(Recasts after end of talks)
By Estelle Shirbon
MARSEILLE, France, July 2 (Reuters) - Trade ministers from the European Union and 13 Mediterranean countries made progress on Wednesday towards boosting commercial flows although obstacles remain, EU trade chief Peter Mandelson said.
The trade talks in the Mediterranean French port city of Marseille were the first official event of France's six-month EU presidency, which started on Tuesday, and part of President Nicolas Sarkozy's pet project of a Union for the Mediterranean.
"We've made good progress towards the establishment of the Euromed free trade area by 2010. We haven't done everything we hoped to do up until now, but the will and the foundations are there," Mandelson told a news conference after the talks.
He said concrete examples were agreements clinched with Morocco and Tunisia on dispute settlement mechanisms, and with Egypt and Israel on trade in agricultural products.
The European Union and its Mediterranean neighbours have been negotiating as a group and bilaterally to lower trade barriers as part of the Barcelona Process launched in 1995.
Progress has been made on scrapping tariffs on manufactured goods. For example, Mediterranean countries that reach a bilateral association agreement with the EU automatically enjoy duty-free access to the EU market for their industrial goods.
However, progress towards deeper regional integration has been slow, not least because of divisions among Mediterranean countries themselves. The Israeli-Palestinian conflict, tense relations between Morocco and Algeria and the Greek-Turkish dispute over Cyprus are just some of the flashpoints.
KEY TRADING PARTNERS
Trade with EU countries is essential to Mediterranean states, representing 46 percent of their exports and 41 percent of their imports in 2007, according to EU data.
Mandelson said poor trade flows between countries on the southern and eastern rims of the Mediterranean were a major obstacle to development and regional integration.
"Trade among the southern Mediterranean countries is among the smallest of any group of countries in the world. That is not something to be proud of," Mandelson said.
"It represents lost business opportunities, lost employment opportunities, lower living standards and a lot of disappointment for many millions of people in this region."
He cited as a positive development the 2006 free trade Agadir Agreement between Jordan, Morocco, Tunisia and Egypt.
Jordanian Trade and Industry Minister Amer al Hadidi told Reuters on the sidelines of the talks the outcome of the Agadir accord was "below expectations" for now, but he had high hopes the system would boost trade and business over time.
Some trade experts are sceptical that even the moderate success of Agadir can be replicated throughout the region.
"The idea of a free trade area by 2010 would generalise to all Mediterranean countries the Agadir system, but I'm pretty sure that a number of the countries will not have completed (the process) by then," said Michael Emerson, senior research fellow at the Centre for European Policy Studies in Brussels.
As well as the 27 EU member states, the Mediterranean countries taking part in Wednesday's talks were Albania, Algeria, Egypt, Israel, Jordan, Lebanon, Morocco, Mauritania, Syria, the Palestinian Territories, Tunisia and Turkey. Libya had observer status. (Editing by Ralph Boulton)
