Mercosur-European Union Agreement: The Rescue of Multilateral Diplomacy

Aloizio Mercadante, president Brazilian Development Bank (BNDES)

The world is undergoing a historic period of profound economic, commercial, technological, climatic, and geopolitical transformations. It faces armed conflicts in Europe (between Russia and Ukraine) and the Middle East (Lebanon, Gaza, Syria), escalating tensions in Asia (Taiwan and the South China Sea), and decoupling among major powers, with unprecedented economic rivalry since the post-war era, putting trade rules and multilateral mechanisms into question.

Developed countries are increasingly adopting aggressive protectionist policies, based on massive subsidies across various industrial sectors and heightened tariff and non-tariff barriers. This approach has fueled a global protectionist spiral and reduced incentives for other countries to adhere to established international trade rules.

In the technological arena, the world is experiencing a revolution driven by Artificial Intelligence, which promises to transform production systems, labor, and global competitiveness. Regarding the climate crisis, we are witnessing increasingly extreme and frequent events that demand a new generational stance to address these challenges.

While the arrival of President Trump to the U.S. government may deepen many of these trends, it also opens a window of opportunity. Brazil, led by President Lula, is well-positioned to drive several of these transformational processes.

The most recent example of synergy between opportunity and historical leadership is the newly finalized agreement between Mercosur and the European Union, the world's largest trade and investment partnership, involving more than 718 million people and a combined GDP of $22 trillion. More than just a trade agreement, this initiative sends an important signal toward a more open and inclusive world, with fewer walls and barriers.

As with any complex agreement involving multiple countries and sectors, it faces challenges for approval. It is not perfect and does not uniformly benefit all stakeholders. On the European side, the agreement still requires internal ratification by member states. There are powerful interests and significant resistance from a few privileged sectors benefiting from substantial subsidies. Under the current structure, a few countries can block the agreement if at least four of them, representing 35% of the population, oppose it.

Despite internal challenges within European mechanisms and some necessary compensatory adjustments, the agreement is robust, endorsed by the President of the European Commission, and supported by an overwhelming majority of member countries. When implemented, it will create a free trade zone encompassing more than 25% of global GDP.

The Mercosur-European Union agreement, alongside the G-20 meeting in Rio de Janeiro—which resulted in an unprecedented global effort to combat hunger—and the COP 30 in Belém, at the heart of the Amazon, the world's largest biodiversity reserve, represents the construction of a world that does not close in on itself, erect walls, or create divisions among nations. The agreement demonstrates that bipolarity between the United States and China is not inevitable, that the growing protectionist spiral is reversible, and that common causes like combating hunger and environmental catastrophe are shared struggles.

Under the leadership of President Lula, Brazil and BNDES are committed to a more pluralistic, open, supportive, green, and inclusive world. And now, more than ever, the world needs Brazil.