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27 Jun, 2012

China Advocates South America Trade Deal

By Qin Jize in Buenos Aires and Wang Chenyan in Beijing

2012-06-27, (China Daily) – A free trade deal between China and Mercosur, the South American trade bloc, was proposed on Monday by Premier Wen Jiabao. Analysts said that the deal, if signed, will carry a number of benefits for the highly complementary economies.

“We share extensive common interests and we have great potential for further cooperation, which will increase the power of developing countries,” Wen said in Buenos Aires where he met Argentine President Cristina Fernandez and held a video conference with the presidents of Brazil and Uruguay. “We should carry out feasibility studies on a free trade area between China and Mercosur.”

He also set a target to raise trade between China and the bloc to $200 billion in 2016, double the trade value of 2011.

All the regional leaders agreed on the benefits of a trade pact. Brazilian President Dilma Rousseff said that boosting relations can keep any contagion from the financial crisis at bay and stop it “provoking unwanted consequences in employment and incomes that would hurt economic growth”.

Fernandez said increasing links between China and Mercosur will inject economic vitality into the member countries, and boost Mercosur’s development. Uruguayan President Jose Mujica highlighted the need for Mercosur to add value to exports of raw materials and create more jobs.

Mercosur, also known as the South American Common Market, groups Argentina, Brazil, Uruguay and Paraguay. Trade links have blossomed in the past decade between China and Mercosur. China is Mercosur’s second-largest trade partner and export market. The bloc is the major exporter of agricultural products, such as soybeans and meat, to China, with total trade between them reaching $100 billion in 2011.

Qi Fengtian, an expert on Latin American studies at the Chinese Academy of Social Sciences, said that free trade offers new opportunities, not just in financial terms. “Considering the rising influence of Mercosur’s member nations, I think cooperation with China will contribute more to a fair and rational international trade order,” Qi added.

Xu Yicong, former Chinese ambassador to Argentina, said increased cooperation will not only promote China’s trade with the bloc but allow for a better understanding of various issues. The proposed free trade deal could be discussed during Mercosur’s meeting in Mendoza, Argentina, this week.

“You can see leaders are aiming at a long-term plan. They expect that working with China will drive their growth,” Qi said.

Trade analysts cautioned that Brazil and Argentina share concerns over any trade deal as both nations have adopted measures to boost home industries.

While members of Mercosur have certainly tried to safeguard their national interests, growing global interdependence can also benefit economies, Qi said.

He Shuangrong, a specialist on Latin America at the Chinese Academy of Social Sciences, pointed out there is no significant barrier to the development of China-Mercosur ties.

Wen held talks with Fernandez at the Rose Palace in Buenos Aires on Monday. Argentina ships about 80 percent of its soybeans to China, with trade between the two countries reaching $14.8 billion in 2011.

What’s Mercosur?

The South American Common Market, or Mercosur, is an economic and political agreement among Argentina, Brazil, Paraguay and Uruguay.

It was founded in 1991 by the Treaty of Asuncion, which was signed on March 26, 1991, in the capital city of Paraguay and amended by the 1994 Protocol of Ouro Preto.

It promotes free trade to allow the fluid movement of goods, people and currency. It officially started operation on Jan 1, 1995, and is now a full customs union.

Mercosur is a component of the continuing process of South American integration. It has followed the approach of the European Union but, with an area of 12 million square kilometers, it is four times bigger. The bloc’s combined market encompasses more than 270 million people and accounts for more than three-quarters of the economic activity on the continent.

In 1985, Argentine president Raul Alfonsin and Brazilian president Jose Sarney signed the Argentina-Brazil Integration and Economics Cooperation Program, or PICE, which served as the starting point of Mercosur and proposed the Gaucho as a currency for regional trade.

In December 2004, the presidential summit agreed to the founding of the Mercosur Parliament, which should have 18 representatives from each country by 2010, regardless of population.

Mercosur is actively developing relations with major countries and organizations around the world. It signed a framework agreement on regional cooperation with the EU in December 1995 and decided to set up a transcontinental free trade zone in 2005.

It has also established dialogue or cooperation mechanism with China, Japan, Russia and the Republic of Korea.

In October 1997, a Mercosur delegation headed by ambassador Aispirosa of Uruguay, then the rotating presidency, paid a visit to China and held the first dialogue with the Chinese side.

Since then, both sides have held regular dialogues on political and economic relations and international issues of common interest.

In June 2004, Martin Redrado, then deputy foreign minister of Argentina, the rotating presidency of Mercosur, headed a delegation to China and held the fifth dialogue with Zhou Wenzhong, China’s then vice-foreign minister, in Beijing. Both sides exchanged views on negotiations of free trade between China and Mercosur and decided to start the feasibility research.

Contact the writers at qinjize@chinadaily.com.cn and wangchenyan@chinadaily.com.cn

Cheng Guangjin and agencies contributed to this story.