MercoPress. South Atlantic News Agency

Argentina and Brazil agree on terms to unlock the bilateral trade conflict

Thousands of Argentine cars should begin moving into Brazil in coming days

Argentina and Brazil agreed Thursday to abide by the 60-day retention period applied to products affected by non automatic tariff trade barriers and accelerate trade in the agricultural sector with the purpose of overcoming the conflict that erupted mid May and had virtually frozen bilateral operations.

Bilateral trade between the two Mercosur senior members was over 33 billion USD in 2010 and this year in the first five months was running at 14.95 billion, up 22% over 2008 which was the record year.

After a two hour meeting in Brasilia between Argentine Industry Minister Debora Giorgi and her Brazilian counterpart, Fernando Pimentel, both sides ended a round of negotiations that began in Buenos Aires last week.

Giorgi said at a press conference that “Argentina will make its best effort” in allowing products into the country no later than the 60-day period that the World Trade Organization contemplates for the non automatic licences on imports.

“We aim to abide by the non tariff trade barriers time periods (60 days), which are those set by the World Trade Organization” Giorgi said.

Apparently the heart of the agreement means that the thousands of Argentine manufactured cars retained in the border will begin crossing into Brazil in the coming ten days, while Argentina will start liberating those Brazilian products contemplated in the WTO 60 day period.

Minister Giorgi emphatically denied that Argentina is implementing a deliberate “non explicit” policy of delaying in customs the shipment of Brazilian products.

“There are regulations to be complied that involve assessing phytosanitary conditions of certain agriculture products and that takes some extra time.”

Meanwhile, Pimentel stressed that “the friendly environment” that was present during all along the negotiations round.

“We have a very similar outlook regarding what the bilateral relationship should be like and on the workings of the world economy. We shared the same views on accelerating imports and reducing the time periods” of non-automatic licences that in Brazil affect cars and in Argentina 557 products of Brazilian origin.

Pimentel explained that the Brazilian government applied the non automatic licenses, a WTO type of non tariff trade barriers to cars (and admitted that created trouble for Argentina), because out of every 10 cars imported by Brazil, 5 are manufactured in Argentina, and we have a strong deficit in that sector.

Giorgi promptly recalled that many of the auto parts used in Argentine cars come from Brazilian factories, creating an annual 1.1 billion USD deficit for Argentina, plus the fact that applying the non automatic licenses affects the Brazilian auto part industry.

Something similar was agreed for the farm equipment sector that had been exposed to delays from both sides. With the mounting of two factories in Argentina, one of them multinational, sales of Brazilian parts for the manufacturing (and export) of tractors, harvesters made in Argentina is expected to soar.

“Argentina has two strong proposals, one from a multinational corporation, and a second one, for the manufacture of tractors and harvesters”, said Giorgi who added that “in that context, part of the production will supply the domestic market while the rest will be exported complementing its output with Brazilian parts. This way we will have a complementary farm machinery policy”.

As had been anticipated in Buenos Aires at technical level the two ministers agreed to hold monthly meetings both technical and political to assess how bilateral trade evolves, plus promoting the two countries different private sectors to meet regularly.

Last February Argentina increased the number of items exposed to WTO non automatic licences for a maximum period of 60 days, from 408 to 557 which disappointed the Brazilians. Following several bilateral meetings in mid May Brazil imposed the non automatic import licences on cars and auto-parts which affect not only Argentina but also Korea, China, the European Union and the US.

Argentina argues that overall bilateral trade represents a strong surplus for Brazil (4 billion USD in 2010 and 1.9bn in the first five months of this year), and the only sector where it has a relative surplus is in the auto sector (450 million USD), because in auto-parts the deficit climbs to 1.1 billion USD.