Uruguay and China AgreeTo PursueFor Bilateral Trade Agreement and Mercosur Deal

Uruguay and China AgreeTo PursueFor Bilateral Trade Agreement and Mercosur Deal

Beijing – November 24, 2023

Uruguayan President Luis Lacalle Pou and Chinese Premier Li Qiang expressed their commitment to advancing a bilateral free trade agreement (FTA) and exploring possibilities for a broader Mercosur trade bloc deal, according to a joint statement released after their meeting in Beijing on Thursday.

This development comes in the wake of the upgrade of China and Uruguay’s bilateral relationship to a “comprehensive strategic partnership” earlier this week, aligning Montevideo’s ties with Beijing with those of major South American nations like Argentina and Brazil.

China, particularly interested in an FTA with Mercosur, sees this as a strategic move to exert pressure on Paraguay, the last South American country with ties to Taipei, to reconsider its connections with Taiwan, which China considers part of its territory.

The joint statement highlighted the completion of a joint feasibility study, signaling the commitment of Uruguay and China to pursue a bilateral FTA. Additionally, both nations expressed their willingness to promote FTA talks between China and Mercosur.

President Lacalle Pou had initially proposed a bilateral FTA with China in 2021, aiming to secure similar opportunities for Uruguayan exporters as enjoyed by countries like Chile, Costa Rica, Ecuador, and Peru, which have tariff-free access to China, the world’s second-largest economy.

“Uruguay is firmly committed to close relations with China and active participation in the Belt and Road Initiative (BRI),” stated Lacalle Pou during the meeting, expressing Uruguay’s eagerness to hasten the establishment of an FTA involving Uruguay, Mercosur, and China.

However, Uruguay faces resistance from fellow Mercosur members Argentina, Brazil, and Paraguay, who prefer their bloc to negotiate an FTA with Europe instead. In November of the previous year, they issued warnings of potential “measures” if Uruguay proceeded with its plans to independently negotiate an FTA with China.

Li emphasized the importance of the Belt and Road Initiative cooperation documents, urging China and Uruguay to utilize the opportunity to boost bilateral trade continually. 

China accounted for 27% of Uruguay’s exports in 2022, with a significant portion attributed to Uruguayan beef, subject to a 12% tariff. In contrast, major beef exporters like Australia and New Zealand, with existing FTAs with China, pay considerably lower tariffs at 3.3% and 0%, respectively.

Despite Uruguay’s previous attempt to sign an FTA with the United States in 2006, concerns over potential expulsion from Mercosur led to the deal’s rejection. A study by the National Meat Institute of Uruguay in 2021 revealed that an FTA with China could lead to a preferential tariff of 0% for the meat industry, resulting in a significant reduction of tariffs by $150 million.

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