Unilateral Regulation Without Mirror Clauses? The Limits of the EU’s Brussels Effect in the EU–Mercosur Agreement

[Erard de Schaetzen is a Belgian lawyer, holding a Master’s degree in European law from the Université catholique de Louvain and an LL.M. in Public International Law from Utrecht University]

On January 9^th, 2026, the European Commission and the Mercosur concluded over two decades of negotiations with the signing of the Partnership Agreement (EMPA) and the Interim Trade Agreement (iTA) – the two legal pillars of the EU–Mercosur free trade agreement. Notwithstanding the Commission praising it as a “win-win,” and its promises of economic growth, employment opportunities and sustainable development for both regions, the Agreement has proved increasingly controversial – notably among European farmer unions and environmental organisations.

The Agreement eliminates 91% of tariffs on EU exports to Mercosur countries, from automotive manufacturing and chemicals to agri-food products like wine and cheese; in exchange, it liberalises 93% of Mercosur’s exports, expanding access for commodities like beef, poultry, sugar and ethanol. Critics (here, here and here) assert that the deal exposes European farmers to unfair competition arising from disparities in regulatory requirements – especially in sanitary and phytosanitary (SPS) protection, consumer safety, labour rights and environmental standards. Some environmentalist organisations further warn that the Agreement may exacerbate Amazonian deforestation and, with it, climate change.

Amidst these controversies lies the absence of so-called “mirror clauses”: provisions conditioning preferential market access for imported goods on compliance, in the country of origin, with health and environmental standards equivalent to those applicable within the Union. In August 2023, the Commission rejected the idea, arguing that such clauses risked jeopardizing an already fragile compromise and that bilateral trade conditionality was not the most effective means of safeguarding EU standards. Instead, it favoured a “horizontal” regulatory approach grounded in unilateral EU legislation, including instruments addressing antimicrobial resistance, neonicotinoids and deforestation.

This preference for unilateral action raises questions. How can the EU, whose regulatory powers are ostensibly confined to its own territory, influence production practices within Mercosur countries? And even if it can, is this strategy preferable to jointly negotiated solutions?

This post addresses both questions in three steps. It first examines whether international law permits unilateral regulatory influence of this kind. It then analyses the structural limitations of the EU’s traditional legislative techniques in the agri-food sector. Finally, it considers more recent EU initiatives targeting global value chains, and traces how political backlash has curtailed their ambitions.

Jurisdiction, Territoriality and the Possibility of Unilateral Regulatory Influence

Under general international law, States may exercise jurisdiction – the authority to enact rules governing conduct – with a strong presumption in favour of territoriality.

The Lotus doctrine (PCIJ, 1927) (in)famously held that States may prescribe rules extraterritorially absent a specific prohibitive norm, provided enforcement remains territorially confined. That permissive stance is now widely regarded as obsolete, as extraterritorial jurisdiction appears antinomic within a Westphalian international order essentially built on territorial sovereignty. The upshot, for present purposes, is that directly regulating production practices within Mercosur territory would expose the EU to significant legal and diplomatic friction.

Notwithstanding international law’s prohibitive tendencies toward extraterritorial jurisdiction, the Union has developed alternative means of influencing actors operating overseas, colloquially known as the “Brussels Effect.”

The term, coined by Prof. Anu Bradford, describes the EU’s capacity to externalise its regulatory standards beyond its borders through market-access conditionality – that is, by making compliance with EU rules a condition for accessing the EU market – rather than through any formal assertion of extraterritorial authority. The mechanism is most famously illustrated by the EU’s General Data Protection Regulation (GDPR), which prompted multinational firms to extend its standards globally and induced several third countries (including Brazil and the U.S. State of California) to adopt similar legislation. Bradford identifies a constellation of conditions underpinning this dynamic, like the size and attractiveness of the market (driven, inter alia, by consumers’ wealth and purchasing power); the stringency and credibility of its regulatory framework; and the substantive nature of the rules concerned (especially areas such as consumer protection and labour rights).

Notably, the Brussels Effect remains formally grounded in territorial jurisdiction: compliance is verified at the border, upon entry into the EU market.

In the context of the EU–Mercosur Agreement, this confirms that unilateral EU legislation can, in principle, influence production practices in Mercosur States without violating international law. Whether existing or emerging EU regulatory techniques are capable of effectively achieving that objective, is another question.

Traditional EU Regulatory Techniques: Market-Access Conditionality and its Limits

Does existing EU legislation in the agri-food sector already leverage market-access conditionality to shape production in Mercosur countries? Trade between the two blocs takes place irrespective of the Agreement, and access to the EU market is already conditioned on an extensive body of SPS standards. Yet the Union’s traditional techniques, though compatible with territorial jurisdiction, are structurally limited in reaching upstream production abroad.

EU SPS legislation relies on two techniques. The Union may prescribe characteristics for end-products, conditioning market access on compliance with harmonised standards (product-oriented rules); or it may regulate the means and methods of production by restricting certain inputs or techniques (process-oriented rules). The distinction is decisive for EU law’s geographical reach: product-oriented rules apply irrespective of the place of production, whereas process-oriented rules typically target practices on European soil.

This product/process divide is, in trade-law terms, the debate over “processes and production methods.” In the unadopted Tuna/Dolphin panel reports (1991), the GATT treated measures distinguishing goods by how they were produced, rather than by their physical characteristics, as falling outside the national-treatment discipline of Article III and caught instead by Article XI’s prohibition on quantitative restrictions, to be justified, if at all, under the Article XX exceptions. In US–Shrimp, the WTO Appellate Body read those exceptions more generously, accepting that conditioning market access on exporters’ production methods is not a priori impermissible, while striking the measure down under the Article XX chapeau as “unjustifiable discrimination” for its unilateral, insufficiently negotiated design; US–Tuna II and EC–Seal Products have since refined how such measures are assessed across the TBT Agreement and GATT. The distinction’s status is itself contested: Howse and Regan argued that origin-neutral process measures belong within Article III and that the product/process line is an “illusory basis” for disciplining them. The Union’s reliance on it is therefore probably less a trade-law constraint than a regulatory choice.

