EU trade ministers agreed on Friday to approve a free trade pact with Colombia and Peru that could boost European car and chemical exports and lift food and mineral exports from the South American countries.
The EU, which is pursuing a number of bilateral agreements to boost trade, has said the agreement could be worth half a billion euros in duties saved and may boost Colombia and Peru's economies by close to 1%GDP.
This made the agreement important in the current economic situation, said Danish trade minister Pia Olsen Dyhr, who chaired a meeting of EU trade ministers.
Peru's trade minister, Jose Luis Silva anticipated the agreement would encourage European firms to invest in his country and would mean farm workers there could go onto formal payrolls and eventually receive pensions.
It's an opportunity for the poor people in agricultural sectors, he said.
Peru has been one of South America's fastest growing economies, expanding 8.8% in 2010 and 6.9% last year. Much of that growth has been driven by exports, thanks to increased production and higher world prices for commodities.
The text of an agreement must still be finalised and adopted before the free trade deal can take effect. EU officials said provisional application of the agreement could happen as early as September if the European Parliament gives its assent
The agreement, initiated in March 2011, sets out to eliminate high tariffs, tackle technical barriers to trade, liberalise services markets, protect EU geographical indications (brand names associated with a particular place) and open up public procurement markets, the European Council, which represents member governments, said in a statement.
It includes commitments on the enforcement of labour and environmental standards,” it said.
Peru and Colombia currently benefit from an arrangement under which the EU imposes low or zero tariffs on imports from the countries, but that is due to expire in 2013.
The EU exported goods worth 2.3 billion Euros to Peru and imported 5.1 billion Euros in 2010, making EU trade a little more than 6% of Peru's total. EU exports to Colombia totalled 3.9 billion Euros in 2010, while imports came to 4.7 billion.