EU pushes Mercosur Trade Pact as raw-materials ethics loom large

London, UK – As the EU accelerates its plan to sign its long-delayed trade agreement with South American economic bloc Mercosur, the pact’s role in securing raw materials is drawing criticism.

While EU officials present the deal as a cornerstone of supply-chain resilience under the forthcoming Critical Raw Materials (CRM) Act, analysts warn that without stronger safeguards, the pact could exacerbate ethical and environmental risks across partner countries.

Brussels frames the agreement as a strategic tool to enhance Europe’s access to raw materials, essential for batteries, electronics, and green infrastructure. It claims the region is not self-sufficient in these critical resources, for which it must rely on imports.

If enacted, the agreement would lower EU import tariffs on raw materials, reduce tariff escalation barriers, and ease rules for European firms to invest in refining and processing minerals locally. EU firms would gain rights of establishment in Mercosur states, facilitating investment.

Strategically, Brussels argues that this dual approach would secure material inflows, encourage value-added industrial development in South America, and align trade with its green transition goals.

EU Reports spoke to Mathilde Dupré, Co-Director at the Institut Veblen for Economic Reforms and Audrey Changoe, Trade and Investment Policy Coordinator at Climate Action Network Europe, to explore the agreement’s hidden implications for both Europe and South American partners.

A warning from Africa: conflict, governance, and human rights

While Mercosur countries like Brazil and Argentina hold significant raw material endowments, many of the most geopolitically-sensitive minerals- including cobalt, rare earths, and tantalum- originate from high-risk zones, such as the Democratic Republic of Congo (DRC).

That larger global challenge is already unfolding under the EU’s raw-material diplomacy, which serves as a cautionary tale.

In February 2025, DRC President Félix Tshisekedi proposed offering strategic mineral access to the EU and the U.S. in exchange for support in stabilizing conflict zones. The African country remains the world’s top cobalt producer, although its mining industry is frequently linked to environmental destruction and severe human rights abuses.

The EU has funded initiatives such as Cobalt for Development and Panafgeo+ to improve artisanal mining conditions and modernize geological data. Amnesty International, however, has noted that such programs risk legitimizing extraction regimes without addressing power imbalances or ensuring real accountability.

Similar controversies have arisen in Rwanda, where minerals exported to Europe have reportedly originated from conflict zones in eastern DRC, despite EU efforts to establish “sustainable mineral value chains.”

In fact, Dupré argued that the EU-Mercosur framework would exacerbate existing deforestation and pesticide footprints associated with EU consumption, while also encouraging the export of banned substances and the use of single-use plastics.

“The rebalancing mechanism acts as a shield against Green Deal regulations,” she told EU Reports.

“Key measures such as the deforestation-free regulation, CBAM [Carbon Border Adjustment Mechanism], or the Forced Labour Regulation could all be challenged before they’re even implemented,” Dupré further stressed.

“A deal misaligned with EU values”

The European Green Deal, launched in 2019, aims to make the EU the world’s first climate-neutral continent by 2050, with a 2030 emissions-reduction target of at least 55%. It has delivered major policies, including the Climate Law, the Fit for 55 package, and the EU taxonomy for sustainable finance.

Yet, the latest Trade & Sustainable Development (TSD) provisions weaken oversight and regulatory autonomy, Dupré warned.

“They oblige the EU to ‘take full account’ of information from Mercosur authorities and recognise their certification systems. In countries with high corruption, this undermines the independence of EU checks.”

She also calls its environmental commitments “illusory,” noting that they merely require countries to apply existing national laws- many of which still permit large-scale ecosystem conversion.

“Instead of halting deforestation, the clause only commits countries to stabilize or increase forest cover from 2030 onwards. It’s a promise delayed, not a safeguard.”

Changoe echoed Dupré’s concerns, highlighting increased trade in deforestation-linked commodities and the export of pesticides currently banned in Europe. Her main worry is the rebalancing mechanism, which allows either party to challenge new environmental laws affecting trade, risking “regulatory chill,” where governments weaken or delay climate action to avoid disputes.

Weak transparency around CRM projects and limited civil-society participation heighten the risks, according to the Changoe.

