According to Reuters, Uruguay, a South American country, is advancing free trade negotiations with China. This move may promote Uruguay to become the “gateway” for economic and trade exchanges between Mercosur and China.
The Mercosur is composed of Argentina, Brazil, Paraguay and Uruguay. The organization implements common tariffs to promote the process of economic integration in Latin America.
South America has long been regarded as the “backyard” of the United States, but China’s economic presence in South America has become increasingly prominent, coupled with the deteriorating Sino-US relations, South America may become a new arena for the two major powers to compete for influence.
Uruguayan President Luis Lacalle Pou revealed last week that China has made “official proposals” to promote free trade negotiations with Uruguay.
Poland and Uruguay will formally study the proposed trade agreement with China and submit it before the end of the year.
Uruguay government adviser Alvaro Delgado recently told the media that Uruguay’s goal is to become China’s “gateway to the Mercosur” and that “this is the ultimate goal and perhaps the most important goal”.
Before Uruguay, its neighbors Chile and Peru had signed free trade agreements with China. But unlike Chile and Peru, Uruguay is a member of the Mercosur, and the organization includes Brazil and Argentina, two large South American countries with considerable size and influence.
China is already Uruguay’s main trading partner. About 30% of Uruguay’s exports go to China, including 56% of Uruguay’s meat. Meat is the country’s main export product.
What is the Southern Common Market?
In 1991, the presidents of Argentina, Brazil, Paraguay, and Uruguay signed the “Asuncion Treaty” in the Paraguayan capital, announcing the establishment of the Mercosur, which officially opened on January 1, 1995.
The purpose of the Mercosur is to promote scientific and technological progress and realize economic modernization in member countries through effective use of resources, protect the environment, coordinate macroeconomic policies, and strengthen economic complementarity, thereby improving people’s living conditions and promoting the development of economic integration in Latin America.
Since 2006, the Mercosur has implemented a comprehensive common tariff. In the same year, it also absorbed Venezuela to join, but because of Venezuela’s domestic situation, its membership was suspended indefinitely since August 2017.
Former Brazilian Foreign Minister Amorim commented that the greatest value of the Mercosur is to speak with one voice when negotiating with third parties and strengthen the international voice of member states.
However, the Southern Common Market is not a “monolithic”. In recent years, trade protectionism within this international organization has risen, disputes have continued, many agreements have not been implemented, and the integration process has stalled.
In April 2020, Argentina announced its withdrawal from the ongoing free trade agreement negotiations between the Mercosur and other countries. In July 2021, Uruguay unilaterally announced that it will conduct trade negotiations with third parties and will continue to participate in the free trade agreement negotiations between the Mercosur and other countries.
Because of this, Uruguay’s opening of free trade negotiations with China may cause dissatisfaction with Brazil and Argentina, the big countries in the organization. In July of this year, Pau said that it would negotiate a trade agreement with China on its own, which led to tensions between Uruguay and Argentina, Brazil and Paraguay.
Regarding the meeting, Reuters said that the Argentine Ministry of Foreign Affairs would not comment.
The US “backyard” becomes a new market for China?
Last year, former Bolivian President Jorge Quiroga was asked, “Who would you choose? The United States or the European Union?” He replied: “I choose Brazil. If I want to choose one in second place, it will be China. This It’s the reality in South America.”
For a long time, South America has been regarded as the sphere of influence of the United States, maintaining strong political and economic influence over the countries in the region. In his book, Professor Mearsheimer of the University of Chicago classified the United States’ regional hegemony as North and South America.
South America is the region farthest from China geographically, among which Argentina is the country farthest from China, and its economic and political ties with China in the past were also weak.
However, in recent years, as China’s economic volume has grown, the degree of globalization has deepened, and South America, which is rich in raw materials and developed agriculture, has become increasingly complementary to China’s economy.
Since the 21st century, the economic ties between China and South America have developed rapidly. Especially in 2018, with the tensions in Sino-US economic relations, Trump’s tariff war on China has objectively strengthened the economic ties between China and South American countries.
Especially agricultural products such as soybeans, pork and fruits. Take soybeans as an example. U.S. soybeans were retaliated by China’s tariffs, resulting in the vast majority of Brazilian soybeans being harvested and flowing to China.
Also in 2018, China’s investment in South American countries surpassed that of the United States. In the epidemic situation, China’s epidemic situation is well controlled, and the scale of foreign trade continues to grow, making this gap continue to widen.
In addition, since the new President of Argentina Alberto Fernández took office at the end of 2019, relations between China and Argentina have accelerated. From the data point of view, China has been Argentina’s largest agricultural product export market and beef exporter many years ago. In 2019, Argentina exported more than 630,000 tons of beef to China, accounting for three-quarters of Argentina’s total beef exports.
On this basis, China intends to invest US$3.5 billion in the construction of pig farms in Argentina. This agreement will make Argentina the largest supplier of Chinese pork. Proponents believe that this move can upgrade Argentina’s original large-scale export of feed into higher value-added pork, which will help the country to get rid of the economic crisis. But opponents believe that a sudden large-scale increase in production will overwhelm the country’s natural environment, and the benefits outweigh the disadvantages in the long run. Under the controversy of public opinion, the Argentine authorities stated that they have postponed the signing of the memorandum of understanding with China.
Even so, according to data from the National Institute of Statistics and Census of Argentina, China has replaced Brazil as Argentina’s largest trading partner.
Ignacio Tornero, a professor at the University of Chile’s Faculty of Law, wrote in the media that in recent years, China’s investment in South America has been increasing, and some people have criticized it. At the same time, we often hear statements like Chinese companies are “buying everything.” In fact, as far as South American countries are concerned, the increase in Chinese investment is actually a “late” phenomenon. From a global perspective, the scale of Chinese investment in South America is still relatively small. China’s foreign direct investment has only started to reach this region one after another since 2010.
Politically, Latin America has also increasingly become a target of China’s wooing.
Since Taiwan’s “diplomatic countries” are largely concentrated in Central and South America, this has also become a hot spot for China to gain political influence. In recent years, Dominica, El Salvador, and Panama have successively severed diplomatic relations with Taiwan and recognized the “one China” policy.
Argentina, which has close economic and trade relations with China, also interacts frequently in politics.
On June 24, Geng Shuang, China’s deputy representative to the United Nations, reiterated his support for Argentina’s sovereignty claim over the Malvinas Islands in the UN General Assembly Special Committee on Decolonization. Geng Shuang said in the UN General Assembly Special Committee on Decolonization that the Malvinas Islands issue is essentially a “historical issue left over from colonialism” and called on the international community to continue its efforts to eradicate colonialism. He especially urged Britain to fulfill its international obligations in accordance with relevant UN resolutions. .
It is worth mentioning that China has always used the “Malvinas Islands” to refer to the Falkland Islands, which also reflects China’s consistent position.
After the Falkland Islands War, Argentina was sanctioned by the British arms embargo. In recent years, the Argentine Air Force has tried to update its old air force equipment, but its efforts to purchase modern models have been repeatedly frustrated.
Argentina had considered buying Mirage F1M fighters and Swedish Lion and Eagle fighters from Spain. However, according to the US Defense Weekly News report, pressure from the United Kingdom prevented the above-mentioned transaction from being concluded. According to reports, 30% of the parts and components of the Swedish Lion and Eagle fighter come from the United Kingdom.
Chinese media reported that China has sold six JF-17 Block III fighters to Argentina with a contract value of US$600 million. There are also reports that Argentina asked China to lower prices at the end of the procurement negotiations, but the Chinese government insisted that the price of US$50 million was worth the money.