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This publication is part of the Asia-LAC Dialogue, a series of interviews produced by the Asia and Latin America program of the Interamerican Dialogue, which provides a global perspective on recent developments in Asia-Latin America and Caribbean dynamics. It features perspective.
In July, Uruguayan President Luis Lacarle Pou announced the completion of a joint feasibility study with China on a potential bilateral free trade agreement (FTA) with China, and the findings will inform future FTA negotiations. Lacalle Pou also said Uruguay intends to proceed with negotiations despite objections from Mercosur’s partner countries. Uruguay’s decision to proceed with negotiations with China, for example, has caused friction between Argentina and Paraguay, which strongly believe Mercosur should negotiate a new trade deal as a bloc.
FTA negotiations with China are based on our expanding and developing relationship with China. During state visits in October 2016, then-President Tabare Vázquez and President Xi Jinping established a strategic partnership between Uruguay and China. At the meeting, President Xi Jinping said China will increase its investment in Uruguay, focusing in particular on his infrastructure projects and expanding cooperation in agriculture, clean his energy, telecommunications, mining, manufacturing and finance. said. Two years later, Uruguay joined the Belt and Road Initiative and became the first member of Mercosur. Uruguay is also seeking deeper integration into the China-led international financial institution, joining the Asian Infrastructure Investment Bank in May 2020 and in September 2021 she will become a future member of the BRICS New Development Bank. .
Relations between Uruguay and China are already underpinned by strong trade ties and good trade balances. China is Uruguay’s main trading partner, accounting for her 30% of Uruguay’s total foreign trade. In 2021, Uruguay’s exports to China totaled $2.72 billion, while imports from China reached her $1.996 billion. Uruguay’s exports to China consist primarily of raw materials, especially beef, cellulose products, and soybeans. Beef accounted for 56% of Uruguay’s exports to China in the second quarter of 2021. The trade agreement aims to diversify Uruguay’s exports to China to also include services, technology and electronics.
Professor at the Catholic University of Uruguay and Adjunct Associate at the Institute for Security and Security at the University of Southern California for additional insight into the Uruguay-China FTA negotiations with China and the broader nature of the current bilateral relationship. We spoke with researcher Nicolas Albertoni. Political Economy (SPEC) Laboratory.
Inter-American Dialogue: What is the current status of China-Uruguay FTA preparations?
Albertoni: So far, as announced, the conclusions of the feasibility study with positive results on commercial issues are being considered. This was expected given the already known trade complementarity that exists between the two countries. The next step is to start formal negotiations. A date still needs to be set to start the negotiation round.
Inter-American Dialogue: What does Uruguay stand to gain from a bilateral FTA with China? How will pursuing an FTA with China affect Uruguay’s relationship with Mercosur’s partners?
Albertoni: It is important to note that from the beginning Uruguay has been open to joint negotiations with other members of Mercosur. What is happening today is that bloc partners appear unwilling to pursue negotiations of this scale in the short term. has never been framed as an impediment to pursuing commercial negotiations for President Lacal has always expressed his desire to sign his already concluded FTA with the EU (within the framework of MERCOSUR) and move forward towards a future agreement with the United States. . Even recently, President Lakal confirmed his intention to join the Comprehensive and Progressive Trans-Pacific Partnership (CPTPP).
Recognizing the importance of the Chinese market, it is undeniable given the enormous trade and economic responsibilities of China’s proposals for Uruguay. That is why the path taken by President Lacal makes so much sense.
It should also be noted that China, like other Latin American countries, plays a very important role as a destination for Uruguayan products. When it joined the WTO in 2001, China accounted for her 5% of Uruguay’s exports and Mercosur’s 41%. Today, China receives 28% of Uruguay’s exports and 23% of Mercosur’s exports respectively.
Today, Uruguay pays (competitively) about $137 million in tariffs to export goods to China. This represents her 42% of the total tariffs paid by Uruguay to all its export destinations. This underscores the importance that East Asian countries play in global commerce today and the opportunity for deeper commerce dialogue possible, which is also acknowledged by the central governments. The decisive step that this government is taking to open up to the world is key to the country’s development.
Inter-American Dialogue: Beyond trade, what does Uruguay expect from China’s modalities of engagement? can you get it?
Albertoni: Of course, progress in establishing commercial and economic ties with countries like China may present other opportunities that must be closely examined. Cooperation and investment are two of them. Uruguay has fewer cooperation and investment ties with China than the rest of the region, so there are opportunities in these areas to explore further. In any case, the focus of interest in Uruguay today is commercial. Uruguay urgently needs to boost commerce after years of stagnation, and the government seems determined to take action.