Uruguay-China FTA negotiations raise tensions over Mercosur’s future

The recent Mercosur summit revealed strains in the bloc. As Uruguay moves for a free trade agreement with China, other members discuss consequences and call for unity


Fermín Koop, Dialogo Chino (UK)

July 28, 2022


The first face-to-face summit since the beginning of the pandemic for Mercosur, the regional trade bloc made up of Argentina, Brazil, Paraguay and Uruguay, exposed the rifts and differing visions for the bloc’s future among its members. Uruguay said it would move forward with its bilateral negotiations with China, while Argentina and Paraguay urged caution over the next steps.


Signing a free trade agreement (FTA) with China is a priority for Uruguayan president Luis Lacalle Pou’s government, which has already concluded a bilateral feasibility study and will soon begin negotiations. But there is a potential stumbling block: Mercosur rules prevent individual negotiations without the bloc’s endorsement.


This situation has pitted Lacalle Pou against his counterparts Alberto Fernández, of Argentina, and Paraguay’s Mario Abdo. But not so with Jair Bolsonaro, president of remaining Mercosur member Brazil, who has made no mention of the issue publicly, interpreted by many as support for making the bloc more flexible. These positions were repeated at last week’s Mercosur summit, held in Asunción, Paraguay.


In fact, the differences between the members of the bloc were so great that, as at the previous summit, there was no final joint declaration signed by all the countries. Uruguay did not want to support a document that did not refer to the possibility of reforming Mercosur to allow countries to enter into bilateral agreements.


In a communiqué, Argentina, Brazil, Paraguay and Bolivia, which is asking to join the bloc and participated as a guest, refer to agreements and advances with different countries, but nothing is mentioned about China. For the communiqué to have the status of a declaration, it needs to have been signed by all member countries.


“The summit showed the persistence of problems that have been dragging on for several years in the bloc,” said Julieta Zelicovich, a lecturer in international relations at the University of Rosario. “If Uruguay were to sign with China, we would be facing an extraordinary situation for Mercosur that would open up a number of different scenarios.”


Disputes in Mercosur


In his speech at the summit, Fernández questioned Uruguay’s moves to negotiate bilaterally with China and asked Lacalle Pou to include the entire bloc in the talks. “If we don’t realise that we have to be more united than ever, we are going to make the worst mistake,” Fernández said.


The Argentine president said that initiatives such as Uruguay’s are focused on the “short term”, and that while he would not refuse to “analyse everything that needs to be analysed” on the issue of flexibility that Lacalle Pou is calling for, he asked that the countries “go through this discussion together”.


In response, Lacalle Pou said that negotiations with China will begin “shortly” and that once this stage has been reached, he will talk to Mercosur member countries “to go all together” to add “more negotiating power”. However, if Mercosur does not want to be part of the agreement, Uruguay will still proceed, the president added.


“President Fernández’s speech echoed a concept that he has repeated a couple of times, which is the concept of protecting ourselves. The best way to protect my nation is to open up to the world, and that is why Uruguay is taking the steps it is taking,” Lacalle Pou reiterated.


For his part, Paraguay’s president Mario Abdo said at the summit that “it is more convenient” to negotiate a joint agreement with China, and that the issue is of concern to his government – which does not have official diplomatic ties with China. “They [China] have very competitive costs and this could threaten Paraguay’s industries, as well as those of Argentina and Brazil,” Abdo said.


Brazil’s president Jair Bolsonaro did not travel to Paraguay for the summit, and limited himself to a pre-recorded video address in which he did not mention the issue of agreements with China – something that Uruguay interpreted as an implicit endorsement. In fact, Brazil’s foreign trade secretary, Lucas Ferraz, argued that there is a “need for greater flexibility” in the bloc.


“The announcement made by Uruguay will certainly bring an even greater impetus to the debate [on flexibilisation] within the bloc. Whether or not we will permit Uruguay’s move is a technical question,” Ferraz said. That “will happen at the time of the adoption of the agreement, not now,” he added.


Uruguay’s negotiations ...


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