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Uruguay opts for preferential trade agreement with US

MercoPress, Uruguay

Uruguay opts for preferential trade agreement with US

28 September 2006

Uruguay discarded the option of a free trade agreement with United States and counter proposed negotiations on the basis of the Trade Investment Framework Agreement.

Uruguayan president Tabare Vazquez made the announcement Thursday following a meeting with eight cabinet ministers underlining that the free trade agreement, under the fast track umbrella, “didn’t give us the sufficient time to analyze in depth the different chapters involved in the overall trade operation”.

Vazquez pointed out that other countries have followed this path, such as Cambodia and African states, besides the fact that the TIFA option does not need approval from the United States Senate.

Under the fast track system the US Senate can only approve or reject trade agreements presented by the White House. However this special power expires July 2007.

According to Vazquez TIFA negotiations are estimated to last eight to twelve months and can be incorporated as an additional chapter to the existing bilateral Investment Protection Agreement with United States.

A US delegation of trade negotiators is scheduled to arrive in Montevideo next October 2 with the purpose of continuing with the negotiations, which originally targeted a free trade agreement on the lines of the recently signed with Peru.

However besides time, mounting resistance inside the ruling coalition to a free trade agreement seems to have forced President Vazquez to opt for the “lighter” version which basically means an expansion of those areas where Uruguay is a strong and efficient competitor and already has the United States as its main trade partner.

Some of those sectors are in the beef industry, dairy produce, software, rice, woolen textiles.

“We are targeting a preferential trade agreement which promotes access to the US market of certain produce which will be defined in the coming talks”, indicated President Vazquez.

Once a chapter by chapter agreement is reached, working on both countries proposals, “then a preferential trade agreement is signed, which is not a free trade agreement, but an agreement that gives Uruguay access to certain produce to the US market”.

Vazquez also pointed out that the TIFA option “does not have an impact on the Common External Tariff, which is the heart and soul of Mercosur, as was recently defined by the Brazilian Foreign Affairs minister”.

TIFA is defined as the previous step to a Bilateral Investment Treaty or Free Trade Agreement, and establishes the terms for a political and legal understanding between United States and another country to promote bilateral trade and investment, working from a greater liberalization.

The mechanism is used mainly by countries that have begun a process of opening their economies to international markets and globalization, be it because they are isolated or have closed economies.

According to Uruguayan authorities the US has TIFA agreements with Afghanistan, Algiers, Saudi Arabia, Bahrain, Brunei, Cambodia, the East and South African Common Market; United Arab Emirates, Philippines, Ghana, Indonesia, Kuwait, Malaysia, Mongolia, Nigeria, Oman, Pakistan, Qatar, Sir Lanka, South Africa, Thailand, Tunisia, Western Africa Monetary Union and Yemen.