When we talk about trade agreements, such as the still-uncertain one between the European Union and the Mercosur countries (South America) or the one recently signed between Brussels and India, we most often focus on trade in agri-food raw materials, "critical" minerals, or at most industrial products. Little is said about another strategic commodity for a very important sector of our economy, namely fashion and textiles: cotton. It is therefore not surprising that while the agricultural world protests against the low-cost competition of South American food, the one pushing to finally finalize the agreement with the four South American countries belonging to Mercosur (Brazil, Argentina, Paraguay, Uruguay, and soon Bolivia) is precisely the textile-clothing-fashion supply chain, which is worth 5% of the GDP and provides jobs to more than half a million Italians, as well as giving prestige to Made in Italy and contributing decisively to exports.
Brazil has become the world's third largest cotton producer, ahead of the US, but today there is an 8% tariff.
Moreover, the EU-India agreement itself would also be beneficial in this sense, as the Asian country is the second largest cotton producer in the world, possessing high-quality cotton. But currently, the most promising market for this precious fabric is Brazil has overtaken the United States and become the world's third largest producerIn the record 2024-2025 harvest, the South American country produced over 4 million tons (an 11% increase over the previous cycle), most of which was exported, nearly 3 million tons worth $4,85 billion. Furthermore, for those who still care, approximately 82% of Brazilian production is certified for sustainability and traceability, according to the national program, Algodão Brasileiro Responsável.
However, currently, buying cotton from Brazil to Europe incurs an 8% tariff, which will be gradually eliminated if the long-awaited EU-Mercosur agreement is finally ratified. This represents a huge opportunity for the Italian textile industry, especially since the sector – according to data from Confindustria Moda –It has lost around 20 billion euros in two years and is in a phase of extreme difficulty. Cotton is, in fact, a raw material that our industry is forced to import almost entirely, and it is increasingly difficult to find as well as increasingly expensive, also because crops are particularly sensitive to climate change: in April 2022, the price hit a record high of 153 cents per pound, then in the following years the value dropped to the current 63 cents, partly because in the meantime the manufacturing sector has made a virtue of necessity by innovating and focusing on synthetic fabrics, or has effectively fallen back on other materials, lowering the average quality of garments.
Mercosur is also an opportunity for exports: Brazil alone could be worth 76 million euros more
However, Italian fashion cannot afford this downgrade, nor can it continue to lose revenue. The agreement with Mercosur It would also represent a significant market, with over 260 million potential customers, of which more than 200 million in Brazil alone. The latter, in particular, has recently observed Luca Sburlati, president of Confindustria Moda, "a market that deeply loves Made in Italy, but which is currently almost inaccessible due to extremely high tariffs: between finished and semi-finished products, the tariffs range from 60% to 100%. However, these are countries with a consumer base interested in beautiful and well-made Italian products." The agreement with Mercosur would also be an opportunity to balance trade costs, given that our buyers currently pay only a 12% tariff on Brazilian finished products.
“Overall – President Sburlati added – in the textile-fashion sector, giving up Mercosur means closing off a market worth several billion euros. According to the Exporting the Dolce Vita report (2023), the Brazilian market alone offers a additional export potential for clothing and home textiles equal to 76 million euros".
