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ECONOMY | 03-12-2022 08:19

Mercosur tensions rise as Uruguay seeks trade deal outside bloc

Uruguay's move to join one of Asia's biggest pacts marks a rupture after years of Montevideo seeking a more open approach to international commerce by the group. 

Uruguay has applied to join one of Asia’s biggest trading pacts, defying its main South American partners who have threatened the nation against seeking an independent trade agenda.

Foreign Minister Francisco Bustillo late on Wednesday submitted Uruguay’s request to join the 11-nation Comprehensive and Progressive Agreement for Trans-Pacific Partnership, known as CP-TPP, during a visit to New Zealand. The pact, which includes countries like Australia, Japan, Canada and Mexico, evolved from the Trans-Pacific Partnership after the withdrawal of the US from the alliance and accounts for about 13 percent of global gross domestic product.

“More opportunities for our country and our people,” Uruguay President Luis Lacalle Pou tweeted following the membership request. “An Uruguay open to the world.” 

The move by the least populated but wealthiest member of Mercosur, as the trade bloc that includes Brazil, Argentina and Paraguay is known, marks a rupture after years of Uruguay seeking a more open approach to international commerce by the group. 

Mercosur appeared to be turning the page on its projectionist past when it finished negotiating a landmark trade deal with the European Union in 2019. However, European opposition to Brazil’s environmental policies among other issues have delayed the signing and ratification of the accord.

 

Fed up with the strategy proposed by Brazil and Argentina, two of the countries with the biggest trade barriers in the world, Lacalle Pou started free trade talks with China earlier this year. He also signaled his willingness to cut deals with other countries while at the same keeping Uruguay in Mercosur. 

Yet the other countries in the bloc reject Uruguay’s strategy, warning in a statement earlier this week that they might take unspecified measures to protect their interests if the nation tries to join the CPTPP and continues to seek its own trade deals. 

Uruguay sent about 27 percent of its exports to the bloc in the first 10 months of the year, according to government data. Brazil is a key market for Uruguayan dairy products and vehicles, while tens of thousands of manufacturing jobs depend on trade with Argentina.

Uruguay’s CP-TPP bid comes days before Lacalle Pou hosts his Mercosur counterparts for a summit in Montevideo on December 5 and 6. Last year’s summit led to an acrimonious exchange between the Uruguayan president and his Argentine counterpart Alberto Fernández.

Argentina’s Foreign Ministry declined to comment. Brazil’s Economy Ministry didn’t immediately reply to a request for comment about Uruguay’s CP-TPP application. Paraguay’s Foreign Minister Julio Arriola told reporters Thursday the bloc will discuss Uruguay’s trade policies at next week’s summit. 

The organisation’s founding treaties “say Mercosur member states should negotiate as a bloc and via consensus and we continue in that line,” Arriola said.

by Ken Parks, Bloomberg

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