December 7, 2013
EU blasts BA protectionism
Just before a G20 summit that will bring together the world’s leading economies, the European Union has warned about a rise in “blatant and uncontrolled protectionism,” particularly in developing countries, including Argentina and Brazil. Countries around the world must move forward with an effort to decrease barriers to trade in order to help “the fragile economic recovery,” the European Commission said in a report yesterday.
The Commission highlighted the case of Argentina, one of the countries that has recently imposed “the highest number of new potentially restrictive import and export measures,” such as “raising import tariffs or equivalent import fees, introducing new import licensing procedures, fixing reference or minimum import prices and applying export duties.”
Mauricio Claverí, foreign trade and international business analyst of the Abeceb consultancy, said the EU report was not surprising, particularly considering many countries imposed protectionist measures during the 2008-2009 economic crisis.
“The world economic crisis has not yet ended and that led to numerous countries trying to protect their industries with more barriers,” he told the Herald. “Argentina needs to maintain a positive trade balance. There’s a shortage of foreign currency, proven by the existence of two foreign-exchange markets, and Central Bank reserves are dropping.”
Now is the time to fight back against those measures, the European Commission said.
“All of us need to stick to our pledge to fight back against protectionism. It is worrisome to see so many restrictive measures still being adopted and virtually none abolished,” said EU Trade Commissioner Karel De Gucht. “The G20 agreed a long time ago to avoid projectionist tendencies because we all know these only hurt global recovery in the long run.”
The 10th EU Report on Potentially Trade-Restrictive Measures identified about 150 new trade restrictions introduced over the last year, whereas only 18 existing measures have been dismantled.
The report analyzed protectionist measures applied by 31 of the EU’s main trading partners, including Argentina, between May 1, 2012 and May 31, 2013.
Almost 700 new protectionist measures have been identified since October 2008, when the European Commission started monitoring global barriers to trade.
Developing countries, including Argentina, Brazil, India, Indonesia, Russia, China and South Africa “increased the adoption of certain highly trade-disruptive measures,” according to the report.
“There has been a sharp increase in the use of measures applied directly at the border, especially in the form of import duty hikes,” noted the report. “Brazil, Argentina, Russia and Ukraine stand out for having applied the heaviest tariff increases.”
The EU report considered this increase as a “striking phenomenon” and said that exports activities are “intrinsically dependent on imports,” advising countries such as Argentina to avoid barriers to trade.
“By keeping their markets open, these fast-developing economies would not only strengthen their competitiveness but also contribute to the economic recovery of other parts of the world, and to an increase in global demand, upon which they themselves depend to a significant extent,” the EU explained.
Argentina’s economic model based on imports substitution has led to frequent complaints from local importers, who assure that some 600 small and medium-sized import companies have ceased to operate over the last few months due to the government’s protectionists policies.
“The federal government has chosen a foreign trade policy to obtain a positive trade balance and that has led to limits on imports,” head of the Imports Chamber (CIRA) Diego Pérez Santiesteban told the Herald. “There are periods of fewer restrictions like the second half of 2012 and others when it increases, like this year.”
Santiesteban assured the Herald that the national market has seen a shortage of several products as a consequence of the import blocks, including silicon sealant for windows, furniture accessories, mechanized scaffolding and oil industry equipment. According to CIRA data, 40 percent of goods imported by Argentina are subject to restrictions.
“The European Union has already complained against Argentina’s trade policy. A report has been presented by the EU at the World Trade Organization and also single countries have expressed their concerns,” Santiesteban explained.
Vicente Lorenzo, spokesman of the Medium-Sized Companies Chamber (CAME), has long been a supporter of strong import-substitution policies, assuring these types of protectionist policies are needed to allow Argentina’s manufacturing sector to grow.
“Argentina is a developing country and chooses to apply trade protectionism as an economic plan to rebuild its industrial sector after the policies of the 1990s,” he told the Herald, in reference to the decade when much in Argentina was privatized. “We support the control of the country’s foreign trade. It has to be managed and regulated.”
Lorenzo related Argentina’s protectionism to a delayed technological development of local industries and admitted delays on import requests, one of the frequent complaints of CIRA.
“The government needs to evaluate each request and that leads to delays that frighten Argentine business leaders,” he said. “It’s true that some companies reach a critical point regarding their stock but there are none that have been forced to shut down production.”