EU TO DISCUSS TRADE DEAL WITH MERCOSUR

Brussels, February 7- European Union Trade Commissioner Karel De Gucht will visit Paraguay and Uruguay in the week commencing in an attempt to advance negotiations towards a "balanced and ambitious" free trade agreement (FTA) with the Mercosur states.

De Gucht said ahead of his visit to South America that an FTA between the EU and Mercosur (Argentina, Brazil, Paraguay and Uruguay) would bring "substantial economic benefits to both sides”.

"Given the economic dynamism of Mercosur, and of Paraguay and Uruguay with their record growth in particular, I see considerable opportunities for EU exporters, investors and service providers in this region in the coming years", he said.

The EU is interested in securing a free trade deal with Mercosur because of its high growth potential and a total gross domestic product that surpasses that of countries like South Korea, Russia, and India. EU exports to Mercosur are currently on a par with India and exceed those to Canada and South Korea. EU investments in Mercosur amount to more than EUR181bn, more than all EU investments in China, India and Russia combined.

Mercosur is a relatively protected market, however. The average rate of applied tariff protection is around 13%, but protection in sectors of particular interest to EU exporters is even higher, such as in the automotive sector, where EU exporters face tariffs of 35% on vehicles.

The EU says that it wants a "comprehensive" trade agreement with Mercosur that goes beyond the respective World Trade Organization obligations of both sides to cover not just goods, but also issues such as services, investment, and government procurement.

The EU began free trade negotiations with Mercosur in 1995. These negotiations were suspended without agreement in 2004. The European Commission decided to recommence the negotiations with Mercosur in May 2010. Since then, three negotiating rounds have taken place and the next one is scheduled in March 2011 in Brussels.

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