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Brazil May Reconsider Threat to Take Argentina do WTO

Brazil auto parts The Brazilian goverment and that of Argentina reached "relatively productive" results following the São Paulo meeting of the bilateral trade monitoring committee to address the ongoing restrictions imposed by Argentina to Brazilian exports, according to diplomatic sources from both sides.

"The possibility of Brazil formally presenting a complaint before the World Trade Organization, as requested by Brazilian manufacturers is considerably more distant," said Ivan Ramalho, a top official from the Brazilian Development, Industry and Foreign Trade ministry.

Following Brazilian exporters disappointment with the slow award of import licenses, Argentina promised to liberate the documents "with the speed contemplated in the framework of accords", said Eduardo Bianchi, Deputy Secretary for Trade Policy and Management from Argentina's Production Ministry.

Last week the Brazilian National Industry Confederation, CNI recommended taking Argentina before the WTO, questioning the non automatic licensing system delays which go far beyond what has been established by WTO.

However following the two day meeting in Sao Paulo, members from both governments also agreed that the "main products exported by Brazil to Argentina" are suffering from the impact of the global crisis.

Bianchi also pointed out that the main products exported by Brazil to Argentina "are not subject to licenses". Only 6% of the list of export products is subject to licenses.

But Ramalho said that "we told the Argentine government that the process of extending non automatic licenses is of great concern, not necessarily because of values involved but rather because it includes highly sensitive products for Brazil" such as footwear, furniture and auto parts.

"We have shown the Brazilian delegation with numbers that Argentina has speeded the award of licenses to those sectors and particularly to all those in which Brazil is involved," added Bianchi.

In the first half of this year Brazilian exports to Argentina dropped 42% compared to a year ago, totaling US$ 4.9 billion. This represents an overall fall in bilateral trade of 32.9%, down to 9.9 billion USD.

Nevertheless Brazilian manufacturers argue that 13.5% of exports to Argentina are exposed to the license restrictions, three times more than in 2004 (3.7%).

Bianchi finally argued that in spite of some misunderstandings and the fallback in total imports, "for Argentina the main trade partner remains Brazil".

Protectionist Policies

Argentina's main trade unions confederation, CGT, and the chamber of small and medium enterprises, CAEM, energetically supported trade protection measures imposed by the government and which triggered complaints and irritation among Mercosur country members.

A joint statement from the unions and the small and medium enterprises describes pressure against Argentina as coming from a "strong lobby" linked to import interests and foreign governments with the purpose of making Argentina "modify its current policy of industrial protection".

"We express our full support to government policies which defend national industry, employment and creation of new jobs," said the joint statement from GCT and CAEM, Argentine Chamber of small and medium companies.

During the recent Mercosur presidential summit in Asunción, junior members Uruguay and Paraguay openly complained about the barriers imposed by Argentina on the imports of goods and services which are contrary to the group's charter and are hindering the two smaller economies' trade.

The Argentine delegation headed by President Cristina Fernandez de Kirchner argued that import restrictions are necessary to promote economic activity which has fallen because of the global crisis that also threatens employment.

Cut out from international money markets because of the hold-out bonds and distanced from multilateral organizations (such as the IMF), which the Kirchner couple administrations blame for Argentina's 2001/02 melting of the economy, the country desperately needs trade surpluses.

With this objective Argentina has imposed import licenses with the only purpose of slowing purchases of goods and services, thus managing scarce international reserves.

Brazil which considers Argentina a "strategic partner" has partly accepted the argument, or rather the situation confronted by Argentina, but has made it quite clear that it will not accept that the "Brazilian imports vacuum" is covered by other suppliers (mainly China).

Mercopress

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