EU, Mercosur May Kick-Start Trade Talks At Portugal Summit

By Bernd Radowitz

Of DOW JONES NEWSWIRES

ESTORIL, Portugal -(Dow Jones)- Heads of state and government from Spain, Portugal and Latin American nations at a summit in Estoril, Portugal, will discuss issues of trade between their regions, and try to address political tensions.

While innovation and development is the official theme of the Iberoamerican summit Sunday through Tuesday, Spain and Portugal want to use the meeting to revive long-stalled talks to reach a free-trade agreement between the European Union and the Mercosur economic bloc.

"The goal of this meeting is to show that the Mercosur countries have the political will to reach an agreement with the E.U.," Milagros Hernando, director of the department for international policy and security of Spain's presidential office, said at a briefing in Madrid Friday.

The E.U. and Mercosur had already started talks for a free-trade deal in 2000, but negotiations have stalled as both economic blocs gave priority to reaching a broader agreement within the framework of the World Trade Organization's Doha round.

Mercosur has Brazil, Argentina, Uruguay and Paraguay as full members, with Venezuela in the process of becoming a fifth full member.

As the WTO Doha round has dragged on for years without a successful conclusion, and others instead have sought bilateral or bi-regional agreements, such as the U.S. with Peru or the E.U. with Central America, the link to WTO talks has been broken now, said David Fleischer, a political scientist at the Federal University of Brasilia.

Spain hopes a deal between the E.U. and Mercosur can be clinched during the time of its E.U. presidency in the first half of 2010, with the talks in Estoril serving as a kick-start.

It is unclear, however, whether much has changed in long-standing demands by both sides and impediments to a free-trade deal between the two blocs.

Brazil, Mercosur's dominant economy, "has always been interested in concessions the Europeans want to make," Fleischer said.

The E.U. wants Mercosur to lower its industrial tariffs, and barriers in the financial and services sector.

Mercosur, by contrast, urges the E.U. to lower its elevated agricultural subsidies.

Spain, Portugal, the Mercosur countries, and representatives from the European Commission Monday afternoon are slated to hold a meeting to discuss trade issues.

Spain, meanwhile, is also trying to soothe the conflict between Venezuela and Colombia that erupted when Colombia said it would be allowing U.S. troops to use Colombian military bases to help fight drug trafficking. Venezuela's President Hugo Chavez - who won't be attending the summit in Estoril - has alleged the move is an attempt by the U.S. to get its troops close to Venezuela for a possible attack aimed at stealing its vast oil riches.

Spain's King Juan Carlos later Sunday is slated to meet Colombian President Alvaro Uribe in an effort to mediate in the conflict.

The institutional crisis in Honduras is also expected to be discussed in Estoril. Polls opened earlier Sunday in the Central American country's first elections since the ouster of President Manuel Zelaya.

Brazilian President Luiz Inacio Lula da Silva has made clear his country won't recognize the outcome of the elections, while Spain has also said the institutional order in Honduras first needs to be reestablished and Zelaya put back in office.

That puts the Latin countries at odds with the U.S. government, which is expected to recognize the Honduran poll.

-By Bernd Radowitz, Dow Jones Newswires, +34-618 526 915, bernd.radowitz@dowjones.com

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(END) Dow Jones Newswires

November 29, 2009 13:48 ET (18:48 GMT)


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