EU-Mercosur Trade Agreement to Enhance Energy Transition and Raw Material Supply
The European Union is proceeding with the provisional application of the Mercosur trade agreement, signed in February, aimed at diversifying critical raw material sources, particularly for the energy transition. Countries like Argentina and Brazil, rich in lithium and other essential minerals, are positioned to support EU's energy needs. While macroeconomic benefits are expected to be modest in the short term, the agreement could strengthen European supply chains and reduce dependence on Russia. Concerns from European farmers regarding competition and environmental standards persist.
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The European Union is advancing the provisional application of the Mercosur trade agreement, signed in February, to enhance its energy transition by diversifying sources of critical raw materials. Argentina and Brazil are key players, with Argentina having significant lithium reserves essential for batteries, and Brazil possessing rich deposits of graphite, manganese, nickel, and rare earth elements.
The agreement aims to reduce tariffs on approximately 91% of products traded over the next 15 years. While macroeconomic benefits are expected to be modest initially, European industrial exporters, especially in machinery and chemicals, are poised to benefit. However, European farmers express concerns over competition due to differing environmental standards.
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