Mercosur coordinators are holding meetings in Montevideo to decide on a mechanism for temporary increases of national tariffs besides those already implemented under the common external tariff for the group.
The proposal which was first presented by Argentina during the 2008 crisis has now been retaken by Brazil the Mercosur member which is most actively preparing for another global crisis with the purpose of defending its domestic market.
According to the coordinators the mechanism approval should be consented, quick and allow members to apply their tariff position according to their interests and current imports situation.
“The mechanism will be applied to the final consumer good and is really an extension of the current list of exceptions to the common external tariff”, said a Brazilian diplomat.
Argentina and Brazil are negotiating the inclusion of fifty to one hundred products in that condition, and have the support of junior members Paraguay and Uruguay, “if the global crisis becomes more threatening, which will also mean a shorter consideration time for its implementation”.
Since the system will apply to final consumption products, there are no risks of triangulation, because the same product entering a second Mercosur member country, based on the origin rules, would have to again pay the import tariff.
The coordinated increase of Mercosur tariffs, as was agreed in 2007, referred to textiles, footwear and clothing, and at the time they were elevated to the highest allowed by the WTO, 35%. Paraguay and Uruguay at the time did not accompany the higher tariffs decision.
Brazil is also sponsoring what it defines as a “foreign exchange antidumping” mechanism which would allow slapping higher tariffs based on the fluctuations of the US dollar. According to Brazil, the US dollar has devalued 40% since 2006.
Another initiative refers to the desegregation of trade nomenclature items mainly auto-parts and toys, which should enable to better target specific products and not affect the whole group.
Likewise Argentina and Brazil want the Mercosur block to increase the external tariff for peaches and other tinned fruit in syrup.
Another tool which Argentina is already implementing is to increase the reference value for imports such is the case for tyres, auto-parts and other items from the sensitive list.
“Brazil has joined Argentina’s position regarding its domestic market. It has ceased to criticize protectionism and is now concentrated in defending its domestic market and Brazilian jobs, the Kirchner-formula. Quite a change”, said an Argentine coordinator at the Montevideo meetings.