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Controversial South America-Europe trade deal 'up in the air'

[BRUSSELS] A blockbuster trade deal between Europe and South America remained uncertain on Thursday as key negotiators tried to clinch a breakthrough and deliver a blow against Trump-led protectionism.

Ministers from the South American trade bloc known as Mercosur were locked into a second day of negotiations with top EU officials in hopes of sealing what would be one of the world's biggest regional trade deals.

The EU has been in talks with the countries of Mercosur (Argentina, Brazil, Paraguay and Uruguay) for two decades, with talks stumbling repeatedly over the highly sensitive beef market, with cattle farmers in Europe furiously against any deal.

"A political agreement today or tomorrow is possible... There may also be no agreement at all. It's still up in the air," said a source close to the negotiations.

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An EU spokeswoman told reporters there have been "constructive exchanges", but refused to comment further given the sensitivity of the talks.

Anticipation of a potential deal comes amid increased political opposition in Europe, with beef farmers joined by activists in demanding an immediate halt to talks over Brazil's deforestation of the rainforests.

Amid the growing uproar, cracks have emerged among European governments with the leaders of France, Ireland, Belgium and Poland expressing their concerns for farming to European Commission President Jean-Claude Juncker.

Pro-trade members meanwhile have staunchly backed the deal, with German Chancellor Angela Merkel on Wednesday insisting that a deal would boost Europe's economy and ultimately benefit the rainforests in Brazil.

"The political context is quite charged in Europe. The anti-trade rhetoric is strong in many countries, including pro-trade ones," said an EU diplomat.

The tricky discussions could also continue at the leader level at the two-day G20 summit in Osaka, Japan where Mrs Merkel was set to meet Brazil's President Jair Bolsonaro.

The increasingly acrimonious debate resembled the pushback against a highly ambitious trade deal with the United States, known as TTIP, that triggered mass protests in Germany, Austria and France a few years ago.

The main obstacle since 1999 has been European reluctance to open its market to beef and other farming goods and more recently differences have emerged with Brazil over trading meat, sugar and automobiles.

EU sources said Europeans await progress from the South Americans on geographical indications that protect European products such as cognac and Manchego cheese and especially on the opening up of their automotive sector.

The EU would very much like to see the deal passed before the end of the current commission's term later this year.

Brussels would also like the deal to mark a blow against protectionism, with US President Donald Trump caught in a trade war with China that is destabilising the world economy.

AFP