Brazil and Argentina Want Higher Tariffs to Stop Chinese Invasion

Chinese textile industry Argentina, which with Brazil makes up the stronger half of the Mercosur, is again expected to propose an increase in the common external tariff (AEC, Arancel Externo Común) for textiles, leather goods, wood and furniture plus other manufactured produce with the purpose of protecting domestic production.

The request will be formalized this week during the meeting of a Mercosur technical group which prepares the documents to be signed at the twice annual presidential summit when the Mercosur chair rotates among country members.

The proposal needs a consensus to be approved but in previous occasions the Uruguayan delegation has voted against higher tariffs, particularly when global trade is threatened by the global crunch.

According to sources in Montevideo, "Uruguay's position has not been defined yet," and there's "no interest in raising the AEC," but that does not mean "that at the end we could support the Argentine initiative."

A conclusive decision on the issue must be arrived by mid December when Foreign Affairs and Economy ministers meet in anticipation of the presidential summit.

An Argentine financial publication close to the Ministry of Foreign Affairs said that the proposal is to hike the AEC five percentage points on average, but it would vary according to the different sectors.

"Uruguay is the least willing to support the alleged Argentine protectionism" and at the last October meeting of the technical groups to address the issue, the Argentine delegation anticipated it would propose the AEC increase.

At the time Uruguay argued that what was needed "was a larger market, since Mercosur is a relatively small market on world scale and Argentina's proposals were against that."

Uruguay added that Argentina was planning an "imports substitution" industrial policy, applied with controversial mixed results in the fifties and "which was against Uruguay's interests."

Although the clash was between Argentina and Uruguay, analysts said that Brazil was also behind Uruguay's position.

Brazil's Foreign Affairs minister Celso Amorim who has played a key role in the stalled WTO Doha Round talks to liberalize trade has repeatedly stated that protectionist measures could have "counter effects."

But the Brazilian press has revealed that President Lula da Silva administration is interested in increasing the AEC for wines, dairy produce, textiles and electronic equipment. The latter are massively manufactured in Manaus (capital of the northern state of Amazonas) free trade zone.

The overall objective of Mercosur senior partners, Brazil and Argentina, is to limit the flush of Asian imports.

Another contentious issue will be the Mercosur Customs code, since Uruguay is against Argentina's position to include a chapter formally authorizing country members to impose taxes on exports, which was at the heart of the recent five months long conflict between the Kirchner couple administration and the farmers.

Mercopress

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