MercoPress. South Atlantic News Agency

Argentine Ambassador to Mercosur wants new tariffs to boost local production

“Advancing with the Brazilian proposal would be wasting an opportunity,” said Kestelboim

Argentina's Ambassador to Mercosur Mariano Kestelboim Sunday said he favoured “a new common external tariff that promotes productive development.”

Kestelboim, an economist by profession and also Ambassador to the Latin American Integration Association (Aladi), an entity made up of the countries of South America (except Guyana and Suriname) plus Mexico, Cuba and Panama, explained in an interview with the newsagency Télam that the regional bloc ”needs a new Common External Tariff (CET) that adjusts to the current productive characteristics“ and in turn, ”promotes the development of regional capacities.“

He also maintained that Mercosur was ”beneficial“ for the smaller countries of the bloc, because given how countries associate at a global level, ”It is very difficult to advance successfully with individualistic strategies.“

The Argentine official explained that the CET was enacted some 25 years ago and since then it has not had any type of substantial modification, while the local and regional production structure together with international trade has undergone key changes that warrant a more thorough review of CET.

”As a result of the advance in control systems and the development of ICTs, mega-industrial companies with productive capacities emerged fundamentally in Asia -and specifically in China- with productive capacities that 30 years ago were unthinkable. This implied that the optimal minimum scales grew notably in industries such as chemistry, pharmaceuticals, plastics, which today have enormous economies of scale and almost insurmountable barriers to entry. In this way, 25 or 30 years ago we could think of having productive capacity in some areas in which we can no longer compete.“

But he also said that ”it seems to us that a proposal for a linear and transversal reduction as proposed by Brazil does not take into account these structural modifications of productive capacities and international trade that merit a more ambitious modification of the CET in the sense of increasing the steps. If we simply make a 10% transverse modification for all positions, we will not be impacted with all the force necessary to stimulate product development. It is not the same to charge a tariff on technology that improves local production as on a substitute good for one that is produced here. In the first case, it can be positive, in the second local manufacturing is discouraged. Advancing with the Brazilian proposal would be wasting an opportunity since it is not easy to bring the 4 countries together to discuss and modify the CET in its entirety.“

Kestelboim insisted Argentina's proposal seeks ”to generate greater staggering in the level of value addition; in other words, where there is a productive capacity in the region, do not make tariff reductions,“ which van still be applied for ”the goods and services that we do not manufacture and that we need to import to make production more competitive.”