By Philip Clarke, Europe Editor

BRUSSELS is to press ahead with plans for a free trade area with five South American countries – which could lead to much stiffer competition for EU farmers and manufacturers alike.

EU Commissioners meeting earlier today (Wednesday) approved a proposal for negotiations to commence with Chile and the four Mercosur nations of Argentina, Brazil, Uruguay and Paraguay.

A free trade area could allow a wide range of South American food and industrial products into the European Union without being subject to import duties.

The proposal has to be ratified unanimously by EU foreign affairs ministers. But several EU farm ministers remain opposed to free trade with South America.

French and German farm ministers attacked the proposal at an EU Farm Council meeting on Monday, saying it would inflict serious damage on European agriculture.

They particularly feared the effects on farmers incomes and expressed concern that embarking on free trade talks in advance of next years WTO round could undermine the EUs position.

Other member states, notably Spain and Ireland, called for a more detailed economic analysis before a decision is taken.

EU farm commissioner Franz Fischler has also opposed the plan. A recent study by his staff calculated that a free trade zone would increase the cost of the EUs Common Agriculture Policy by 25% if farmers were compensated for price falls.

Suggestions that certain farm products could be excluded from any deal have been played down as WTO rules require that at least 90% of all trade is covered by any free trade agreement.

UK farm minister Jack Cunningham believes establishing a free trade area with South America could be beneficial. But with the EUs internal Agenda 2000 negotiations already on the table and WTO talks looming on the horizon, a free trade deal is not a priority.