Since President Luis Lacalle Pou announced, on September 7, the beginning of formal negotiations with China to explore the possibility of signing a Free Trade Agreement (FTA) between the two countries, the impact on tariffs that it would have on exports such an agreement. Since 2013, China has been the main destination for Uruguayan sales abroad. In the case of agricultural products, which constitute Uruguay’s main export item, China’s tariffs stand at 14.8%.
But the discussion about signing an FTA with China transcends tariffs and even strictly economic aspects, and involves geopolitical and development model factors. In geopolitical terms, historian Gerardo Caetano warns, the trade dispute between China and the United States should not be ignored. “In geopolitical terms, if you move towards China, and you want to move at the same time towards the United States or towards the European Union (EU), in reality you are poorly informed. The United States is pressuring its Latin American partners to cut ties with China. They consider it a commercial enemy, ”he recalled, and considered that the eventual signing of an FTA with China would have an impact on Uruguay’s ties with the United States.
And it will also have them with the EU, he predicted. “The EU is not interested in negotiating alone with Uruguay, I have discussed this with EU negotiators. So, it is not just an economic-commercial option, it is a geopolitical option, “he warned, and argued that it would imply abandoning the agreement signed between Mercosur and the European bloc.
He considered that China “is not thinking of Uruguay” but “in a great hub in the Río de la Plata basin ”. “In any hypothesis, is it neutral for you to propose yourself as the hub of China in South America? I do not think so. I see it as very voluntaristic, I see it as a kind of ideologization covered in pragmatism. Does anyone think that the United States is going to turn a blind eye to a small country like Uruguay making an FTA with China? The United States is going to see reality, and it is that China is not betting on Uruguay, it is betting on a hub in South America, an enclave that joins Chile, but that enclave is with the Atlantic, and Uruguay is also between Argentina and Brazil, ”the historian remarked.
Isabel Clemente, grade 4 professor of the International Studies Program of the University of the Republic, opined, along the same lines, that “the scenario for a political alliance with China, thought in those terms by Uruguay, would not have much harmony with the line what are you following [el presidente de Estados Unidos, Joe] Biden ”. In addition, he added that “it could have costs with Argentina and Brazil.”
“From a geopolitical point of view it would be a very risky move for Uruguay because it is a very uncertain scenario. It is complex not because of the relationship with China, but because of the reactions that there may be from partners, both from South America and from the United States. And it is not very clear what the counterpart of China would be. One, for an alliance, has to be sure that the other party is going to be consistent, and perhaps China’s priorities go the other way, ”Clemente evaluated.
Calibrate all costs
“We claim our membership in Mercosur,” Foreign Minister Francisco Bustillo said last week, when asked about an eventual agreement with China. The government has made it clear that it does not intend to leave the regional bloc, although the president, Luis Lacalle Pou, described it as a “drag” in the last summit of Mercosur leaders.
Caetano assessed that in its 30 years of existence, “Mercosur really has very poor balance sheets,” and “when looking at Mercosur’s external agenda, the result is extremely poor.” However, he described as “very unrealistic” and “a serious mistake” to think that a bilateral opening move by Uruguay with China will not have an impact on the internal part of the bloc. In addition, he warned that the impact study for the eventual signing of an agreement with the Asian country should consider not only the tariffs that are lowered or eliminated, but also the loss of tariff preferences in sales to the region that would mean a break for Uruguay with Mercosur. “The impact study has to incorporate everything, not only the tariffs that are no longer paid on our export products to China, but we must remove those tariffs that we do not pay and the preferences that we have in access to neighboring countries” , he indicated.
Although the government has said that it does not want to break with Mercosur, “and that it continues afterwards to negotiate with the EU, with the United States and with whoever comes, well, that world does not exist. Believing that Uruguay can establish trade openness with all who come, and believing that this is free … no, it is not free. This is something systemic: one move implies many other moves, ”said Caetano.
In addition, it evaluated that an eventual break with Mercosur would have strong impacts on sectors dependent on Argentina, such as tourism.
Caetano warned that Uruguay “is a country loaded with restrictions, it always has been and always will be. It does not mean that we are not independent, but we do not do what we want, because we have multiple conditioning. To believe that Uruguay takes this line and says that it does not want to break with Mercosur and in Mercosur they are going to say yes, it does not seem realistic ”, he questioned.
