MercoPress. South Atlantic News Agency

Chile reaches free trade agreement with Brussels

The European Commission and Chile on Friday agreed a broad political and commercial accord that was expected to lead to a liberalised trade agreement once the details were ratified by the 15 European Union governments.

The deal, which followed more than two years of intense negotiations, was agreed in principle in time for next month's EU-Latin America summit in Madrid. This was despite a series of hurdles, including fierce trade disputes between the two sides covering whiskey excise, fishing rights and agricultural protectionism.

Negotiators from both sides had privately expressed fears as recently as last week that next month's official signing in Madrid would be largely symbolic. For the EU, Friday's agreement establishes a beach-head for further bilateral and regional accords. For export-driven Chile, which is struggling against a regional tide of economic and political crisis, the deal will be an important element in lifting growth rates above the current 3 per cent. It hopes to sign a similar agreement with the US this year.

The EU in recent years has replaced Asia as Chile's most important export market, accounting for more than 25 per cent of total shipments of some $17bn in 2001.

Ricardo Lagos, Chile's president, on Friday described the accord as a ''historic day for Chile". "We will pay less for products that come from Europe and will live better as a result," he said. "But more importantly, we will export more to Europe and create more jobs for Chileans."

Meanwhile in Brussels, Pascal Lamy, EU trade commissioner, and Soledad Alvear, Chile's foreign minister, said the agreement went well beyond any World Trade Organisation commitments. It embraces a free trade agreement covering all sectors, a separate accord to encourage foreign direct investment flows in both directions and a free trade agreement in services.

But the accord is also part of a wider economic and political strategy by the Commission. The strategy is particularly supported by Spain, holder of the EU's rotating presidency.

The Commission wants to forge a long-term relationship with individual countries in Latin America as well as support regional integration being driven by Mercosur, the trading bloc comprising Argentina, Brazil, Paraguay and Uruguay, with Chile and Bolivia as associate members. The EU has been negotiating a free trade agreement with the group since 1999. The EU is now Latin America's second trading partner. Most trade is conducted with Mercosur, followed by Chile.