Argentina’s import curbs threaten to bite back

The South American nation, which saw exports rise 25 percent year-on-year in May, responded to the global financial crisis by limiting imports of shoes, fresh fruit and other goods that it also produces.

The curbs, designed to protect jobs and boost local production, range from administrative delays at borders and in customs to anti-dumping penalties on goods such as steel products and textiles.

China has stopped buying Argentine soy oil in response to the restrictions.

Separate complaints from the EU at the World Trade Organisation and from Brazil, the top destination for Argentine exports, have raised concerns that Argentina’s protectionist stance could backfire.

“Argentina is creating a certain amount of tension with its informal and formal commercial policies,” said Dante Sica, a trade expert with the Buenos Aires consultancy Abeceb.com. “There are always risks of retaliation.”

Frustrations about the Argentine measures have also soured negotiations to open up new markets for Argentina’s producers, including talks on an EU-Mercosur accord that would create the world’s largest free trade zone.

For the time being, Argentine exports are faring well.

Its soy oil producers have found new customers in India, Bangladesh and Peru and are enjoying a bumper harvest. Argentine exporters of grains, cars and consumer goods also are finding plenty of customers, especially in Brazil.

Enrique Mantilla of the Argentine Chamber of Exporters told reporters that Argentina’s exports were set to increase 17 percent this year from a year ago.

He said it would take a long time for Europe’s complaints to work through WTO mediation, and described the chance that other countries would retaliate, as China did, as slight.

“(Exporters) are mostly preoccupied with the facts. Today it is a problem of imports not exports,” he said of the Argentine border measures.

Protectionist
Argentine Economy Minister Amado Boudou has defended his government’s trade measures as helping “to preserve the quality of life among Argentines” and said: “Europe has farm subsidies, and the countries that champion free trade also have restrictions.”

But with Argentina’s economy recovering well, in part due to the strong sales to Brazil, economists said it was unlikely other countries would continue to accept what they see as unfair treatment of their goods.

“It is difficult to justify, today, with Argentina’s current volume of trade,” Abeceb.com’s Sica said. “Maybe last year there was less criticism from other countries, but today there is less tolerance with protectionist measures.”

Last month, European farm ministers said Argentina’s curbs on imported foods threatened the drive for a EU-Mercosur deal that would link the European bloc with Brazil, Argentina, Paraguay and Uruguay, covering trade valued at 65 billion euros ($82bn) a year.

Roberto Bouzas, an economics professor at Argentina’s San Andres University, said the country’s defensive trade stance would be just one thorn in the side of those negotiations, which restarted in May after a six-year hiatus.

“Without a doubt it complicates things. But the obstacles to an agreement go far beyond that individual problem.”

The long-sought deal has faced strong opposition from environmentalists, lawmakers and farmers in Europe who fear an influx of food imports from South America.

Boris Segura, senior economist for Latin America at RBS Securities, said Argentina needed to “play ball” and be clear about the restrictions it is imposing to avoid losing access to the markets that were key to its exporters.

“The main complaint from these trade partners is the arbitrariness of the (Argentine) barriers,” Segura said.

Companies working to bring goods into Argentina would also prefer clear trade policies to the current makeshift mix, said Miguel Ponce of Argentina’s Chamber of Importers.

“Obviously we support the return as soon as possible to an open trade policy,” Ponce said. “We would like to see everything normalise.”