In practice, product-oriented rules target value-chain outputs – finished goods marketed in the EU, imported or not: Regulation (EC) No 178/2002 bars market-access for food and feed deemed “unsafe”; Regulation (EC) No 396/2005 sets maximum pesticide residue levels regardless of origin; etc. What matters is not how or where a product was made but whether the final good meets EU standards on entry. EU and non-EU producers are formally treated equally, since conditionality bears only on the product’s characteristics. This remains firmly territorial, while still generating a limited “Brussels Effect” insofar as exporters adapt to meet EU standards.

By contrast, process-oriented rules concentrate on value-chain inputs – the means and methods of production. They do not generally operate through market-access conditionality and so cannot reach imported goods. They may govern production tools, as Regulation (EC) No 1107/2009 does for the approval of active substances and plant-protection products, or production techniques, as Directive 2009/128/EC does for the sustainable use of pesticides. Such measures bind EU farmers at every stage of production, yet their scope is essentially internal: producers in non-EU countries are not bound, despite their goods eventually competing on the same market.

This coexistence exposes the central limitation of the traditional approach. Product-oriented rules let the Union regulate imports consistently with territorial jurisdiction but cannot capture upstream practices. Compliance with product-oriented standards does not necessarily reflect alignment with process-oriented ones: substances prohibited within the Union may degrade, metabolise, or otherwise leave no detectable trace in the final product. Goods may thus satisfy EU residue thresholds while having been produced using methods unlawful in the Union. The “Brussels Effect” then operates only superficially, securing conformity at the level of outputs while failing to regulate inputs across foreign production chains – which may explain why recent initiatives have sought to extend regulatory control to global value chains.

Beyond Traditional Techniques: Value-Chain Regulation and Political Backlash

To influence production abroad, the Union has in recent years moved beyond end-product control and developed more ambitious instruments targeting global value chains. The deforestation regulation ((EU) 2023/1115) and the CSDDD (2024/1760) notably embodied this shift. By imposing due diligence obligations on EU importers and transnational operators – requiring them to trace products to their origin and verify compliance with environmental or human rights standards – these instruments aimed to embed production requirements within the logic of market-access. In doing so, they reached upstream conduct abroad, expanding further on a Brussels Effect capable of bridging the gap left by classical SPS rules.

This shift has, however, encountered severe political resistance. Under pressure from Member States, industry and trading partners, key elements have been delayed, weakened or removed. The deforestation regulation has been repeatedly postponed and watered down, with critics warning that exemptions, reduced traceability and “low-risk” classifications create systemic loopholes; its original architect, Hugo Schally, has said it was virtually “hollowed out” by the removal of obligations on downstream traders to verify the origin of commodities such as soy, wood, beef and cocoa. The CSDDD shows the same pattern: removing its civil-liability mechanism (former Art. 29) has stripped affected individuals of any faculty to invoke EU law against overseas corporate misconduct.

These developments reflect a broader reorientation of EU regulatory priorities. Calls for “simplification,” “competitiveness” and “regulatory burden reduction” have been mobilised to justify scaling back sustainability legislation, reinforced by a shifting political balance within EU institutions and by external pressure from trading partners who have denounced such measures as disguised trade barriers. Far from being an automatic or structural feature of EU market power, regulatory externalisation depends on sustained political support. Where such support weakens, a “reverse Brussels Effect” may emerge, whereby coordinated opposition from economic and political actors erodes the Union’s regulatory strength through a narrative portraying the EU as an overregulating bureaucracy whose rules stifle “innovation” and “competitiveness” in an increasingly contested world economic order.

Conclusion

The Commission’s rejection of mirror clauses rests on the assumption that the EU can project its standards beyond its borders through its own instruments. That assumption is, in principle, well-founded: international law does not preclude the Union from leveraging territorial jurisdiction to generate extraterritorial effects, and the Brussels Effect offers a viable mechanism for influencing foreign production without legislating extraterritorially.

However, this strategy’s effectiveness depends on the design and political sustainability of EU legislation. Traditional market-access conditionality, focused on end-products, cannot align global value chains with EU production standards. Besides, the more ambitious due-diligence instruments that might close the gap are precisely those that have drawn the strongest backlash, leading to their dilution. The limits of unilateral action thus appear primarily political rather than legal.

This also contradicts the Commission’s argument, which frames mirror clauses and unilateral instruments as opposite alternatives instead of complements. A negotiated clause binds the counterparty and, as a treaty commitment, is harder to unwind than ordinary legislation; it would entrench rather than displace the Union’s horizontal instruments, anchoring at the bilateral level the standards that EU legislation have proved unable to secure domestically. The Commission’s logic thus led to rejecting the negotiated route while eroding the unilateral one. This tension is ultimately reflected in the Agreement itself. Alongside the absence of mirror clauses, it contains a “rebalancing mechanism” (Art. 21.4(b) iTA) allowing a party to challenge, before an arbitration panel, any measure applied by another party that “nullifies or substantially impairs” an expected benefit, even where said measure breaches no provision of the Agreement. While it does not blanketly bar unilateral lawmaking – Art. 21.14(10)(c) iTA expressly denies the panel any power to order a change in domestic law – it still exposes future EU standards to compensation claims and the attendant regulatory-capture pressure, a chilling effect that operates politically rather than as a legal prohibition. That, eventually, is where the limits of unilateral EU action lie: not in what international law forbids, but in what the Union’s political economy will sustain.