MercoPress. South Atlantic News Agency

Safeguards in bilateral Argentina/Brazil trade ”inevitable

Brazil considers the introduction of trade safeguards to address Mercosur members' asymmetries, particularly with Argentina, as “inevitable”, according to the Sao Paulo financial press.

"Argentine and Brazilian governments are going to negotiate the creation of a safeguards mechanism, including the introduction of trade barriers, in case domestic industry is threatened", published Monday "Valor", quoting an unidentified source from the Brazilian delegation currently discussing the issue with Argentina.

"Brazil considers inevitable the introduction of a mechanism of this type, although it previously rejected the idea point blank".

The two governments are trying to formally regulate the "informal" quota system already adopted by businessmen from both sides regarding refrigerators and foot wear.

Finance minister Antonio Palocci said Brazil was ready to discuss safeguards and for that purpose had named Development Ministry Director General Marcio Fortes.

The mechanism will be identified as the Competitiveness Adaptation Clause, CAC, following a suggestion from Argentine Finance minister Roberto Lavagna, who believes that when a sudden jump in imports from one of the two major Mercosur partners occurs, a quota system should begin to operate.

Above the quota, trade will continue as normal but whatever the product is, it will be submitted to the common external tariff. Previously negotiations will take place to try and reach a voluntary agreement restricting exports.

To finally approve the quota system, evidence of a sudden jump in imports plus a real threat to the local industry must be effectively proven. This means statistics showing that the safeguard benefited product is important for the local market and could condition local production.

However the Brazilian government has underlined that the CAC system must be bilateral, which means that Brazilian businessmen who feel affected by Argentine imports, such a rice farmers or wineries, particularly in the southern state of Rio Grande do Sul, can also request safeguards.

Argentine industry has repeatedly protested against Brazilian industrial goods (white line home appliances, footwear, cotton goods, etc), while Brazilian farmers have blocked trucks carrying Argentine rice, wines, fruit, etc.