Inteligencia y Seguridad Frente Externo En Profundidad Economia y Finanzas Transparencia
  En Parrilla Medio Ambiente Sociedad High Tech Contacto
Economía y Finanzas  
 
22/08/2007 | Argentina: China Trade Sends Warning Signals

Oxford Analytica Staff

SUBJECT: The steady decline of Argentina's trade performance vis-a-vis China since 2002.

 

SIGNIFICANCE:

The evolution of bilateral trade raises concerns over the sustainability of the growth and employment policies pursued by the Kirchner administration.  

ANALYSIS:

In recent years, the Argentine government has relied on welfare subsidies and import substitution as the main tools to fight unemployment, which peaked at levels in excess of 20% at the height of the 2001-02 crisis.

These policies have proved at least partially successful -- the official unemployment rate dropped to 8.5% in the second quarter of 2007 -- although doubts as to their sustainability remain. Ample trade surpluses -- fostered by an undervalued currency, weakened domestic demand and high international prices for farming commodities -- played an important role in post-crisis recovery: from 2002 onwards, Argentina has maintained record trade surpluses with nearly all of its leading commercial partners, including China.

China trade

Bilateral trade has boomed in the past 15 years, tracking China's emergence as a major global player:  

Imports from China rose from 484 million dollars in 1992 to 3.1 billion last year. Exports have also grown sharply, increasing from 138 million dollars to 3.5 billion in the same period.

At present, China is Argentina's third largest trading partner, behind only Brazil and the United States. Chinese goods currently account for roughly 10% of all Argentine imports.  

Imports from China dropped abruptly in 2002, during the worst of the crisis, only to recover the lost ground in subsequent years. Official statistics showed the surplus narrowing to a meagre 109 million dollars in the first half of this year, with exports totalling 2.15 billion dollars and imports reaching 2.04 billion. Trends indicate that the slim surplus will turn into a deficit by 2008 at the latest.  

The surge in Chinese imports does not seem to be merely mirroring the recovery in domestic demand. The inflow of Chinese goods rose by 822% in the period 2002-06, while imports from Argentina's main trading partner, Brazil, rose by only 365% in that period. Moreover, challenges are not limited to the domestic front: China has already overtaken Argentina as the second-largest supplier of goods to Brazil.  

Qualitative concerns.

Nor are concerns limited to the quantitative aspects of trade:  

Argentine exports to China consist largely of raw materials. Agricultural commodities accounted for 20% of all Argentine exports in 2006, but in the case of China-bound shipments, this share reached 44%.

Recent trends offer no grounds for optimism. The share of manufactured goods in Argentine exports to China dropped from 7.8% in 2000 to 3.7% in 2006, while in the case of Chinese exports, the portion increased from 98.3% to 99.01% in that period.

The average value-added of Argentine exports to China stood at 34 US cents per kilo in 2006 -- roughly 10% of the 3.47 dollar per kilo average for Chinese exports to Argentina.  

Unique problems.

While manufacturers worldwide are being challenged by Chinese competition, Argentina currently faces a unique set of problems:  

The government of President Nestor Kirchner has succeeded in boosting domestic demand in order to secure popular backing, but this goal does not appear to be compatible with currency depreciation -- itself a cornerstone of post-crisis import substitution policies.

Competitiveness gains achieved through the steep devaluation of the peso in 2002 have been steadily shrinking, owing to domestic price inflation.

Growth, initially fuelled by export-driven industries, has been increasingly reliant on domestic demand, which expanded 9.5% in the first half of 2007 -- more than one percentage point above the rate of GDP growth.

Energy shortages represent an additional limitation to the expansion in the supply of locally manufactured goods and, subsequently, to the feasibility of pursuing protectionist policies.  

Although this mix of policies appears unsustainable, the Kirchner administration appears determined to pursue it. In July, following the resignation of former Economy Minister Felisa Miceli over corruption allegations, she was replaced by Industry Secretary Miguel Peirano, who served as chief economist of Argentina's main manufacturing lobby, the Argentine Industrial Union, for many years.  

New restrictions.

The Kircher administration has frequently resorted to administrative measures to block manufactured imports from Brazil and Asian countries. On August 17, Peirano announced a new set of restrictions affecting manufactured goods such as leather and plastic products, tyres and bicycles, among others.

They include the expansion of the list of goods that are subject to Customs reference price valuation and non-automatic import licences. In the specific case of Chinese products, tougher requirements in terms of quality and certification of origin for consumer goods were announced. Peirano explained that the purpose of the measures is to tackle "disloyal competition" and protect labour-intensive industries. He also stated that monitoring imports from China would be one of the main tasks of his tenure at the ministry.  

With China emerging as the leading market for Argentina's principal exports -- oilseeds and vegetable oil -- room for imposing further import restrictions could be limited. The WTO timeframe is another significant element: the terms of China's accession to the WTO imply that, by the end of 2008, members will no longer be allowed to levy exceptional surcharges on Chinese textile imports. The deadline for other manufactured goods has been set at 2013.  

Regional approaches.

Argentina and Brazil, which are partners in the regional Mercosur trade bloc, have been discussing possible joint strategies to deal with Chinese imports. Under consideration is a possible rise in the bloc's common tariff for vulnerable products such as footwear, toys and textiles, and the introduction of Mercosur-wide safeguard restrictions to limit imports of textiles -- an unprecedented measure. Chinese products currently account for just 3% of all textile imports in Argentina, but this share is expected to boom in 2008, when special protective measures allowed by the WTO are set to expire. The Argentine textile industry employs around 100,000 people, mostly unskilled workers.  

Chinese caution.

