Mercosur senses dangers of free
trade with China By Marcela
Valente
BUENOS AIRES - There is little
likelihood that South America's Mercosur trade
bloc will take up China's proposal to establish a
free trade agreement, at least in the short term.
Experts and industrialists fear an invasion of
cheap Chinese goods, and unequal competition.
Although the sources consulted by IPS
agreed that trade and investment between Mercosur
(Southern Common Market) and China will continue
to expand, they said a free trade deal was
unrealistic under the present circumstances.
Chinese Premier Wen Jiabao expressed
interest in such an agreement on his June 25 visit
to Buenos Aires, in a video conference with
presidents Cristina Fernndez of Argentina, Dilma
Rousseff of Brazil, and
Jos Mujica of Uruguay.
The four leaders
welcomed the idea of forging closer trade ties
between Mercosur and China.
Paraguay,
Mercosur's fourth founding member, has been
suspended from the bloc since that country's
legislature removed president Fernando Lugo in a
lightning-quick impeachment trial on June 22.
Paraguay is also facing the dilemma of
maintaining diplomatic relations with Taiwan or
agreeing to cut off ties in order to negotiate
with Beijing.
The fifth full member of
Mercosur, Venezuela, had not yet been admitted to
the bloc at the time of the video conference. It
officially joined on July 31.
At the last
Mercosur summit, held in the Argentine province of
Mendoza four days after Wen's visit, the
governments of Argentina, Brazil and Uruguay
agreed to strengthen cooperation with China.
They also approved a proposal to send a
joint trade mission this year to China's
commercial hub, Shanghai. But they did not
elaborate on the Asian giant's suggestion of
freeing up trade, which analysts agree will be a
long, complex process.
Mauricio Mesquita
Moreira, an Inter-American Development Bank (IDB)
expert on international trade, said the conditions
are not in place for reaching a free trade deal in
the near future.
On one hand, Argentina
and Brazil have industries that are highly
vulnerable to competition from Asia. And on the
other, the state still has too much of an
influence in the promotion of industry in the
Chinese economy for Mercosur to accept a
liberalisation of trade, the Brazilian economist
told IPS.
The smaller partners, Uruguay
and Paraguay, lack industrial structure and could
benefit from an agreement with China. But being in
Mercosur also gives them benefits such as
privileged access to the bloc's larger markets, he
said.
Mesquita Moreira was in Buenos Aires
this month to present a study carried out by the
IDB together with experts from the Asian
Development Bank Institute, which analyses the
future of ties between Asia and Latin America.
The study recommends an increase in trade
and investment between the two regions.
Argentine economist Guillermo Rozenwurcel,
director of the Center for Research on Economic
Development in South America (IDEAS), said the
Chinese proposal is not viable in the least over
the next 10 to 15 years.
The presidents
gave a diplomatic response to the Chinese
interlocutors, to show that they had listened to
the proposal. But until the playing field is
level, there are few prospects for real
discussions on free trade, he told IPS.
Rozenwurcel also said there was little
political margin for considering the question.
On the other hand, there is a challenging
and complex, but possible, outlook for boosting
trade, investment and scientific and technological
cooperation between this region and Asia, he
added.
According to the study by the IDB
and the Asian Development Bank Institute, trade
between Latin America and Asia has grown by an
average of 20.5% a year since 2000, to US$442
billion today.
With that sharp increase,
China, Asia's biggest supplier of imports to Latin
America, is now the region's second-largest
trading partner, after the United States.
The pattern of trade between the two
regions is based mainly on exports of raw
materials from Latin America and sales of
manufactured goods from Asia.
Abeceb, a
private consultancy in Argentina, reported that
trade between Mercosur and China climbed from
$10.3 billion a year in 2003 to $77.9 billion in
2011, and could reach $200 billion by 2016.
But Abeceb also noted that in the same
period, Argentina's purchases of manufactured
goods from Brazil such as textiles, capital goods,
plastics or pharmaceutical products fell as a
result of competition from lower-cost imports from
China.
In the case of textiles, for
example, 56% of Argentina's imports came from
Brazil in 2003, but today that proportion is less
than 23%. Meanwhile, purchases of textiles from
China grew from 2% to 34% of the total.
And while footwear imports from Brazil
fell from 79.2% to 37.5% between 2003 and 2011,
purchases from China rose from 12.6% to 36% in the
same period.
The president of Argentina's
toy industry chamber, Miguel Faraoni, said a free
trade accord between Mercosur and China would be
very counterproductive.
Competition is
impossible due to the differences between the
policies of each one. China produces between 75%
and 80% of the toys sold around the world, which
means it would be an unequal fight, he said.
Faraoni said the share of locally produced
toys sold on the domestic market has gone up from
10% in 2002 to 50% today. He also noted that the
number of foreign companies producing toys in
Argentina has increased.
"Production,
employment and investment in machinery and new
technologies have grown, and we are exporting 8%
of what is produced to the region and to the
Latino market in the United States," he said.
Faraoni stated that Argentine industry
could compete in terms of price and quality with
Brazil, which has the same rules of the game, but
that opening up the market to China would reverse
the gains made in the last few years.
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