Uruguay rejects Argentina and Brazil’s proposal to lower MERCOSUR external tariffs

RIO DE JANEIRO, BRAZIL – Uruguay’s government conveyed its position on tariffs to the administration of Brazilian President Jair Bolsonaro, with which it shares a common understanding that the regional bloc needs to be “modernized.”

In October, Argentina and Brazil’s Foreign Ministers announced a bilateral agreement to propose a 10% reduction in the CET to the other partners; Paraguay later expressed its support for the idea. By rejecting this step, Uruguay is now in a solitary position.

A meeting of the MERCOSUR Common Market Group is scheduled for Tuesday and Wednesday, November 23 and 24, where the CET proposal will be on the agenda for discussion, sources say.

Uruguay does not plan to raise the issue, although it will express its position if it arises as it considers that this is a “technical” area and that it should be dealt with in the Common Market Council, a “political decision-making” body comprising the Ministers of Foreign Affairs and Economy.

Ministers are scheduled to meet on December 16, in Brasilia, and the following day the presidents’ summit will be held. Luis Lacalle Pou plans to travel to the Brazilian capital to take part.

Uruguay’s position and strategy on MERCOSUR is directly addressed by the president and Ministers Francisco Bustillo (Foreign Affairs) and Azucena Arbeleche (Economy).

In April, the Uruguayan government expressed its willingness to support a more ambitious CET reduction than the one agreed in October by MERCOSUR’s major partners and urged flexibility to negotiate with third parties. But after this request failed, it announced that it would seek trade agreements despite lacking the support of the bloc’s partners.

So far only China – Uruguay’s main export destination – has expressed interest in exploring a potential FTA, which led to a feasibility study. In October, the Foreign Ministry sent a document with specific queries “on the potential impact” of such a treaty to several trade associations and granted time to respond until tomorrow, Friday, November 5.

It suggests “conducting ‘focus group’ exercises or previous meetings to exchange ideas at sectorial level before completing the questionnaire,” the document instructs.

There are 6 questions:

“What is your understanding of the impact of a trade agreement between China and Uruguay for the country in general?;”

“What impact would the agreement have on your activity sector, particularly in terms of foreign trade (exports and imports), investments and employment?;”

“What strengths and opportunities do you know or detect for your sector in the Chinese market?;”

“What public policies should be implemented to help realize the trade opportunities identified in the previous question?;”

“What weaknesses or threats do you detect for your sector in a potential trade agreement between Uruguay and China?;”

“What public policies would you recommend to implement to mitigate or offset the weaknesses and threats detected (tax relief periods, support, etc.)?”

The government considered it a very positive sign that the Chinese ambassador to Uruguay Wang Gang, on October 22 in a press conference, stated that the feasibility study “is progressing expeditiously.”

SMALL PRINT AND OPPORTUNITY

Meanwhile, four former Ministers of Economy from different political parties referred to the issue of the country’s future external insertion.

In the framework of a talk organized yesterday, November 3, by the National Academy of Economics, Ignacio de Posadas (1992-1995) spoke of generally following the path of “incremental measures” because, in his opinion, “there is no room in the country for in-depth reforms.” As for the opening of trade, he said that “it is not easy (…), but it is essential for economic, cultural and political reasons.”

Luis Mosca (1995-2000) was emphatic in pointing out the convenience of Uruguay requesting its adhesion to the TPP11 (Transpacific Partnership) “as soon as possible.” “At another time, in another MERCOSUR context, it would not have been possible for us to embark on this adventure, but today it is,” said Mosca.

After defending some of the actions taken by the Frente Amplio governments, also in terms of rapprochement with China, Álvaro García (2008-2010) said: “The only thing we can do is wish the government the best of luck” to take Uruguay “as far forward as it can go” without “breaking MERCOSUR.”

After the three speakers’ interventions, Ricardo Zerbino, another former minister (1985-1990), supported Mosca’s proposal regarding accession to the TPP11. For Uruguay this “is served on a platter. If we don’t seize the opportunity, maybe the platter will be gone,” he said. Furthermore, he pointed out that Argentina and Brazil would also be in a position to apply for membership to the treaty.