Time is Money: The Cost of Delaying the Ratification of the EU-Mercosur Trade Agreement

Hi! Today is 26 January, and here is your EU news summary for the week. Feel free to share this newsletter with friends and colleagues, and follow us on LinkedIn.

This week’s briefing is brought to you by Oscar Guinea. Oscar is a director at the European Centre for International Political Economy (ECIPE). He has been an economic advisor to the Scottish Government and a seconded national expert at the European Commission. He is from Spain. You can find his papers for ECIPE here.

The European Parliament delivered a stunning blow to the long-delayed EU-Mercosur trade agreement. By a razor-thin margin, MEPs voted to refer the deal to the European Court of Justice for a legal opinion, effectively pressing the pause button on the ratification of an agreement that has been decades in the making.

While the European Commission could still potentially go forward and apply the trade agreement provisionally, the Parliament’s move to wait for the ECJ’s opinion could freeze the final ratification of the agreement for up to two years. But what is the real cost of this hesitation? A recent study by the European Center on International Political Economy (ECIPE) did the math.

What Is The Real Cost of the Delay?

The delay is not a cost-free option. The trade deal was initially scheduled to be implemented in 2021. Between 2021 and 2025 (i.e., a five-year delay from 2021), the EU has already foregone an estimated €183 billion in exports and a staggering €291 billion in gross domestic product. These figures represent the net present value of economic activity that would have materialised had the agreement been implemented as originally scheduled in 2021.

This isn’t just about lost sales; it represents a significant blow to the EU’s overall economic health, equivalent to about 1.6 per cent of its total economic output. To put that in perspective, it’s roughly two years of the continent’s recent economic growth. If the deadlock continues until 2028, the total loss could swell to nearly €447 billion in GDP.

In other words, the European Parliament vote could cost the EU economy €156 billion.

Who Foots the Bill?

If the deal does not go through in 2026 (i.e., a six-year delay from 2021), Germany — Europe’s economic powerhouse — will have borne the brunt of the losses, with a €71 billion hit to its economy at a time when it was already contracting. But also France, which MEPs were in favour of delaying the ratification of the agreement, will have missed out on €38 billion in exports, while Italy will have lost €29 billion. The impact is not confined to the larger economies. Smaller, export-oriented nations like Portugal, Hungary, and Belgium will have also foregone gains equivalent to more than one per cent due of the national GDP as a result of the delay.

The costs of delay fall mainly on sectors where the EU is particularly competitive. Transport equipment is hit hardest, with an export gap of €94 billion over the six‑year delay. Machinery and equipment account for a further €23.8 billion in forgone exports, followed by chemicals (€21.2 billion), iron and steel and agri‑food (each €12.6 billion), and pharmaceuticals (€11.5 billion).

Are There Greater Strategic Risks?

Beyond the immediate economic losses, Europe’s hesitation carries significant strategic risks. As European firms face uncertainty, they are redirecting their investments and supply chains away from Mercosur, effectively surrendering market share to competitors like China.

This erodes Europe’s influence in a vital region. Furthermore, the delay undermines the EU’s push for greater economic resilience. By failing to ratify the agreement, the EU is denying itself preferential access to Mercosur, prolonging its dependence on Chinese supply chains of critical raw materials and on US consumer demand. The European Commission calculated that thanks to the agreement, the EU could cushion the blow of higher US tariffs by redirecting EU exports towards Mercosur.

What’s Next?

The evidence is clear: the opportunity cost of postponing the EU-Mercosur agreement is immense and growing daily. The political narrative that portrays this delay as a pause is a damaging fiction. For European policymakers, the choice is stark. Implementing the agreement is not merely a matter of trade policy; it is an essential step towards securing Europe’s economic growth, enhancing its global competitiveness, and strengthening its economic resilience in an increasingly uncertain world.

NO CONFIDENCE VOTE • On 22 January, the European Parliament rejected a motion of censure against the European Commission, with 165 votes in favour, 390 against and 10 abstentions.

Tabled by the Patriots for Europe group, the motion targeted the EU‑Mercosur trade agreement. The vote followed a debate with Commission Vice‑President Maroš Šefčovič on 19 January.

MORE ON MERCOSUR • On 21 January, the European Parliament voted—by a narrow margin (334 votes in favor, 324 against, and 11 abstentions)—to refer the EU-Mercosur agreement to the Court of Justice of the European Union (CJEU) for an advisory opinion.

The purpose of the referral is to assess the agreement’s compatibility with the EU Treaties, particularly regarding the procedure followed and the Commission’s compliance with the Council’s negotiating directives. The request covers both components of the deal: the interim trade agreement (ITA) and the broader EU-Mercosur partnership agreement (EMPA).

The Commission cannot unilaterally decide on the provisional application of the agreement; this requires a qualified majority decision in the Council. EU leaders backed provisional application at the informal European Council summit on 22 January.

The Commission is ready to act on the member states’ instructions, so provisional application could start as early as March, once the first Mercosur country ratifies the deal (most likely Paraguay).

DAVOS • Ursula von der Leyen used her 2026 Davos speech on 20 January to argue that today’s geopolitical shocks must drive a permanent push for European independence in trade, energy, capital markets and security.

She highlighted the EU‑Mercosur agreement (the day before the Parliament’s vote) and ongoing talks with India (the “mother of all deals”) and others as proof of Europe’s strategy to de‑risk and diversify through open, sustainable trade.

At home, she announced plans for a “28th regime” (EU Inc.) to let companies operate under a single EU‑wide corporate framework, alongside deeper capital markets and an Affordable Energy Action Plan to deliver cheaper, homegrown energy.

She stressed the link between economic strength and defence, citing a surge in European defence spending and support for Ukraine, including a large EU loan and the decision to immobilise Russian assets. She closed by framing Arctic and Greenland security as a test of EU‑US solidarity and Europe’s emerging security strategy.

EU INC • Speaking in Davos on 20 January,Ursula von der Leyen pitched the 28th regime as a new, optional EU‑wide company form, branded “EU Inc”, built on one single and simple set of rules that would apply across all Member States.

“Ultimately, we need a system where companies can do business and raise financing seamlessly across Europe – just as easily as in uniform markets like the US or China. If we get this right – and if we move fast enough – this will not only help EU companies grow. But it will attract investment from across the world,” she said.

The Commission is expected to table its formal proposal in the first quarter of 2026, to be followed by the ordinary legislative procedure in Parliament and Council.

The recent Noyer‑Kukies report on financing innovation in Europe underscores the urgency of deploying the 28th regime as a key tool to reduce single-market fragmentation and remove legal barriers to scaling startups and scaleups across the EU.

• Giuseppe Spatafora of the EUISS—the EU’s own foreign affairs think tank—and Veronica Anghel of the Robert Schuman Centre for Advanced Studies at the EUI have conducted the 2026 edition of the Global Risks to the EU expert survey, which assesses the major risks facing the European Union.
• In another good read from the ECIPE, Bruno Capuzzi contends that many common criticisms of the EU-Mercosur agreement, such as that it is outdated or will flood the EU with cheap agricultural imports, are misleading.