Argentina formally protested on Monday a possible move by China to block imports of Argentine soybean oil in a trade row that threatens a key export of the country and last year involved almost 1.5 billion US dollars.
Argentine Foreign Minister Jorge Taiana summoned China's ambassador in Buenos Aires Gang Zeng to discuss the potential Chinese measure. According to Argentine diplomatic sources China “is willing to hold contacts that can help find a solution to the problem”.
Last year, Argentina, the world's leading soy-oil seller, exported to China 1.84 million tons of soy-oil worth 1.4 billion USD and a prolonged conflict could end up benefiting US or Brazilian soy oil exports, analysts said.
The Argentine response came after Chinese companies were called to an emergency meeting last week in Beijing and urged not to buy Argentine soy oil in retaliation for the country's decision to restrict imports of Chinese products, including shoes and steel pipes.
As the global economic crisis grew in late 2008 and early 2009, Argentina restricted Chinese imports to shield its industries from import competition.
A trade body under China's Ministry of Commerce told traders to cancel soy oil cargoes from Argentina because Chinese authorities planned to raise standards on the imports to levels which Argentina currently does not meet.
The disposition of the Chinese sanitary authorities established a maximum of 100 parts per million of hexane-solvent residues used in the extraction of oilseed oils in the shipments of crude soy oil.
Chicago, US soy oil futures were up in Monday afternoon trade, getting support from the trade spat although several US traders said they did not expect the row to drag on.
However, some analysts said the conflict might mean export business shifted to other leading producers such as Brazil and the United States.
”If it went on long enough, it probably would (benefit US soy oil exports) because Argentina is by far the largest exporter of soybean oil in the world and China is by far the largest importer. But that combination tells me that this situation might not last very long, said Anne Frick, oilseeds analyst with Prudential Bache Commodities.
If it were to continue, it would probably benefit US soybean oil exports and possibly Brazilian exports as well, she said.
Soybean and soy derivative exports are a pillar of Argentina's economy and the government could lose some 600 million USD in tax revenue this year if Chinese soy oil exports are suspended, according to analysts.
Last Saturday, Argentine Industry and Tourism Minister Débora Giorgi reiterated that Argentina, through its external commerce policy, defends national production from disloyal competition, and highlighted that Argentina did not restrict imports from any country, including China.
Giorgi added that regardless of the international crisis and the decrease in world commerce, the Argentine deficit with China grew.
Our measures look to avoid disloyal competition, which grew in consequence to the international crisis and the surplus of stock of products from last year, but we didn't prohibit Chinese imports, which continue coming in to our country in the form of healthy competition,” said Giorgi in a communiqué.
The Argentine Government says that the restriction -assuming it comes into force- would not last long, since more than 50% of soy oil imports to China come from the South American country and replacing this volume would not be easy.
Although the measure created some alarm, Argentine businessmen trust a solution will soon be found. Argentine Industrial Union (UIA) lobby Secretary, José Ignacio de Mendiguren, said he was very positive about a possible accord between the governments of Argentina and China over the conflict.
De Mendiguren downplayed the whole situation as he considered that it's just a matter of trade negotiations between the two nations.
The lobbyist also remarked that China's development without the alimentary security that South American products bring to them is not possible or viable as only ten percent of China's soil is cultivable.
De Mendiguren also believes that being China the country that will dispute the US hegemony within the next decade, they will necessarily need Brazilian steel, Argentine soy, and South American oil and energy.