The Mercosur-EFTA Free Trade Agreement (FTA) constitutes a turning point in South America’s trade strategy and was signed between Mercosur (Argentina, Brazil, Uruguay, Paraguay and Bolivia in the membership process) and the European Free Trade Association (EFTA; Norway, Iceland, Switzerland and Liechtenstein) as a result of negotiations initiated in 2017. This agreement, which is designed more flexibly compared to the larger-scale and politically debated Mercosur-EU agreement, envisages the removal of tariffs on more than 97% of trade flows and creates a common market covering approximately 300 million people with a total Gross Domestic Product (GDP) exceeding $4.3 trillion.[1]
For the agreement to finally enter into force, it must be approved by the parliaments of the signatory countries and legal procedures must be completed. Therefore, the completion of the process may extend until the end of 2025. However, this agreement is expected to encounter less internal political resistance compared to the Mercosur-EU agreement, particularly in EFTA countries where agricultural lobbies are weaker.[2]
This agreement encompasses not only the removal of tariffs in goods trade but also multifaceted areas such as services trade, investments, intellectual property rights, public procurement, competition regulations, dispute resolution, and sustainable development. This framework, designed in accordance with the structural components of modern free trade agreements, is also compatible with EFTA’s FTA networks in Latin America and other regions.[3] From a trade policy perspective, the opportunity for Mercosur members to access high-income EFTA countries creates significant opportunities, particularly in agricultural products, industrial goods, and services exports. For example, according to 2018 data, EFTA imported €2.1 billion worth of goods from Mercosur while exporting €3.7 billion worth of goods. It is possible to foresee that the reduction of tariffs under the new FTA will lead to a marked increase in these trade volumes.[4] On the other hand, for EFTA exporters, the Mercosur market provides competitive advantage against global competitors and offers more effective integration opportunities into regional value chains.
In the context of Latin American regional policy, this development should be evaluated as part of Mercosur’s strategy to diversify its relations with actors outside its traditional trading partners China, the European Union (EU), and the United States (US). Indeed, unlike the Mercosur-EU agreement that was suspended in 2019 due to environmental concerns and sustainability debates regarding the Amazon Forests, the agreement with EFTA was completed as a result of more constructive negotiations in terms of environmental guarantees. In this context, the 13th negotiation round held in April 2025 strengthened the environmental and labor rights sections of the agreement.[5] Additionally, with Bolivia’s full membership process, Mercosur’s internal integrity is increasing, thus enabling it to present a more unified structure in agreements.
The timing of this agreement is also noteworthy. At a time when uncertainties in the global trading system, US tariff-based policies, and transatlantic trade negotiations are intensifying, the Mercosur-EFTA agreement is considered a strategic gain in geopolitical terms. From the perspective of EFTA countries, the FTAs signed consecutively with India (March 2024) and Mercosur (January 2025) reinforce EFTA’s moves within the framework of trade diversification and strategic autonomy principles.
Although the Mercosur-EFTA agreement has the potential to enter into force more rapidly compared to its EU counterpart due to encountering less political resistance, it contains some challenges in terms of environmental protection, labor rights, and legal dispute resolution mechanisms. The agreement includes provisions regarding sustainable development and the resolution of legal disputes between parties. In this respect, it presents a model consistent with the normative structure of today’s value-based trade agreements. Within Mercosur, these provisions may also cause regional tensions to be reshaped between export-oriented countries (for example, Brazil and Argentina) and other members with more protectionist tendencies (for example, Uruguay and Paraguay).
When evaluated from a regional foreign policy perspective, the agreement increases Mercosur’s competitiveness in global markets and strengthens its hand in other bilateral or multilateral trade negotiations. Indeed, Brazil is conducting negotiations with both the US and China during the same period, taking a position in favor of multilateral trade mechanisms. This strategy has significance not only economically but also in terms of diplomatic diversification. Comparatively speaking, although the Mercosur-EU agreement covers a larger population and economic volume, it has been unable to progress in the approval process for years due to political reservations, particularly on the EU side. Some countries, primarily France, Ireland, and Austria, oppose the agreement citing reasons such as environmental destruction in the Amazon, concerns that the livestock sector will be harmed, and inadequate sustainability controls.
In conclusion, the Mercosur-EFTA FTA is a strategic turning point not only economically but also in terms of regional diplomacy. The agreement presents a comprehensive example for 21st-century multilateral trade regimes by bringing together trade liberalization, strengthening institutional governance standards, and sustainable development goals. During this period when Mercosur is trying to ensure its internal integrity and aims to diversify its foreign trade relations, if the agreement is successfully implemented, it is likely to pave the way for new models in South-South and South-North cooperation. However, the agreement has not yet been approved by all signatory states’ legislative bodies, and its actual effects cannot yet be fully observed. It is anticipated that real results will become clearer in the coming years in areas such as small-scale producers, environmental controls, and services sector integration. Whether Mercosur will emerge stronger from this process depends not only on the technical content of the agreement but also on regional political will.
[1] “Mercosur, four-nation European trade bloc seal sweeping trade deal”, Reuters, https://www.reuters.com/world/americas/mercosur-efta-blocs-seal-free-trade-agreement-cnn-brasil-reports-2025-07-01/, (Date Accessed: 03.07.2025).
[2] “South America’s Mercosur, Europe’s EFTA bloc seal trade deal”, DW, https://www.dw.com/en/south-americas-mercosur-europes-efta-bloc-seal-trade-deal/a-73134998, (Date Accessed: 03.07.2025).
[3] “Trade between EFTA and Mercosur”, EFTA Secretariat, https://trade.efta.int/#/country-graph/EFTA/MERCOSUR/2024/HS2, (Date Accessed: 03.07.2025).
[4] Ibid.
[5] “Mercosur–EU Free-Trade Agreement: What’s in It and What’s Next?”, AS-COA.org, https://www.as-coa.org/articles/mercosur-eu-free-trade-agreement-whats-it-and-whats-next, (Date Accessed: 03.07.2025).