–
Hierarchs of the governments of Argentina and Paraguay have already expressed their concern over the announcement. Paraguay’s Minister of Foreign Affairs, Euclides Acevedo, told AFP that his country is observing the issue “with concern” and that it will be discussed at next week’s meeting of the Common Market Group, which is made up of technicians from the foreign ministries and from the block ministries of Economy. “Paraguay continues to maintain its position of being faithful to the provisions of the founding treaty and the Ouro Preto protocol” on the need to adopt decisions by consensus, said the Paraguayan Foreign Minister.
For his part, the Minister of Productive Development of Argentina, Matías Kulfas, affirmed that “it is negotiated as a bloc, not an individual country.” “Uruguay can make a bilateral agreement with China outside of Mercosur or it can continue in Mercosur. Mercosur regulations are very clear, the agreements are made en bloc, not unilaterally ”, he remarked.
The Brazilian ambassador to Uruguay, Antonio Simões, was cautious when asked by the press last week on this issue. “Everything will be discussed in Mercosur, we must not anticipate,” he limited himself to pointing out.
The Uruguayan government is confident that it will have the support of Brazil, but Caetano also evaluated this expectation as “unrealistic”. “The Bolsonaro government is in a very unpopular logic, it has many difficulties even to obtain the parliamentary majorities for its government, and Brazil is a volcano. On the other hand, to believe that Argentina is going to turn a blind eye, with the mess it has and that this government is going to have with the results of the PASO … then, you have to be realistic, “he insisted.
Development model
The main export items from Uruguay to China are agricultural products: beef, soybeans and cellulose. According to data from Uruguay XXI, in 2018 beef represented 43.3% of sales to the Asian country, and soy, 23.3%. That year, exports of beef to that destination were on the rise, and those of soy, on the decline. And just as China represents the main destination for Uruguay’s exports, it is also the main country of origin for imports. But in very different areas: Uruguay mostly imports telephones (with a share of 11% in the total amount of imports from that country in 2018); insecticides, rodenticides and disinfectants, with 5.2%; and computers, with 4.4%.
This same Uruguay XXI report identifies items that have commercial opportunities for exports to China: meat offal and by-products, fish and seafood, cleaning supplies, hides, wool and fabrics, honey, wood and wood products, and rice .
“Who today manages the market for commodities she’s Chinese. If we want to continue selling to China, which is what all of South America sells, are unprocessed foods, basically meat and soybeans, and unprocessed natural resources, basically wood, more unprocessed minerals, well, China has demand for everything that Uruguay can produce. Now that has consequences. That means saying: ‘well, I’m going to dedicate myself to that, I’m going to put all the eggs in that basket’. And what society do we have? What is the employment system going to be? What will the social data be? ”Caetano asked.
Along the same lines, Clemente warned that China usually signs classic free trade agreements, which incorporate intellectual property clauses and other provisions present, for example, in the bilateral free trade agreements that the United States used to sign. He valued that these are agreements that “do not contribute much to development policies, understood as ECLAC understood them, such as the growth of productive sectors that may imply a positive transformation in the economy.” “These are agreements that are as predatory as those that the United States has signed with other countries from the point of view of national development, understood as the generation of its own capacities, progress towards industrialization and the development of sectors that allow the generation of employment and productive innovation”, I consider.
Lacalle Pou: travel and links
From Thursday to Saturday, Uruguayan President Luis Lacalle Pou will be in Mexico, where he will participate in the VI Summit of Heads and Heads of State of the Community of Latin American and Caribbean States (Celac). Then he will travel to the United States, where on Tuesday 21, accompanied by the Minister of Economy and Finance Azucena Arbeleche, he will hold a meeting with 30 investment funds from that country to expose the advantages of Uruguay as a recipient country of investments. Until September 24, he will participate in the 76th session of the United Nations General Assembly, in New York, and on Wednesday 22 he is scheduled to deliver his speech to the Assembly.
In June 2021, Lacalle Pou was consulted as to whether the proximity with China could not harm Uruguay’s ties with the United States. In an interview he gave to the Center for Latin America of the ultra-liberal Atlas network, he argued that Uruguay’s relations with China and the United States “are not exclusive”, and that “that is what the other power should understand”, in reference to USA. He also considered that that country has an agenda “more of reaction than of action” against the influence of China in South America.
–
–
–
