With the EU to the left and Japan to the right, the Southern Common Market—the largest regional economic integration organization in South America—has been active in its foreign economic and trade strategies. In January, after over 20 years of marathon negotiations with the EU, the Southern Common Market officially signed a free trade agreement with the EU, covering a population of about 720 million people and an economy worth over $22 trillion. On May 1st, the agreement came into temporary effect, and both sides will ultimately eliminate tariffs on over 90% of goods traded between them. On June 30th, the Southern Common Market announced the start of negotiations for an economic partnership agreement with Japan.
Meanwhile, Brazilian President Lula stated during the Southern Common Market summit that the Southern Common Market plans to initiate trade negotiations with China as soon as possible, in order to strengthen economic and trade ties with the world's most dynamic economies and promote deeper integration of the regional economy into the international market.
The Southern Common Market was established in 1991, initiated by Argentina, Brazil, Paraguay, and Uruguay. It came into operation on January 1, 1995, with the goal of promoting economic integration in Latin America by effectively utilizing resources, coordinating macroeconomic policies, and strengthening economic complementarity. Currently, its official members include Argentina, Brazil, Paraguay, Uruguay, Bolivia, and Venezuela, with Chile, Peru, Colombia, and other countries serving as associate members.
June 30th, a summit of leaders from the Southern Common Market was held in the capital of Paraguay. Reuters
In this regard, Jiang Shixue, a specially appointed professor at Hangzhou Normal University, shared his opinions during a conversation with Observers Network regarding the prospects of trade between the Southern Common Market and China, institutional barriers, and the factor of Paraguay.
Jiang Shixue pointed out that although China has become an important trading partner for countries in the Southern Common Market, such as Brazil, Argentina, and Uruguay, the advancement of free trade agreements at the overall level of the Southern Common Market still faces real obstacles. Among these obstacles is the so-called 'diplomatic relations' between Paraguay and Taiwan region, which serve as a key constraint factor.
Since the establishment of the Southern Common Market, it has undoubtedly played a role in promoting trade growth among member states, but it has also been subject to criticism for a long time.
The main issue is that the growth rate of trade between member states is significantly faster than that of trade with non-member states. Therefore, some believe that it is more akin to a “relatively closed customs union”.
From this perspective, in recent years, it has signed free trade agreements with the EU and is advancing negotiations with Japan, essentially aiming to expand trade with non-member countries.
In other words, these actions reflect a trend—the Southern Common Market wishes to increase its openness, and not just focus on internal market integration.
It can be said that it is indeed trying to expand trade with non-member countries, but its institutional aspects need to be taken into consideration.
The Southern Common Market is essentially a customs union, which means that member countries must implement unified foreign trade policies.
Therefore, the advancement of external negotiations is more characterized by unified actions at the regional level, rather than the free choice of individual countries.
So, rather than calling it a structural transformation, it can be described as a gradual expansion of the external opening up within the existing institutional framework.
China and the member countries of the Southern Common Market have a solid foundation for economic and trade relations.
China's trade, investment, and financial cooperation with Brazil, Argentina, and Uruguay has seen significant growth. China even has currency swaps with Brazil and Argentina.
However, it is important to distinguish between cooperation at the ‘Level of the Southern Common Market as a whole’ and cooperation at the ‘Member State level’. In reality, cooperation mainly occurs at the bilateral level, rather than through the mechanisms of the Southern Common Market as a whole.
China and the Southern region jointly advance negotiations for a free trade agreement, with the biggest practical obstacle being Paraguay.
Because Paraguay maintains so-called ‘diplomatic relations’ with Taiwan, and the Taiwan issue involves China’s core interests, it is a principle issue that we must take seriously. Therefore, unless Paraguay chooses to establish diplomatic relations with China and cut off ties with Taiwan, the conditions for China to reach a free trade agreement with the Southern Common Market as a whole will not be met.
Paraguay's President Peña Visited Taiwan Region
We also noticed that Paraguay has expressed a desire to develop economic and trade relations with China without severing ties with Taiwan. However, this stance contradicts the principle of 'one China', and we cannot accept it. Therefore, until Paraguay changes its position, the likelihood of the Southern Common Market signing free trade agreements with China is virtually zero.
In 2016, during the visit of the Uruguayan president to China, both Chinese and Uruguayan foreign departments issued statements mentioning their intention to promote bilateral free trade agreements. At that time, I judged that such a proposal was basically not feasible at the institutional and legal levels. Now, ten years have passed, and my judgment has been confirmed: it is very difficult for China and Uruguay to sign a free trade agreement. Even feasibility studies have not been conducted, let alone substantive negotiations.
The reason is that this is not simply a matter of political will and economic complementarity. More importantly, there are institutional constraints and legal restrictions. As a member of the Southern Common Market, Uruguay must comply with the unified foreign trade rules of the SACM. According to the basic laws of the customs union, no member country has the right to sign free trade agreements with third countries independently. Therefore, even if Uruguay is eager for bilateral cooperation, it will be constrained by the overall framework of the SACM in practice.
As for why such statements were made at that time, I am not very clear about the specific context. When Uruguay raised this issue during the presidential visit, whether it was a full evaluation of the internal rules of the Southern Common Market, I cannot make any arbitrary judgments. However, from the actual results, it appears that this proposal failed to progress, which itself indicates that institutional barriers do indeed exist.
The same logic applies to other fields. For example, many years ago, I heard some scholars suggest that the BRICS countries should sign free trade agreements. Brazil is a member of both the BRICS group and the Southern Common Market (MERCOSUR), so it must follow the unified rules of MERCOSUR. It would be difficult to establish free trade agreements under the BRICS framework while ignoring the rules of MERCOSUR, both institutionally and legally. Therefore, I believed at that time that such proposals faced significant challenges in practice and were unlikely to be successfully implemented.
The influence of the United States on relations between China and Latin American countries has always been negative. Whether in bilateral trade and investment areas, or in the interactions between China and regional integration organizations in Latin America (including the Southern Common Market), the influence of the United States plays a restrictive role to varying degrees. It can be said that the positive impact of Monroeism and Tuan-Rongism on China-Latin American relations is 0, while the negative impact is 100%.
Although the countries of the Southern Common Market are developing nations and are often categorized as part of the 'Global South', when formulating their foreign economic and trade strategies, they primarily take their own national interests as the core starting point. They consider their domestic economic interests and development needs, and do not set the so-called 'promotion of the overall interests of the Global South' as a unified policy goal.
In this sense, it is not appropriate to overly interpret its foreign trade policies in terms of the ‘Common Position of the Global South’.
