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Renewed talk of US-Uruguay free trade agreement

April 1, 2012

Last week, the Senate confirmed several nominations to key positions in the Obama Administration. Among those confirmed were Roberta S. Jacobson as assistant secretary for western hemisphere affairs, as well as ambassadors to Nicaragua, Panama, and Uruguay.

MercoPress ran a piece yesterday about Julissa Reynoso’s confirmation as US Ambassador to Uruguay. According to the running title, the Ambassador plans to make a US-Uruguay free trade agreement a priority:

The new US ambassador in Uruguay, confirmed this week by the US Senate, expects to hold contacts with Uruguayan authorities to promote and negotiate a free trade agreement.

This will be an uphill battle, at best.

While Ambassador Reynoso didn’t specifically mention a free trade agreement (FTA) in her statement before the Senate Committee on Foreign Relations, the topic did come up during the question and answer period.

The full video is available here, with talk of an FTA starting at around 4:16.

While the Ambassador mentioned that previous efforts to establish a US-Uruguay FTA failed due to a lack of support on both sides, the issue goes much deeper than that.

As a member of Mercosur, Uruguay is restricted in its ability to enter into bilateral FTAs. In a slightly different context, James Bosworth described some of the requirements placed on Mercosur members:

…Mercosur actually has rules with an economic impact. It’s not one of those nominal integration organizations in which a group of presidents hang out and talk once or twice per year and then is forgotten. Mercosur rules, though sometimes poorly enforced, have an impact on its members trade agreements, customs, tariffs, monetary policies and contractual law.

He goes on to state that it was actually Mercosur that prevented Uruguay from entering into a full FTA with the US a few years ago because of Mercosur’s restrictions on unilateral trade agreements.

Although Mercosur blocked the bilateral FTA, the US and Uruguay did ratify a Trade & Investment Framework Agreement (TIFA) in January 2007. The Dow Action Network Trade Glossary explains that a TIFA is essentially one step down from a FTA:

TIFA’s are non-binding agreements that establish regular interaction between governments on these topics and can “pave the way” for FTA commitments.

Under the Mercosur agreement, this is probably about as close as Uruguay will come to a FTA with the US, unless the Free Trade Area of the Americas somehow becomes a reality.

Argentina and Brazil have been criticized for promoting protectionist policies to the detriment of Uruguay and Paraguay, the two considerably smaller Mercosur nations. Uruguayan Vice President Danilo Astori went so far as to say in March that “Argentina completely ignores the Mercosur treaty and spirit.”

Despite growing disillusionment with Mercosur among the people of Uruguay, it’s unlikely that the country will leave Mercosur. In fact, President Jose Mujica has promised to “fight to the death” for the future of Mercosur.

In the end, Mercosur’s restrictions on bilateral trade agreements will present the greatest hurdle to establishing a full-blown FTA between the US and Uruguay.

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  1. Toward a U.S., Brazil FTA? « cuando así no sea…

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