Argentina joins Ecuador in protectionism
April 17, 2009
World Trade\Interactive
Argentina’s Resolution 61 took effect on March 25, 2009. The resolution establishes the requirement of obtaining non-automatic import licenses and certificates of importation on a wide range of goods such as place settings, harvesters, recordable CDs, textile made-ups, air conditioning devices, and more. Typically, non-automatic licenses are used to administer quantitative and other trade restrictions, which are justified in the framework of the WTO. However, the current resolution is being viewed by many, including the other members of MERCOSUR like Brazil and Uruguay, as a protectionist measure that Argentinean authorities are imposing to protect local industries and economies.
The administration of Cristina Kirchner argues that this action is a response to significant changes in the trade flows of certain products, while Debora Giorgi of the Ministry of Production contends that the new regulations are temporary. Be that as it may, importers who wish to purchase certain textiles, metal or household goods from Uruguay, Brazil, Paraguay or any other country now require a prior import license in advance of the importation, instead of an automatic license. Many other products have been subject to a similar requirement for months or years.
The resolution becomes even more problematic for Argentine importers when one factors in that required import licenses and certificates of importation have been taking as long as four months to be issued, as opposed to the 60 days legally imposed by the WTO.
Despite strong rhetoric at both the World Economic Forum annual meeting, held Jan. 23-27 in Davos, Switzerland, and the recent G-20 meetings against engaging in protectionist practices in response to the current global economic crisis, Argentina is by no means the first country to enact such measures. Ecuador’s president, Rafael Correa, recently signed an agreement with importers to reduce imports on nearly 300 products and establish tariff quotas for another 330 imported products, mostly luxury items like perfumes, shoes, automotive parts and mobile phones. As previously reported in WTI, Brazilian authorities issued a policy earlier this year requiring import licenses on a wide range of imports only to have Brazilian President Luiz Inácio Lula da Silva rescind those restrictions three days later. Canadian Prime Minister Stephen Harper protested the passage of the Buy American program by the U.S. Congress, which prohibits most purchases of foreign iron and steel used in the infrastructure projects associated with the recently enacted economic stimulus package.
Protectionism is an economic policy designed to restrain trade between nations through the use of such tools as tariffs, import quotas, administrative barriers, anti-dumping legislation, direct and export subsidies, and exchange rate manipulation. Protectionism is designed to discourage imports and prevent the loss of domestic business to foreign competitors. As an economic policy, it is almost directly opposed to the policies of free trade and globalization pursued through various free trade agreements and joint international efforts such as the WTO. There are observers who argue that the establishment of labor and environmental standards and restrictive certification procedures amount to protectionism as well. Some have also argued that recent measures taken by several governments to support the financial and automotive industries amount to subsidies or protectionism.
There is always some degree of nationalism and favoritism in international trade, even at the height of globalization and free trade. However, recent events appear to be dramatically increasing that tendency. Those who have argued that protectionist policies deepened the economic crisis that led to the Great Depression see the same possibility in the current situation. Whatever the future holds, the present reality is that the international marketplace is becoming an even more complex and fluid environment, and those who are engaged in the business of international trade will need to be aware that the rules of the game can and will change rapidly and will require inventive and well thought out reactions.
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