In a significant stride towards strengthening international trade relations, China and Uruguay have recently upgraded their bilateral ties.
This development, a result of a high-level meeting in Beijing between Chinese President Xi Jinping and Uruguayan President Louis Lacalle Pou, signifies a new chapter in the economic and diplomatic engagement between the two nations.
At the heart of Beijing, in the iconic Great Hall of the People, President Xi outlined China’s eagerness to collaborate with Uruguay. He envisaged this enhanced partnership as a fresh starting point for deepening and diversifying their cooperative efforts.
This move places Uruguay’s relationship with China on par with that of Brazil and Argentina, both influential members of the Mercosur trade bloc.
China’s foray into South America, driven by its need for raw materials and its status as a key investor, is a notable aspect of its foreign policy.
The Asian powerhouse has already granted tariff-free access to its extensive consumer market to several South American countries, including Chile, Costa Rica, Ecuador, and Peru, thereby bolstering their export capabilities.
In a strategic move in 2021, President Lacalle Pou proposed a free trade agreement with China. This initiative aims to provide Uruguayan exporters with competitive advantages similar to those enjoyed by their peers in countries that already have FTAs with China.
The beef industry, a major component of Uruguay’s exports to China, accounting for a substantial 67% in 2022, stands to benefit significantly from such an agreement. Currently, Uruguayan beef is subject to a 12% tariff in the Chinese market, a stark contrast to the more favourable tariffs for beef from Australia and New Zealand, who have FTAs with China.
Uruguay’s participation in the Mercosur bloc’s ‘Common External Tariff’ scheme complicates its ability to negotiate an independent FTA with China. This policy also affects Chinese exporters, who encounter a 9% tariff on goods entering Uruguay – a comparatively advantageous rate against the tariff imposed on Uruguayan beef exports to China.
A study conducted in 2021 by the National Meat Institute of Uruguay highlighted the potential benefits of an FTA with China, particularly the possibility of a 0% preferential tariff for the meat industry, which could lead to a significant tariff reduction, estimated at around $150 million.
The Beijing meeting between Xi and Lacalle Pou concluded with the signing of several cooperation agreements covering various sectors, including agriculture, education, science and technology, and customs processes. These agreements are expected to significantly benefit Uruguay’s export sectors, especially the meat industry.
Uruguay’s trading relationship with China is noteworthy, with the country maintaining a trade surplus that doubled to $1.5 billion in 2022. In contrast, Paraguay, the only Mercosur member not engaged with China and maintaining diplomatic ties with Taiwan, remains outside China’s trade and investment network, highlighting the complex geopolitical dynamics in the region.
President Xi expressed his hope that the enhanced China-Uruguay relations would serve as a beacon of cooperation and solidarity between countries of diverse sizes and systems, underscoring the potential of varied international partnerships.
