Promoting FTA talks with Mercosur to propel China-Paraguay cooperation
Published: Aug 17, 2023 10:16 PM
The Flag of Mercosur. Photo: Xinhua

The Flag of Mercosur. Photo: Xinhua

Paraguay is a variable in China's economic and trade cooperation with Mercosur, also known as the Southern Common Market that consists of Brazil, Argentina, Uruguay and Paraguay as its main members. Venezuela's membership was suspended in 2016.

Paraguay is currently the only remaining "diplomatic link" of the Taiwan authorities in South America. Taiwan's deputy regional leader, Lai Ching-te, recently utilized this relationship to travel to Paraguay, with a stopover in the US.

Igor Patrick, a Brazilian journalist who has long studied China, argues that it is unlikely that Mercosur will consolidate any deals with China because Paraguay has no ties with China. However, the issue could be viewed from a different perspective. If China's economic and trade cooperation with Mercosur could deepen and a free trade market is established, Paraguay's relationship with China will be fundamentally changed.

Paraguay shares a common need for trade and economic cooperation with China, just like other Mercosur countries. They look first and foremost to the enormous Chinese mainland market to increase exports of agricultural and livestock products such as soybeans, corn and beef. Additionally, these countries expect to use Chinese manufacturing inputs to spur the development of local manufacturing. This will also reduce these countries' concerns about the impact of Chinese goods that an FTA will likely bring.

Mercosur has a collective desire to reach an FTA with China. Uruguay applied to join the Comprehensive and Progressive Agreement for Trans-Pacific Partnership last year and has begun to push for free trade negotiations with China. But under Mercosur rules, members must negotiate jointly to establish "a common external tariff and a common trade policy in relation to third States or groups of States." As a result, Brazilian President Luiz Inacio Lula da Silva tried to dissuade Uruguay from going it unilaterally with China early this year.

Regarding timing, Brazil is considering reaching an agreement with the EU before starting negotiations with China. Mercosur and the EU reached an agreement on an FTA in 2019 and are in the final review stage of the text. In March of this year, the EU proposed additional conditions requiring exports from Mercosur countries to the EU to comply with EU environmental requirements. This drew strong opposition from Mercosur.

Under the current impasse between Mercosur and the EU, China can play a more active role in promoting negotiations with Mercosur. This would serve as an incentive for both Mercosur and the EU to resolve their dispute and expedite the consideration of the agreement. Deepening cooperation between China and Mercosur could also help promote unity within Mercosur and encourage this perceived conservative economic and trade bloc to become more open.

Economic and trade cooperation between China and the South American trade bloc meets the needs of both parties. China, with its population of 1.4 billion, represents a large market, while Mercosur is the world's sixth-largest economic bloc, with a market of 295 million people. The two sides have solid and complementary relationships in various areas, and China's experience in industrialization can greatly assist Mercosur countries in accelerating their own industrialization processes. Together, they can form a significant force that can influence global trade and economic growth.

We must not let the Taiwan authorities' attempts to co-opt Paraguay endanger the mainland's collaboration with Mercosur, an essential partnership for both parties and the global economy. We can enhance China's economic and trade relations with Paraguay by promoting economic and trade cooperation between China and Mercosur. Paraguay's economic and trade ties with China will be regulated and promoted within the FTA framework through relevant agreements. The advantages that the Chinese mainland market and manufacturing can offer to Paraguay will significantly surpass the impact of Taiwan's financial support. We trust that the Paraguayan government will make a prudent and wise decision.