Sunday, March 29, 2020

OP-ED | 17-03-2018 09:49

Trading (with) places

Even if Argentina is this year chairing the summit of the G20, there is a key problem has not been absent from recent news developments.

There have been various twists and turns in the chosen agenda of the Mauricio Macri administration in recent weeks (such as the injection of the abortion issue and the somewhat contrived spat with the manufacturing sector, which seems more aimed at reshaping the government’s image than specifically defining policy) while economic analysts almost unanimously concentrate on the fiscal deficit as the root problem. But almost nobody talks about that other twin splash of red ink – the trade deficit. Today’s editorial will thus address that neglected subject, regardless of what else might have happened in the past week.

Even if Argentina is this year chairing the summit of the G20 and not the World Trade Organisation (that was last December), this key problem has not been absent from recent news developments. If March began with US President Donald Trump’s decision to slap import duties on the steel and aluminium entering the United States from all countries except its NAFTA geographical neighbours (with potentially devastating consequences for world trade), the previous week ended with a Mercosur meeting in Asunción where the formal start of negotiations toward a MercosurCanada free-trade agreement was the immediate agenda but where consensus towards the far more ambitious objective of a deal with the European Union was also sought (still inconclusively, it seems, at the time of writing).

A quantum leap in trade volume (the current 23 percent of gross domestic product represents a paltry pre-globalisation and 20th-century level way below today’s international averages) in a country which has almost always favoured consumer-led over exportled growth would require multiple and major structural approaches but ahead of entering into any details here, it is worth recommending a more informed and thoughtful approach to the outside world in general. Just as Macri began his presidency with the illusion that replacing populism with a government preaching a free-market creed would suffice to bring the investments flooding in, so there seems to be a similar notion that ending Kirchnerite isolationism and opening up the economy to the world would effortlessly insert Argentina in global chains of value, reaching at a stroke a stage which took Chile a full generation of consistent policies in that direction. Argentina might be open to the world but is the world open? Trump’s import duties obviously have “America first” protectionism written all over them but in truth, he is not alone in his unilateralism. If the Asunción huddle made little visible progress towards an EU-Mercosur agreement, this is also because no sooner did French agricultural protectionism relax slightly following industrial concessions offered during Macri’s European swing last January than Brazilian protectionism stiffened, especially its mighty auto industry. While Chinese President Xi Jinping’s imposition of his indefinite re-election looks like a “me first” response to “America first” and “me too” in the US, we also have Brexit and other unilateral outbursts elsewhere in the world.

Within this context Argentina must go clawing back last year’s trade deficit of US$8.47 billion. With scant scope for reprisals too, in part due to the stunted commercial development. If manufacturers complain of an “import flood” under Macri (even if imports actually shrank in 2016, although not last year) – and here this month’s artificial spat does have some substance – the government retorts that most imports are capital goods essential to industry but here retaliation would hurt Argentina more than the US and the outside world. There are easy answers in the short term – over a longer haul the disastrous drought might turn crisis into opportunity if it weans the country away from commodities and toward industries geared to the world rather than domestic market – but the important thing for now is to place trade back on the agenda.

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