“Many concessions go to companies with poor human-rights records. The deal even restricts Argentina and Brazil’s ability to manage exports during economic crises, locking them into a neocolonial model.”

A briefing by the European Parliamentary Research Service notes that despite Latin America’s vast raw-material reserves, value-added processing largely takes place outside the region.

Governance problems, including opaque licensing, hinder sustainable outcomes. Civil-society groups similarly warn that the selection of “strategic projects” under the CRM Act often bypasses community consultation and lacks transparent criteria.

“The CRM Act aims to secure supply for European industry, but gives too little attention to the rights of communities at extraction sites. With the weakening of the EU’s Corporate Sustainability Due Diligence Directive, these risks grow,” Changoe said.

Green rhetoric, yet extractive reality

Beyond environmental risks, the EU-Mercosur pact raises serious democratic and social concerns. CRM projects, already associated with weak transparency in several Latin American contexts, would gain momentum without adequate safeguards in place.

Changoe pointed to recent EU policy shifts that weaken corporate accountability as responsible for these changes. The dilution of the Corporate Sustainability Due Diligence Directive (CSDDD), for one, leaves multinational firms with minimal binding obligations at a critical moment.

“The CSDDD could have held companies responsible for human rights and environmental abuses across their supply chains. But in its current form, it fails to guarantee real corporate accountability, especially in contexts like Mercosur, where enforcement capacity is already weak,” she argued.

Dupré backed these concerns, highlighting a structural imbalance within the pact: its commercial provisions are legally binding, while environmental and social commitments are not.

“This asymmetry gives companies powerful tools to challenge public-interest regulations, while governments and communities have few mechanisms to contest harmful investment practices,” she explained.

The co-director added that sustainability clauses rely heavily on domestic laws from Mercosur countries, which are often insufficient to prevent ecosystem loss, protect Indigenous rights, and lack clear monitoring or sanctions.

“Without binding obligations, voluntary commitments simply legitimize business as usual,” Dupré warned.

For frontline communities, the stakes are immediate.

“Women leaders from the largest Indigenous networks [The Articulation of Indigenous Peoples of Brazil] traveled to Europe to warn that this agreement threatens their lands and livelihoods. That tells you everything about its real impact,” Changoe noted.

Together, these factors risk entrenching extractive dependencies rather than fostering equitable, sustainable development. Weak safeguards and corporate-friendly mechanisms leave vulnerable communities with few avenues for redress.

Outlook: possibility or paradox?

In its current form, the EU-Mercosur pact remains misaligned with the EU’s environmental and ethical commitments. Dupré and Changoe argued that without binding sustainability standards and robust accountability, the deal risks undermining the Green Deal and human rights protections across supply chains.

Looking ahead, Changoe stressed that legal scrutiny may now be indispensable:

“Members of the European Parliament are considering asking the Court of Justice to review the deal’s compatibility with EU treaties. If Europe truly believes in the Green Deal, it must prove it through its trade policy.”

Her warning reflects a broader credibility test for the EU: climate leadership cannot rest on domestic ambition alone, but must also shape the Union’s external relationships.

For Dupré, the agreement’s shortcomings reveal a deeper contradiction between rhetoric and practice:

“We cannot claim climate leadership while outsourcing environmental harm. If trade policy continues to reward extractive models, it will systematically undermine the Green Deal from the outside.”

Unless trade instruments are aligned with the EU’s sustainability commitments, they risk becoming tools that erode rather than reinforce ecological transition, she said.

Yet, both experts acknowledge that an alternative path remains possible. If implemented with rigor, the EU–Mercosur pact could complement the objectives of the Critical Raw Materials Act by supporting more diversified and truly sustainable supply chains.

This, however, would require mandatory due diligence implementation, robust enforcement, civil-society participation, deforestation-free guarantees, and the removal of mechanisms that enable a “regulatory chill.”

Only then could the agreement contribute to more equitable development in Mercosur countries, rather than entrenching neo-extractivist dependencies.

If EU negotiators fail to recognise these flaws, the pact lawmakers champion today may become tomorrow’s reputational liability: a reminder that supply security achieved at the expense of justice is not a climate strategy but a political paradox.

Featured image: Ricardo Stuckert via Brazilian Center for International Relations