EU, Central America reach first ever free trade deal

Central American countries and the European Union has reached agree-ment on the first ever free trade deal between the two regions, the parties announced in a joint statement Tuesday.

It said the deal between the 27-nation EU and the Central American nations of Costa Rica, El Salvador, Guatemala, Honduras, Nicaragua and Panama followed "an intensive negotiation process".

The agreement was announced during the Sixth European Union-Latin America and the Caribbean Summit taking place in the Spanish capital, Madrid.

"The EU and Central America ... have finalised the negotiations on the trade pillar of the association agreement," the statement said.

"The trade ministers of Central America and the EU express their full satisfaction with the outcome, which will result in an ambitious, comprehensive and balanced trade pillar of the association agreement."

The negotiations are to be formally concluded by EU and Central American leaders at their summit meeting today, Wednesday.

It is the first ever deal of its kind between the 27-nation bloc and Central America.

Salvadorean chief of cabinet Alexander Segovia said the EU's "flexibility" led to the deal.

"There was a show of flexibility by the European Union and with that we managed to get to an agreement," El Salvador television quoted him as saying from Madrid.

The six Central American countries have been in talks on a free trade deal with the European Union since 2007.

The deal follows agreement on Monday between the EU and the four-nation South American trading bloc Mercosur to resume talks aimed at reaching a free trade agreement, despite opposition from a number of European nations.

"We have decided to restart the talks to reach an agreement that is ambitious and balanced," Spanish Prime Minister José Luis Rodriguez Zapatero told a news conference late on Monday.

The EU and Mercosur, which is made up of Argentina, Brazil, Uruguay and Paraguay, began free trade talks in 1999 but they stalled in 2004 due to disagreement over tariffs and subsidies paid to European farmers.

Zapatero, whose country holds the rotating six-month presidency of the EU, said a free trade agreement between those two blocs would lead to an extra €5 billion (US$6.2 billion) in exports per year.

But last week 10 EU nations led by France issued a statement opposing the resumption of the free trade talks with Mercosur because "the strategic agricultural interests of the European Union are clearly at stake".

The statement was backed by Austria, Cyprus, Finland, Greece, Hungary, Ireland, Luxembourg, Poland, and Romania in addition to France.

France is the main beneficiary of the EU's Common Agricultural Policy, which pays billions of euros each year in subsidies for food production.

A free trade deal between the EU and Mercosur has been a key goal of Spain, which enjoys close ties with its former colonies in Latin America.

- AFP