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Europe warms up to Mercosur, but has terms

Oct. 19, 2011 at 5:33 PM   |   Comments

MONTEVIDEO, Uruguay, Oct. 19 (UPI) -- Europe is warming up to Latin American trade pact Mercosur in its bid to tie a free trade knot with EU partners but European negotiators want a deal that will reflect European interests in a time of pressing economic need.

Through years of inconclusive negotiations, Europeans obstructed moves toward any realistic progress in an EU-Mercosur deal for fear that unrestricted trade would flood European markets with competitive -- if not crushingly cheap -- agricultural produce and raw materials from Latin America.

Until recently several frontline EU states including France, Austria, Germany and Italy, saw it fit to back agricultural lobby groups set against any deal with Mercosur but successive economic setbacks in the EU over the eurozone crisis forced a change of mind.

Now the Europeans can't wait to get into Mercosur, which, unlike the EU, is an amorphous but huge trade zone comprising 267 million people and a gross domestic product of about $2.9 trillion.

Mercosur includes Argentina, Brazil Paraguay, Uruguay and Venezuela as full members, Bolivia, Chile, Colombia, Ecuador and Peru as associate members and Mexico as an observer.

The prospect of gaining entry into such a huge market is music to the ears of cash-starved and increasingly worried European exporters, harried by a procession of eurozone crises that seems unlikely to fade away anytime soon.

With sovereign bailouts and stimulus subsidies bleeding European treasuries, the EU needs new customers and new sources of revenue. The Mercosur region beckons as a light at the end of a tunnel.

Mercosur members think differently, though. For Mercosur members, even hard-up eurozone is a lucrative hunting ground for new export markets and Latin American members are psyched up for a period of relatively free -- if not entirely free -- trade with Europe to start soon.

German Chancellor Angela Merkel raised hopes after she met with Uruguayan President Jose Mujica in German capital Berlin in the run-up to the Group of 20 summit in November in Cannes, France.

Merkel told Mujica the EU has a strategic interest in expanding trade with Latin America and promised to "do everything on the sidelines of G20 summit" to take the negotiations forward.

A trade deal would be beneficial for the EU, said Merkel, who hopes to continue talks on a possible free trade agreement at scheduled G20 talks with Brazil and Argentina.

Mujica said Mercosur sought to diversity its trade, increasingly dependent on the Asian economies, and to find markets for its member countries' manufactured goods.

Mercosur's Asian trade partners, in contrast, are mainly interested in Latin American raw materials, Mujica said.

© 2011 United Press International, Inc. All Rights Reserved. Any reproduction, republication, redistribution and/or modification of any UPI content is expressly prohibited without UPI's prior written consent.
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