MercoPress. South Atlantic News Agency

Argentina/Brazil agree on trade Competition Mechanism

Argentina and Brazil agreed Wednesday the incorporation of a Competition Adaptation Mechanism, MAC, to regulate bilateral trade including provisions for protecting local industries, particularly in the case of Argentina.

The agreement was announced in Buenos Aires by Argentine Economy Minister Felisa Miceli, Foreign Affairs minister Jorge Taiana together with Brazilian Deputy Chancellor Samuel Pinheiro Guimaraes and Ivan Ramalho, Development Secretary.

MAC was proposed by Argentina a year ago to address development and market "asymmetries" among Mercosur economies and basically entitles either side to apply safeguards in the event that imports from the partner begin to hurt local industry. This has to be accompanied by compulsory negotiation between the companies of both countries that are involved in the dispute.

If no agreement is reached a panel of experts will assess the case and can eventually establish quotas or some other form of imports regulation for a minimum period of one year and maximum of four.

"It's not a mechanism to control trade but rather a mechanism to expand trade; in such a way it does not limit investment decisions and will provide a second chance for diversification in both countries economic relations", explained Pinheiro Guimaraes.

"The accord was reached after much hard work involving different ministries, and we are very satisfied, very happy. It's something positive, acknowledging that we have to fully develop our economies," said Argentine Foreign Minister Jorge Taiana.

MAC provides the industry involved or potentially harmed by imports a prudent period of time to develop and become competitive and also contemplates a Competition Adaptation Program, PAC, with the purpose of "contributing to adapt the particular branch or industry to competition and national productive integration".

Brazilian Deputy Foreign Minister Samuel Pinheiro Guimaraes insisted the agreement "will help strengthen industrial investments but will not hurt trade".

Bilateral trade between Brazil and Argentina ended in 2005 with a 3.676 billion US dollars deficit for Argentina, double the 2004 figure. Argentina supplies mainly primary products (commodities), farm processed goods and different fuels while Brazil is prevalent with manufactured goods.

MAC puts an end to a year long of tedious negotiations which started when former Argentine Economy Minister Roberto Lavagna presented the original proposal given the recurrent skirmishes over bilateral trade misbalances originated in the steady increase of Brazilian textiles, footwear, television sets and other household equipment.

However the Brazilian Industry Confederation criticised MAC since it fears it could actually become an obstacle for Brazilian exports and once the mechanism is applied Brazilian goods could end being replaced by imports from third countries.