The negotiator.

Once campaign chairman for U.K. Prime Minister Tony Blair and a former trade-union economist and minister for Northern Ireland, European Union Trade Commissioner Peter Mandelson has been as controversial in Brussels as he was in London. Yet he firmly believes trade policy, used well, leads to economic development around the world, assuming leaders focus their efforts on the poor. LATIN TRADE Europe Correspondent Meghan Sapp talked with Mandelson about the economic bloc's future with Latin America and the Caribbean.

The European Union (EU) is waiting for Central American countries to reach a certain level of regional integration before having closer trade relations. At what point do you think these countries will be ready?

An advanced level of regional economic integration, ideally with a common external tariff, common rules and free circulation of goods and services within the region, is important for a mutually beneficial bi-regional free trade agreement (FTA). In particular, our experience tells us that FTAs between a large market like the EU and small, individual economies are not easily sustainable. In the case of Central America, deeper regional integration would allow the region to attain a critical size in economic terms, offer wider perspectives for operators and become an attractive market for foreign direct investment from the EU. This is also why the EU is promoting further regional integration in Central America already at this stage. The commission and Central America are currently jointly assessing regional economic integration. I will study the results carefully and will take a decision on a proposal for further steps soon after.

European foreign direct investment in the Andean Community far outweighs trade between the two entities. What accounts for this imbalance, and do you see any reason for concern if this is not rectified?

It is true that in the last 10 years we have seen EU investment flows towards the Andean Community at unprecedented levels. In 2004, EU investment was five times bigger than our merchandise exports to the region. The EU is the world's main source of foreign direct investment in the Andean Community. Large EU companies are established in [the Andean Community] for many reasons. While U.S. investment in the region is focused in the manufacturing sector, due to its proximity to the U.S. market, EU investments primarily go to the services sectors, such as telecom, tourism, banking or transport. The reasons attracting EU investment in the region are many and include proximity to the U.S., a significant regional market, cultural links with Europe, the current political stability and attractive exchange rates with the euro.

After the World Trade Organization (WTO) meeting in Cancun, Brazil was brought to the "grown-ups table" in negotiations, partly as recognition of its growing trade role but also as a way to keep developing countries from breaking up those talks, as happened at the Mexico meeting. What changes have you seen in trade negotiations since?

I always welcome the active involvement of Brazil and the personal commitment of Celso Amorim in the WTO talks. The role played by Brazil in the WTO since the meeting in Cancun reflects the economic weight of this country. Brazil is the third-largest exporter of agriculture products and first exporter of products such as sugar, soya or orange juice. I can only welcome the fact that Brazil takes its responsibilities in the WTO as seriously as it does. Its position also confirms that there is a need to differentiate between developing countries with a large exporting capacity in many sectors, and not only in agriculture products. Brazil is not Benin. Brazil exports cars, aircraft and satellites and competes with European products. This is why I expect Brazil to continue to play the vital role it does in the WTO.

The United States and the EU seem to be in a race to finalize free trade agreements with Mercosur. Do you think Mercosur might be playing the EU and United States against each other?

There is a general trend worldwide to conclude bilateral FTAs as a complement to the multilateral system. The EU is the first trade partner of Mercosur and our trade flows have increased rapidly in recent years, deepening our relationship and making a bi-regional FTA a 'natural outcome.' The level of ambition on both sides for the FTA is high. Negotiations are not concluded yet and depend on other factors, in particular the current WTO talks. The recent WTO Ministerial in Hong Kong did not yield the results we had hoped for. We need further clarity on what can be achieved both multilaterally and bilaterally. We are all confronted with the same dilemma. The fact that we are all waiting for a successful WTO outcome does not mean that we are in a race to finalize free trade agreements. And I don't see that Mercosur is playing one off against the other. In the end we all depend on the negotiations in Geneva.