However, in spite of the generally discouraging picture, the Chinese impact on the domestic economy has thus far been less serious than had been feared:  

Although the visit of Chinese President Hu Jintao in November 2004 triggered expectations that China could become a major investment player in the regional scene, subsequent developments have contradicted these assumptions.

For the time being at least, China's interests in South America appear to be largely limited to securing a steady supply of raw materials for its growing economy and marketing a proportional share of its exports.  

CONCLUSION: Government efforts to protect uncompetitive labour-intensive industries are already showing their limitations and appear doomed in the not-too-distant future. The fate of these policies may ultimately rest on global trends, namely the outcome of competition between major players such as the United States and China, over which the Argentine government has no influence.  

Oxford Analytica (Reino Unido)

 


Otras Notas Relacionadas... ( Records 1 to 10 of 5712 )
fecha titulo
22/09/2018 Sin dudas, la Argentina necesita volver a tener moneda
22/09/2018 3 Reasons Why the Monos Trial in Argentina Matters
06/09/2018 Argentina- La crisis dejó al descubierto las mismas miserias
03/09/2018 Precariedad emergente
02/09/2018 Argentina- El plan fue el no plan y fracasó
31/08/2018 Argentina- La fiebre del dólar pone contra las cuerdas al Gobierno de Macri
27/08/2018 Argentina- La oscura transparencia de la corrupción populista
25/08/2018 Pan y circo en una Argentina que se derrumba
06/08/2018 Argentina - ¿Hay luz al final del camino?
21/07/2018 El inversor argentino, en modo ''wait and see'' y a la espera de noticias


Otras Notas del Autor
fecha
Título
16/10/2009|
25/03/2009|
13/03/2009|
13/03/2009|
07/03/2009|
07/03/2009|
03/03/2009|
03/03/2009|
01/03/2009|
01/03/2009|
01/03/2009|
01/03/2009|
01/03/2009|
01/03/2009|
03/01/2009|
29/12/2008|
29/12/2008|
30/11/2008|
30/11/2008|
30/11/2008|
30/11/2008|
30/11/2008|
30/11/2008|
30/11/2008|
30/11/2008|
25/11/2008|
25/11/2008|
21/10/2008|
21/10/2008|
21/10/2008|
21/10/2008|
18/10/2008|
18/10/2008|
18/10/2008|
18/10/2008|
18/10/2008|
18/10/2008|
18/10/2008|
18/10/2008|
18/10/2008|
18/10/2008|
05/10/2008|
05/10/2008|
03/10/2008|
03/10/2008|
15/09/2008|
15/09/2008|
15/09/2008|
15/09/2008|
15/09/2008|
15/09/2008|
15/09/2008|
15/09/2008|
15/09/2008|
15/09/2008|
15/09/2008|
15/09/2008|
15/09/2008|
15/09/2008|
15/09/2008|
15/09/2008|
06/09/2008|
06/09/2008|
06/09/2008|
06/09/2008|
05/09/2008|
05/09/2008|
28/08/2008|
28/08/2008|
22/08/2008|
22/08/2008|
10/08/2008|
10/08/2008|
10/08/2008|
10/08/2008|
09/08/2008|
09/08/2008|
26/07/2008|
26/07/2008|
11/07/2008|
11/07/2008|
11/07/2008|
11/07/2008|
11/07/2008|
11/07/2008|
11/07/2008|
11/07/2008|
11/07/2008|
11/07/2008|
30/06/2008|
30/06/2008|
30/06/2008|
30/06/2008|
30/06/2008|
30/06/2008|
27/05/2008|
27/05/2008|
27/05/2008|
27/05/2008|
19/05/2008|
19/05/2008|
18/05/2008|
15/05/2008|
14/05/2008|
14/05/2008|
09/05/2008|
09/05/2008|
08/05/2008|
08/05/2008|
06/05/2008|
06/05/2008|
06/05/2008|
05/05/2008|
05/05/2008|
30/04/2008|
30/04/2008|
29/04/2008|
29/04/2008|
25/04/2008|
24/04/2008|
24/04/2008|
24/04/2008|
24/04/2008|
24/04/2008|
24/04/2008|
21/04/2008|
21/04/2008|
21/04/2008|
21/04/2008|
21/04/2008|
06/04/2008|
06/04/2008|
05/04/2008|
04/04/2008|
04/04/2008|
04/04/2008|
04/04/2008|
04/04/2008|
28/03/2008|
28/03/2008|
26/03/2008|
16/03/2008|
14/03/2008|
14/03/2008|
12/03/2008|
12/03/2008|
11/03/2008|
11/03/2008|
11/03/2008|
11/03/2008|
04/03/2008|
03/03/2008|
03/03/2008|
28/02/2008|
28/02/2008|
28/02/2008|
27/02/2008|
20/02/2008|
19/02/2008|
18/02/2008|
17/02/2008|
17/02/2008|
17/02/2008|
27/12/2007|
07/10/2007|
12/09/2007|
30/08/2007|
30/08/2007|
20/08/2007|
31/07/2007|
14/07/2007|
10/07/2007|
23/05/2007|
23/05/2007|
16/05/2007|
16/05/2007|
09/05/2007|
09/05/2007|
17/01/2007|
17/01/2007|
20/12/2006|
20/12/2006|
05/12/2006|
05/12/2006|
29/11/2006|
29/11/2006|
24/10/2006|
05/08/2006|
03/08/2006|
28/07/2006|
27/07/2006|
20/07/2006|
01/02/2006|
01/02/2006|
01/02/2006|

ver + notas
 
Center for the Study of the Presidency
Freedom House