Senator Richard Lugar, the ranking Republican on the Foreign Relations Committee, is urging the U.S. to extend trade benefits to Uruguay, a move he says would increase pressure on Brazil to deepen commercial ties.
In a report to be distributed next week, Lugar says Uruguay and neighboring Paraguay, the junior members of the Mercosur trade block led by Argentina and Brazil, should be included in an expanded trade program currently reserved for South American nations assisting U.S. anti-narcotics efforts.
“Trade preferences are usually designed to promote economic growth in our poorest trading partners. Uruguay does not fall into that category, but I believe that preferences should also be used strategically to advance foreign policy goals,” Lugar wrote in a letter accompanying the report.
The Indiana Republican is among a group of Senate and House members who proposed legislation this year to grant duty-free access for Paraguayan exports under the Andean Trade Promotion and Drug Eradication Act, which is set to expire this year.
Titled “Uruguay Trade Preferences: A Strategic Opportunity in the Southern Cone,” the 18-page report was prepared at Lugar’s request by Republican committee staff, based on meetings with Uruguayan officials in Montevideo this year.
Mercosur
The report recommends bypassing Mercosur’s common external tariff, which prevents members from signing individual free trade agreements, by granting trade privileges unilaterally to Uruguay, South America’s second smallest nation.
Such a move would have no impact on U.S. manufacturers because trade with Uruguay accounts for less than 1 percent of U.S. exports and imports, wrote Carl Meacham, author of the report. For Uruguay, which has expressed frustration with the dominance of Mercosur’s larger members, it’s a chance to diversify its trade ties, he wrote.
Embracing Uruguay would send a “signal the U.S. is not ceding its interests” in the region and “could encourage some heretofore reluctant countries to expand their trade relations with the U.S.”
Foremost among them is Brazil, Latin America’s largest economy, the report says.
President Luiz Inacio Lula da Silva has resisted U.S. efforts to strike a hemisphere-wide trade accord. His objections to U.S. farm subsidies were blamed for the breakdown in 2005 of decade-long talks on a free trade zone stretching from Alaska to Tierra del Fuego.
The former union leader, who as a candidate accused the U.S. of trying to “annex” Latin America, has since shown greater flexibility on agricultural issues, breaking away from allies in the developing world and urging completion of the stalled Doha round of global trade talks.
The U.S.’s role as South America’s largest trading partner has been eroded in recent years, as trade with emerging economies like China and inter-regional trade led by Brazil expands. This year, China replaced the U.S. as Brazil’s largest trading partner.
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