Time to open up to trade, EU tells Argentina, Brazil

Sat Jan 26, 2013 3:30pm EST
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By Robin Emmott and Alexandra Ulmer

SANTIAGO (Reuters) - EU leaders told Argentina and Brazil on Saturday to open up their markets and push ahead on a free-trade deal that would be a major prize for Europe as it tries to emerge from three years of economic crisis.

Treading carefully in a region whose fortunes are markedly better than Europe's, German Chancellor Angela Merkel warned Buenos Aires and Brasilia not to revert to the kind of protectionism of the 1930s that deepened the Great Depression.

Five years after the global financial crisis and with the euro zone in its second recession since 2009, the European Union needs Latin America's buoyant economies. But it is frustrated by Brazil and Argentina's policies to protect local markets.

At a two-day summit in Santiago, Merkel led EU leaders' efforts to win a breakthrough on the long-stalled negotiations for with the South American trade bloc Mercosur that is made up of Argentina, Brazil, Paraguay, Venezuela and Uruguay.

"We need to have open markets in terms of free trade and not protectionism," Merkel told a meeting of business leaders. "History has taught us that in the '20s and '30s," she said, flanked by the pro-free trade presidents of Mexico and Chile.

Negotiations on a trade pact with the South American trade bloc Mercosur began in the 1990s and were relaunched in 2010.

They have yet to make real progress due to disputes over European farm subsidies and moves by Brazil and Argentina to shield local industry from cheaper, foreign-made imports.

In the meantime, Brussels has signed free-trade deals with a number of Latin American countries, including Mexico, Peru and Chile, revealing a split between the free-trade advocates on the Pacific side and the more closed economies, such as Brazil, Argentina and Venezuela, on the other side of the continent.   Continued...

Brazil's President Dilma Rousseff (R) shakes hands with her Argentinean counterpart Cristina Fernandez de Kirchner during a meeting in Santiago January 26, 2013 in this picture provided by the Brazil Presidency. REUTERS/Roberto Stuckert Filho/Brazil Presidency/Handout