24 July 1998

Link with Latin America nearer

By Philip Clarke

BRUSSELS is to press ahead with plans for a free trade area with five South American countries (the so-called Mercosur group), despite strong opposition from several EU farm ministers.

Commissioners, meeting on Wednesday (July 22), approved a proposal for negotiations to commence, though this now has to be ratified unanimously by foreign affairs ministers.

Under such an agreement, a wide range of food and industrial products could be allowed into EU markets without having to pay import duties, leading to much stiffer competition for farmers and manufacturers alike.

But the commission also noted that the Mercosur economy is one of the fastest growing in the world, with potential benefits for EU exporters. In 1996, for example, the EU enjoyed a £2.1bn trade surplus with the area.

French and German farm ministers attacked the plan at the farm council on Monday (July 20), saying it would inflict serious damage on EU agriculture. They particularly fear the effects on farmers incomes, while embarking on free trade talks with South America in advance of next years WTO round could also 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 concluded that the cost of the CAP would increase by 25% (£9bn) if farmers were to be compensated for price falls.

UK farm minister Jack Cunningham believes establishing a free trade area with South America could be beneficial, but with Agenda 2000 on the table and WTO talks due next year a deal with Mercosur is not a top priority.

But shadow farm minister Michael Jack warned against complacency. "The prospect of cheap South American beef flooding our market is a definite cause for concern," he said. Farmers should not become unwitting casualties of the proposed agreement. &#42