage their position within the EU to secure favorable terms. Latvia has expressed support for the EU-Mercosur deal, despite concerns raised from the MOA, which may shape behind-the-scenes decision-making in Riga and Brussels. Further, potential concerns from Estonia’s farming sector could still shape its stance, particularly as all three Baltic States continue to prioritize national security in the face of ongoing Russian aggression. While smaller players in the broader EU context, the Baltic States—together with larger Poland—may still be able to leverage their strategic role in the Union’s stance against Russia to secure meaningful concessions for their agricultural producers. Beyond CAP concessions, it is possible that Poland may consider using its position on EU-Mercosur as leverage for Ukraine-related aid, though no related public demands have emerged yet. As such, Warsaw could potentially still link its support for the EU-Mercosur accord to broader issues like EU enlargement or military aid. The Baltics—smaller players on the EU stage—have not yet shown signs of pursuing similar demands, although this positioning may change if Warsaw secures clear concessions in regards to Ukrainian aid or succeeds in obtaining stronger protections against neighboring Russia.

Conclusion

The EU-Mercosur agreement functions not just as a simple trade deal, but as an instrument to adapt to the shifting state of the global political and economic order. At a time when China has firmly supplanted the EU as Mercosur’s top trading partner, and the United States has turned inward with protectionist industrial policies, the EU faces a narrowing window to assert itself as a credible global economic actor. The agreement offers one of the last major opportunities for the EU to deliver a comprehensive, values-driven trade partnership with the Global South, reinforcing its role as a rule-setter in a rapidly shifting international order.

China’s rise in Latin America has been both swift and multidimensional. It now dominates Mercosur’s commodity exports and has extended its influence through infrastructure financing, energy investment, and high-level diplomatic engagement. These efforts are not confined to Latin America. China has actively expanded its presence in Eastern Europe and the Baltic Sea region, investing in logistics, digital infrastructure, and port facilities across countries like Hungary, Serbia, and Latvia. While the Belt and Road Initiative has lost momentum in some parts of Europe, its economic footprint remains significant. For the EU, this dual front—China’s deepening ties in both South America and Europe’s periphery—raises the stakes for concluding the EU-Mercosur agreement as a signal of continued commitment to democratic, transparent, and rules-based economic integration.

Meanwhile, the United States’ increasingly protectionist stance, seen in policies such as the Inflation Reduction Act and the CHIPS Act, reflects a broader turn toward industrial nationalism. These measures, while promoting domestic resilience, have introduced transatlantic trade tensions and created new obstacles for EU exporters. The absence of a U.S.-driven trade framework in Latin America further underscores the EU’s urgent desire to step in—not only to expand its own economic reach, but to prevent further erosion of the multilateral trade system that underpins its external strategy.

The EU-Mercosur agreement, therefore, carries stakes that reach far beyond tariff schedules or commodity flows. For countries like Germany, it offers a critical boost to industrial exporters. For agricultural economies such as France, Poland, and Lithuania, it poses real competitive challenges, but also opens the door to new markets. For the Baltic States, the agreement aligns with broader efforts to de-risk from Russian dependencies, secure new energy and fertilizer inputs, and support the diversification of global supply chains. In a multipolar world marked by strategic rivalry, the EU’s capacity to finalize and implement this agreement will serve as a test of its geopolitical maturity.

Whether or not the EU-Mercosur agreement is ratified, it will serve as a key indicator of the EU’s ability to navigate a complex global trade environment marked by geopolitical competition, domestic pressures, and shifting alliances. As the bloc weighs these competing interests, the outcome of the ratification process will shape not only the future of EU-Latin America relations but also the EU’s broader capacity to respond to China’s growing influence and to engage with the Global South on its own terms. The final decision will reflect how the EU balances economic opportunity with political cohesion, strategic autonomy, and its evolving role in the global order.

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69 European Parliament, Committee on Foreign Affairs Ordinary Meeting Hearing.

70 Fleishhauer Corrêa da Costa and Regazzoni, Now or Never.

Cover photo: Olevs Nikers

By [Grace Zagoria, Matthew Clauser]