UPDATE 1-EU, Mercosur agree on draft free-trade treaty -source

The European Union and the South American bloc Mercosur agreed on Friday on a draft free-trade agreement, a source close to the talks told Reuters, bringing to an end almost 20 years of negotiations.

"We have a deal," the source said. The two blocs began negotiations in 2000, intensifying efforts to reach an accord after Donald Trump's presidential victory prompted the European Union to freeze talks with the United States and look for other global trading allies.

That push has seen it implement a free trade agreement with Canada and reach agreements with Japan and Mexico and now, after 39 rounds of talks, also a provisional deal with Mercosur, the grouping of Argentina, Brazil, Paraguay and Uruguay. European Trade Commissioner Malmstrom said earlier this month that sealing a trade accord with Mercosur was her top priority.

To date, EU nerves about a surge of beef imports and Mercosur hesitation about opening up some industrial sectors, such as cars, have meant past deadlines have come and gone. An agreement faces a potentially difficult road to approval. France and other countries fear the impact of a sharp hike in beef imports, while environmental groups, whose influence is stronger in the new European Parliament, argue that the agreement could exacerbate deforestation.

EU countries and the European Parliament both need to give their backing for the agreement to enter force.