Inter Press Service

URUGUAY-US: A Trade Agreement, After All

Raúl Pierri

MONTEVIDEO, Jan 26 2007 (IPS) — After huge internal controversy and strong opposition from the rest of the members of the Southern Common Market (Mercosur) trade bloc, Uruguay has agreed a trade pact with the United States.

The Trade and Investment Framework Agreement (TIFA) signed on Thursday drew harsh criticism from the more radical sectors in the leftwing Broad Front governing coalition, which has historically condemned Washington’s trade and foreign policies.

The Tabaré Vázquez administration chose a solitary path towards a bilateral agreement, in spite of the displeasure expressed by Uruguay’s partners in Mercosur, like Argentina, Brazil and Venezuela, which prefer trade integration with the rest of the world to be channelled through the regional bloc.

"This is a new step taken by the governments of Uruguay and the United States towards a strengthening of bilateral ties in terms of trade and investment," Uruguayan Economy Minister Danilo Astori said on Thursday after the agreement was signed.

Astori also stressed that Uruguay needs to "diversify its opportunities for integration into world markets."

Deputy U.S. Trade Representative John Veroneau, for his part, said the TIFA — the first signed with a South American country — symbolised the need for economies in the 21st century to look outwards and not inwards, to be open.

TIFAs are often seen as an important step towards establishing free trade agreements (FTAs), by promoting a healthy investment climate and fomenting the promotion and diversification of trade in goods and services.

The purpose of the framework agreement is to evaluate trade and investment relations, and to identify opportunities to liberalise bilateral trade and investments.

A Trade and Investment Council made up of delegates from both countries will start work in April, probably in the United States. It will meet at least twice a year for discussion of each separate point.

The agreement stresses the importance of cooperating to ensure the success of the stalemated World Trade Organisation (WTO) Doha Round of talks, which include key negotiations on market access and the elimination of tariff barriers for agricultural products and export subsidies.

Uruguay is the most recent success of the George W. Bush administration’s crusade to sign bilateral trade agreements with Latin American countries, after the failure of plans for a Free Trade Area of the Americas (FTAA).

Washington has signed FTAs with Chile, Central America and the Dominican Republic, and more recently with Colombia , Panama and Peru. The last three are still awaiting approval by the U.S. Congress.

The United States also expanded the Andean Trade Promotion and Drug Eradication Act (ATPDEA) which exempts products from Bolivia, Colombia, Ecuador and Peru from U.S. import duties to support anti-drugs policies in the Andean countries.

However, the ATPDEA benefits to those countries were conditional on their willingness to advance towards bilateral FTAs.

Washington appears to have taken advantage of Uruguay’s disenchantment with Mercosur, fuelled by its dispute with Argentina over roadblocks on border bridges put up by demonstrators opposed to the construction of a paper pulp mill on a border river, the lack of support from other Mercosur partners when seeking resolution of this conflict, and the economic asymmetries that have characterised the bloc since its inception.

Astori asked Mercosur for greater flexibility towards bilateral treaties with countries outside the region, as a way for the smaller countries of the bloc to overcome the asymmetries, but his proposal was rejected, especially by Argentina which considered it to be "harmful."

Argentine Economy Minister Felisa Miceli even urged Montevideo to reconsider whether the bloc "served its interests, or not."

The government, on Astori’s advice, then decided to revive the Uruguay-U.S. Joint Commission on Trade and Investment, created during the administration of conservative President Jorge Batlle (2000-2005).

Vázquez announced the start of formal talks between the two governments last May, after visiting the White House, and has defended the idea of a trade treaty ever since. He used an expression meaning "sometimes, you only get one chance."

However, faced with lack of support from his Mercosur partners, and resistance from government sectors, unions, civil society organisations and the media, Vázquez settled for the more modest TIFA which may eventually pave the way to an FTA.

Within the Broad Front, several sectors are opposed to a treaty, the Communist Party in particular. The executive committee of the coalition called an urgent meeting on Monday to discuss the issue, and rebuked the government for not having consulted the rest of the party to obtain a consensus on the text of the TIFA.

However, the executive committee meeting ended without a resolution. Another meeting called on Wednesday also came to no decision, leaving the government free to act.

In an attempt to defuse the controversy, Astori drew a distinction between the agreement signed in Montevideo on Thursday and the pacts between the United States and Colombia, Panama and Peru, and he tried to calm the fears that the TIFA would lead to an FTA.

"We must concentrate on the situation in Uruguay and its relations with the United States. Other agreements that may have been made with other countries in the region do not set a precedent here," he said.

"We are going to focus on this framework agreement. We cannot know what’s going to happen in the futureàLet’s let the ink dry first," he added.

However, the agreement casts doubts on the future of Mercosur, in which serious rifts have existed for some time.

Washington appears to have found a way to divide the bloc that, because of its leaders’ general political and ideological consensus, has become more of a threat than ever to U.S. plans for a single free trade zone in the Americas.

Veroneau clearly stated the United States’ interest in Uruguay, and expressed satisfaction with its economic policy, quipping "If Uruguay were a share, I’d be glad to buy it."