Protectionism causes worry

CARTAGENA, Colombia

The big headlines at the summit of President Barack Obama and 29 other hemispheric leaders that ended here Sunday focused on the U.S.-Latin American spats over Cuba and the Falkland/Malvinas Islands, but the talk behind the scenes among the presidents dealt with something that worries them much more — the return of protectionism.

Failure to reach a consensus on Cuba and the Falkland/Malvinas Islands led to the collapse of the hard-negotiated 16-paragraph summit final declaration. It was replaced by a presidential statement by the summit’s host, Colombian President Juan Manuel Santos, in which he summed up his view on the summit’s conclusions.

But behind closed doors, most presidents talked about the rising trade barriers that several Latin American countries, especially Brazil and Argentina, are erecting to protect their industries, senior U.S. and Latin American officials say.

New measures by these and other countries to restrict imports are causing growing concern in the hemisphere. In the private talks among the leaders, “there is much more conversation about the economy and trade than on the big headline issues, such as Cuba and the Falkland/Malvinas,” Roberta Jacobson, the top U.S. State Department official in charge of Latin American affairs, told me in an interview.

Naming names

Mexican President Felipe Calder ≥n took the unusual step of denouncing the protectionist trend publicly at the beginning of the summit, in a meeting with some of the hemisphere’s top business leaders — and of naming names.

Latin America’s way to face the world’s economic recession “should clearly not be protectionism,” Calder ≥n said. “There are protectionist measures in the U.S. Congress, but there is also protectionism in many, I would say, in all of our countries.”

He added that for Mexico “it is vital to have a free trade agreement with Brazil. But unfortunately, what we are finding (in Brazil) is a trend in the opposite direction.”

Mexico is increasingly angered by Brazilian measures to reduce imports of cars from Mexico, which had grown spectacularly since a 2002 agreement that allowed free trade in cars between the two countries. Brazil’s super-strong currency had made it much cheaper for companies to import foreign-made cars.

But similar spats are taking place across the region. Argentina recently stopped granting automatic import licenses, and started to demand that its importers match their orders with exports, which has hurt countries across the region, including Argentina’s Mercosur common market partners Brazil, Uruguay and Paraguay.

Last month, the United States and 39 other countries, including the European Union, Japan and Mexico, filed an unusual complaint at the World Trade Organization against Argentina’s latest trade barriers. It asserted that Argentina is not only requiring more import licenses, but that the system is arbitrary and unpredictable.

Argentina responded in a statement that “Among the WTO 157 members, the United States and the European Union have received the highest amount of complaints, and their trade policies are being investigated by specialized courts. We will accept no external pressure.”

Import restrictions

On Saturday, at the start of the two-day summit in Cartagena, Obama held a 20-minute private meeting with Argentine President Cristina Fern °ndez de Kirchner, which centered on the international complaints over Argentina’s import restrictions and on efforts to have it not spoil overall bilateral relations, officials familiar with the discussions said.

Elsewhere, Colombia is complaining about trade restrictions in Ecuador, and Peru about trade barriers from Brazil. Despite Latin American leaders’ frequent summits in which they solemnly swear the start of the region’s definitive economic integration — most recently, they created the Community of Latin American and Caribbean States, or CELAC — trade within the region was already relatively small before the latest wave of trade barriers.

While trade among European nations amounts to 67 percent of their world-wide trade, and commerce among Asian countries amounts to 47 percent of their total trade, Latin America’s intra-regional trade is only 22 percent of its total commerce, according to the Inter-American Development Bank.

Why are Latin American leaders raising trade barriers to their own neighbors? Alicia Barcena, head of the United Nations Economic Commission for Latin America, says that the explanation has a lot to do with South America’s commodity boom, and the resulting appreciation of South American currencies in recent years.

As countries become more heavily dependent on commodity exports to China and have increasingly strong currencies, their industrial sectors become an increasingly smaller portion of their economies.

“There is concern in South America about de-industrialization,” Barcena told me. “Therefore, some countries are taking measures to support their productive sectors,” including several that others see as trade barriers.

Andres Oppenheimer is a Latin America correspondent for the Miami Herald. Distributed by MCT Information Services.