China and Uruguay decide to pursue both a Mercosur agreement and a bilateral trade agreement.
A joint statement from Chinese Premier Li Qiang and Uruguayan the president Luis Lacalle Pou stated that they are eager to continue pursuing free trade agreements between China and the larger Mercosur trade bloc in addition to continuing to work on bilateral ones.
The announcement comes after the two met in Beijing on Thursday. This week, China and Uruguay upgraded their bilateral relationship to a “expansive strategic partnership,” bringing Montevideo’s connections with Beijing up to par with those of Brazil and Argentina.
An FTA with Mercosur is thought to be of special interest to Beijing because it may force Paraguay, the last nation in South America with connections to Taipei, to reconsider its ties to Taiwan, which China claims is a part of its territory.
In addition to mentioning that a joint feasibility study had been finished, the statement stated that China and Uruguay were dedicated to pursuing a bilateral free trade agreement.
In order to provide its exporters with opportunities comparable to those enjoyed by Chile, Costa Rica, Ecuador, and Peru—countries that have secured tariff-free access to the second-largest economy in the world—Lacalle Pou first proposed a bilateral free trade agreement (FTA) with China in 2021.
As stated in a meeting readout released by Chinese state media, “Uruguay is fully dedicated to close relations with China and taking part in the Belt and Road Initiative (BRI)” stated Lacalle Pou.
Additionally, he stated that Uruguay was “willing to… accelerate establishing an FTA between Uruguay, Mercosur, and China,” according to Chinese media.
However, Uruguay is up against strong resistance from other Mercosur members, Brazil, Argentina, and Paraguay, who prefer that their group negotiate a free trade agreement with Europe.
They threatened to take “measures” against Uruguay in November of last year if the country moved forward with its plans to negotiate an FTA with China on its own.
According to a quote from Li, China and Uruguay ought to use the signing of cooperation documents for the Belt and Road Initiative as a chance to encourage a sustained growth in their bilateral trade.
According to data from UN Comtrade, 27% of Uruguay’s exports in 2022 came from China.
Two-thirds of those exports to China were Uruguayan beef, which is currently subject to a 12% tariff.
Australia and New Zealand, two other significant beef exporters with free trade agreements with China, pay tariffs of 3.3% and 0%, respectively.
In 2006, Uruguay was on the verge of signing a free trade agreement (FTA) with the United States; however, the government of the country ultimately decided against it, citing concerns about possible expulsion from Mercosur.
The National Meat Institute of Uruguay conducted a study in 2021 that states that if China signs an FTA with Uruguay, the meat industry can apply a 0% preferential tariff, resulting in a $150 million reduction in tariffs.