Trying to Avoid an Argentina-Brazil Trade War

In the first half of this year Brazilian imports to Argentina rose over
75 percent, compared to last year. Exports of washing machines
climbed 176 percent, refrigerators 126 percent and stoves 121
percent. In response to that, the Argentinean government decided
to impose restrictions on imports of Brazil's home appliances.

Liésio Pereira

Brazil will take advantage of the 26^th Mercosur Summit, which is now underway, to attempt to resolve the impasse created by Argentina when that country decided to impose restrictions on imports of Brazilian home appliances.

Argentina has announced limits on the importation of "white line" goods, and a surtax of 21 percent on TV sets produced in the Manaus Zona Franca.

Minister of Development, Industry and Foreign Trade, Luiz Fernando Furlan, says he will meet with the Argentine Minister of Economy, Roberto Lavagna, to discuss the matter.

Meanwhile, a meeting has been scheduled for July 14, in Buenos Aires, which will bring together government authorities and representatives of the business sector for further discussions.

In the first half of this year Brazilian imports to Argentina rose over 75 percent, compared to last year. Exports of washing machines climbed 176 percent, refrigerators 126 percent and stoves 121 percent.

Buenos Aires says it fears an "invasion" of Brazilian goods and sees a threat to its economy in the possibility. The Argentine Industrial Union (UIA) has strongly supported the government's decision to impose restrictions on Brazilian imports.

The dispute occurs as Brazil is set to take over the presidency of Mercosur (the presidency rotates every six months; Brazil substitutes Argentina).

Brazil Might Retaliate

Although Argentina suspended its restrictions on imports of Brazilian electric-electronic goods, minister of Development, Industry and Foreign Trade, Luiz Fernando Furlan, declared that the issue would be dealt with at the Mercosur summit.

Brazil's Foreign Minister, Celso Amorim, says he is confident a solution will be found. "We have managed to resolve problems before," he declared.

"I spoke with Argentina's Minister of Economy, Roberto Lavagna, and he said the restrictions have been suspended so the private sector can work out a solution while we discuss the matter at the summit,"

Furlan added that the 21 percent surtax on Brazilian-made TVs was under study in order to see whether or not it was legal. "We discussed this matter with Argentine authorities so as to avoid a rash of sanctions on their part, which could cause Brasilia to do things which would not be constructive for Mercosur."

Furlan pointed out that this year was shaping up to be the first nine years that Brazil would have a trade surplus with Argentina.

Brazil's Turn

Brazil is taking over as temporary president of Mercosur. The rotating presidency changes every six months. Brazil's challenge will be to strengthen the economic block and increase trade with the rest of the world.

At the 25^th Mercosur Summit, last year in Montevideo, the presidents of Brazil, Argentina, Paraguay and Uruguay approved a timetable for targets to be reached between 2004 and 2006.

President Luiz Inácio Lula da Silva now has to put the timetable into practice and get the action plans off the ground so Mercosur can find solutions to the main problems it faces.

One of the first targets is the consolidation of the customs union joining Mercosur members so as to permit the free circulation of goods under mutually agreed upon common rules.

This year's summit is expected to officialize the creation of a Permanent Review Board (Tribunal Permanente de Revisão) which will have the final word on internal Mercosur trade disputes.

At the moment, such disputes often wind up in international forums, such as the World Trade Organization.

Another target is to improve the block's Common External Tariffs (TEC), which consists of import surtaxes levied on goods from outside the member nations.

Liésio Pereira works for Agência Brasil (AB), the official press agency of the Brazilian government. Comments are welcome at lia@radiobras.gov.br.

Translated from the Portuguese by Allen Bennett.