EU-Mercosur trade talks progress on divisive issues, sources say

By Anthony Boadle

BRASILIA (Reuters) -European Union and South American negotiators ended two days of trade negotiations on Friday with "significant progress" on contentious issues that have been holding up the long-overdue EU-Mercosur agreement, two sources close to the talks said.

The sources said the negotiations seem to be on course for a positive conclusion before the end of the year. The meeting marked the first in-person talks since April.

"The round of negotiations went very well. There was significant progress in the areas of the environment and government procurement," said a source at the Brazilian foreign ministry, where the talks were held.

"A new round of negotiations should take place in a few weeks," the official added.

Eleven EU governments this week called for a rapid conclusion of the trade deal that has been in the works for 25 years in a letter to European Commission President Ursula von der Leyen.

"It is now urgent to secure the progress reached so far and close the negotiations," the letter seen by Reuters said. "We believe that all elements are in place to allow for a rapid conclusion of negotiations by the end of 2024," the prime ministers of Germany, Spain, Portugal, Sweden, Denmark, Finland, Croatia, Estonia, Latvia, Luxembourg and the Czech Republic wrote.

Mercosur joins Brazil, Argentina, Uruguay, Paraguay and more recently Bolivia in a market that is a sought-after destination for EU manufacturing exporters, though European farmers, especially in France, fear the competition it will bring.

The deal was concluded in 2019, but was stalled by EU demands for commitments on Amazon deforestation and climate change.

In the midst of demonstrations by French farmers in January, French President Emmanuel Macron reinforced his opposition to the deal, saying it would cause environmental damage and subject farmers to unfair competition.

The main French farmers' union, FNSEA, said on Friday it opposed the resumption of talks, saying the EU-Mercosur agreement would increase competition for producers of beef, chicken, rice, sugar and ethanol.

"European agriculture should not be sacrificed in order to conclude international trade accords. On the contrary, agriculture should be protected and considered one of the main strategic European sectors," the union said in a statement.

With the European election over, now is the time to finalize the deal, the 11 prime ministers said in their letter.

"The agreement will create a free trade area encompassing more than 700 million people, creating enormous opportunities for European businesses and workers in markets which have been relatively closed up until now," the letter said.

(Reporting by Anthony Boadle in Brasilia; additional reporting by Philip Blenkinsop in Brussels; Editing by Matthew Lewis and Leslie Adler)