Concerns over Protectionism, Currency Dominate Trade Agenda at Americas Summit

 

The impact of rich country monetary policy on Latin American economies and the rise of import restrictions in the latter both took centre stage last weekend as leaders from thirty Western Hemisphere countries gathered in Cartagena, Colombia. The Summit of the Americas also saw Washington and Bogotá establish the implementation date for their long-awaited trade pact, as US President Barack Obama works to promote his trade record ahead of the November presidential elections.

US, Colombia set date for FTA

The long-awaited free trade pact between the US and Colombia will enter into force on 15 May, leaders from both countries announced at the summit. The pact was ratified and became law in the US late last year following four years of political wrangling in the US Congress that saw Colombia come under harsh scrutiny for allegedly poor protections of labour rights.

“This agreement is a win for both our countries,” US President Barack Obamasaid. “It’s a win for the United States by increasing our exports by more than US$1 billion, supporting thousands of US jobs and helping to achieve my goal of doubling US exports.”

For his part, Colombian President Juan Manuel Santos also underscored the jobs that the pact would bring to his country, noting that the deal “is a dream we had for a long time.”

The announcement comes as the US President works to promote his trade record ahead of the upcoming November elections, having announced in early 2010 a goal of doubling US exports from their 2009 levels of US$1.57 trillion to US$3.14 trillion by the end of 2014.

“I’m willing to go anywhere in the world to open up new markets for American businesses,” Obama said during a campaign stop in Florida on the way to the summit.

“In Latin America alone, over the past decade, tens of millions of people have stepped out of poverty and into the middle class,” he continued. “That means they’ve got more money to spend, and we want them spending money on American-made goods, so that American businesses can put more Americans back to work.”

However, Obama’s trade record has come under fire from his Republican opponents, particularly Mitt Romney, the front-runner for the Republican party nomination.

In a statement released by the Romney campaign the same day, Florida Governor Jeb Bush, also a Republican, criticised the US President’s trade policies, claiming that Obama’s “recent decision to focus on trade… comes three years too late” and that the US pacts with Colombia and Panama could have been ratified sooner had the US President not given in to “political pressure from labour unions.”

Brazil currency woes echoed by regional leaders

At the summit, Brazilian President Dilma Rousseff repeated her earlier criticisms of rich country monetary policy, which have dominated headlines in recent months as Brazilian government officials renewed warnings of a global “currency war.” (See Bridges Weekly, 7 March 2012).

Excessively loose monetary policy in advanced economies have been criticised by emerging economies for flooding their markets with imports, with Brazil taking a strong public stance on the subject as it struggles to combat the effects of the appreciation of its currency, the real, on its manufacturing sector.

Rousseff’s remarks in Cartagena took a similar tone to her White House comments earlier this month. (See Bridges Weekly, 11 April 2012) “This is affecting us by causing our currencies to appreciate, [creating] an obstacle for the trade in goods and services and transform[ing] our economies into easy prey for deindustrialisation,” she said in a speech on Saturday.

“It’s clear that we have to take measures to defend ourselves,” she added, rebuffing claims that Brazil’s measures to respond to these monetary pressures are protectionist. “I said defend, not protect. To defend is different, defend means … that we cannot leave our manufacturing sector to be cannibalised.”

Brazil’s criticism of US monetary policy’s effects on Latin America was supported by some of the other nations in the region, with the summit’s host, President Juan Manuel Santos of Colombia, publicly echoing Rousseff’s concerns.

“In some ways, [rich countries] are exporting their crisis to us via the appreciation of our currencies,” he said. “I share President Dilma Rousseff’s anxiety.”

US, Argentina discuss trade tensions

Argentina’s policies on import restrictions also drew attention from its trading partners during the weekend summit, with US President Barack Obama holding a meeting with his Argentine counterpart, President Cristina Fernández de Kirchner, to discuss recent trade frictions between their two countries.

Trade tensions between the two sides have been on the rise in recent weeks, with Washington suspending Buenos Aires from its Generalised System of Preferences (GSP) programme last month, citing Argentina’s failure to pay arbitration awards in two disputes involving US investors (see Bridges Weekly,28 March 2012).

A week later, the US joined the EU, Japan, Mexico, and 10 other WTO members in sharply rebuking Argentina for its import restrictions at a meeting of the WTO’s Council on Trade in Goods - policies that, the group said, were “unbefitting any WTO member.” (See Bridges Weekly, 4 April 2012)

The criticism drew a harsh response from Buenos Aires, and fostered speculation that Argentina could soon face a WTO challenge over these policies.

The White House, in a press release, said that Obama “reiterated his concern with regards to certain trade matters” during this weekend’s bilateral meet. Experts from both sides will meet to discuss these issues further, Argentine Foreign Minister Héctor Timerman said afterward.

However, officials from both Washington and Buenos Aires rebuffed suggestions that their trade disagreements were indicators of larger problems. “Obama clarified to [Kirchner] that, although there might be some small differences regarding some trade issues, in no way would these be the focal point of the relationship between the two countries,” Timerman commented.

“I think the position of the United States is simply that we believe that all businesses, all countries need to adhere to the clear standards articulated by international organisations like the WTO,” US Deputy National Security Adviser Ben Rhodes told reporters prior to the summit.

“But we believe that… the relationship between the United States and Argentina is broad and able to prosper, even as we have our occasional differences.”

Argentina’s policies have also drawn notice from some of its other trading partners in the region, with recent reports indicating that Mexico City is considering requesting consultations at the WTO regarding Argentina’s import policies.

“Mexico is preoccupied that this sort of protectionism is occurring just as regional trade integration is increasing, therefore we will not permit such a thing to occur,” Mexican economy minister Bruno Ferrari told Mexican newspaper Reforma earlier this month, while adding that Mexico would first explore all other options before filing a complaint.

ICTSD Reporting.

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Date Posted

May 01 2012