Bearing of the International System in a south-south cutting-edge free trade agreement: The case of the free trade agreement between Uruguay and Chile

Abstract: Uruguay signed a cutting-edge free trade agreement with Chile that triggered political discussions on the impact it would have on Uruguay’s development. This agreement is the first bilateral trade instrument framed under Uruguay’s current international economic and trade insertion strategy, and serves as a case study to examine the bearing of the International System on that strategy, on the instruments Uruguay pursues to further it, and on the country’s future development prospects. Theories extensively used to study multilateral, north-south and south-south trade agreements are tested to analyse this cutting-edge south-south agreement, following a deductive and qualitative approach to research. This thesis casts doubts on the idea that south-south trade agreements are the least restrictive of developing countries’ national policy space for development. Interviews, documents, conferences and seminars revealed that this cutting-edge agreement has unique features that distinguish it from conventional south-south trade agreements: it includes standards of regulation now required by developed countries in the trade agreements they pursue. These standards are concluded to be the good policies and good institutions of the global economy organised around global value chains. They are furthered by developed countries in their own self-interest and adopted by Uruguay through this agreement in the understanding that they would help it broaden its markets. However, by abiding to these rules and standards it would shrink its own national policy space for development, kicking away the ladder to its development and locking-in its structural heterogeneity and technological exogeneity.