MercoPress. South Atlantic News Agency

Mercosur and EU still wide apart.

The European Union and Mercosur were wide apart yesterday in negotiations to form the world's biggest free trade area despite a new EU offer to settle their differences, diplomats said.

The European Commission, the EU's executive, sent a trade liberalization offer to Mercosur, saying it matched proposals made last week by the Latin American trade bloc, which an EU official had branded as "timid, minimalist and insufficient."

"The gap we have is still very big and the more time passes the more difficult the talks are," an EU diplomat told Reuters, asking not to be named.

But the Commission's spokeswoman for trade, Arancha Gonzalez, extended an olive branch to the four-nation Mercosur, saying the EU could improve its offer, but only if Mercosur made improved proposals offer in turn. "It can be improved on our side, but we would need an improvement on the other side," said Gonzalez.

The Commission said in a statement it offered to gradually eliminate nearly all tariffs on industrial goods, open up services and public procurement markets as well as to substantially reduce barriers in farm imports.

"This offer matches the approach and the level of ambition in the offer which the Mercosur sent to the EU," it said."The Mercosur offer was poor, disastrous, and the offer we make will be equally minimalist," said one EU trade diplomat before the Commission made its offer, adding that the Oct. 31 deadline to reach a deal was probably unrealistic.

Commission's offer.

The Commission, which negotiates trade matters on behalf of the 25-nation EU, said its offer envisaged eliminating 65 percent of tariffs on industrial goods upon the entry into force of a trade agreement.

The remaining barriers to industrial goods trade would be scrapped gradually over 10 years.

On the more sensitive agricultural trade, the Commission said it planned to keep import quotas "on a small number of sensitive products". It did not name the products, but trade officials had said they included sugar and beef.

The EU executive added it did not want to negotiate with Mercosur on reducing its farm subsidies, saying the issue was subject to talks at the World Trade Organization.

A free-trade pact could give a huge boost to trade between the EU and Mercosur, which groups Brazil, Argentina, Uruguay and Paraguay, from its current $40 billion a year.

But negotiations have been plagued since they opened more than five years ago by differences over farm trade and industrial goods and even over how the talks should proceed.

Negotiators now fear momentum could be lost in linking the markets of 29 countries ? which together have a population of 680 million people ? if a pact is not reached before a new European Commission takes office on Nov. 1.

Mercosur says its latest offer raised to over 90 percent from 88 percent the range of goods that would be subject to tariff elimination and gives greater access to key sectors for the EU such as telecommunications and financial services.

But EU diplomats say Mercosur offer in areas like industrial goods and state contracts fell far too short.

The Mercosur nations have pressed Europe to improve market access for farm products, which are among their top exports.