MercoPress. South Atlantic News Agency

Leading Senator calls for US trade benefits to Uruguay, “bypassing” Mercosur

Lugar’s proposal linked to Mercosur junior members’ frustration with Brazil and Argentine dominance

United States Senator Richard Lugar, the ranking Republican on the Foreign Relations Committee is urging the US to extend trade benefits to Uruguay, bypassing Mercosur, a move he says would also increase pressure on Brazil to deepen commercial ties.

In a report to be distributed, Lugar says Uruguay and Paraguay, the junior members of Mercosur led by Argentina and Brazil, should be included in an expanded trade program currently reserved for South American nations assisting US 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.

The report recommends bypassing Mercosur common external tariff, which prevents members from signing individual free trade agreements, by granting trade privileges unilaterally to Uruguay, South America’s smallest nation.

Such a move would have no impact on US manufacturers because trade with Uruguay accounts for less than 1% of US exports and imports, wrote Carl Meacham, author of the report. For Uruguay, which has expressed frustration with the dominance of Mercosur larger members, it’s a chance to diversify its trade ties, he wrote.

Embracing Uruguay would send a “signal the US is not ceding its interests” in the region and “could encourage some heretofore reluctant countries to expand their trade relations with the US” Foremost among them is Brazil, Latinamerica’s largest economy, the report says.

President Lula da Silva has resisted US efforts to strike a hemisphere-wide trade accord. His objections to US 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 US of trying to “annex” Latinamerica, 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 report also points out that the US 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 US as Brazil’s largest trading partner.