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17 June 2011
On June 2 2011 the governments of the two biggest Mercosur economies announced the settlement of their latest and nastiest trade dispute.
Tired of Argentina's increasingly tough protectionist policies - including both formal and informal non-tariff barriers, such as non-automatic import licences and arbitrary delays at Customs - Brazil decided to include cars (including those manufactured in Argentina) in its own non-automatic import licensing regime.
Cars, especially those shipped to the booming Brazilian market, are a large foreign exchange earner for Argentina. The tough stance taken by the Brazilian authorities led to renewed tension in Argentina.
After two weeks of intense bargaining, the industry minister of Argentina, Debora Giorgi, and the development minister of Brazil, Fernando Pimentel, announced the details of the agreement.
The main points of the agreement include the following considerations.
Licences that have been held by the Argentine government for more than 60 days are subject to prompt release. However, this solution is only for licences in the pipeline at present. Brazil must additionally deliver to the Argentine government a list of the products subject to delay.
In future, Argentina must aim to process licences within the 60-day timeframe set forth by the World Trade Organisation agreements. This is a commitment that Argentina assumed in February 2011 and has thus far failed to honour.
Argentina and Brazil have agreed to help private parties in sensitive sectors to reach sectorial agreements in order to achieve balanced industrial development in both countries. These sectors include household appliances, textiles, footwear and car parts.
For agricultural machines, Argentina has agreed to grant licences to products imported from Brazil, as long as the main multinational companies that have manufacturing facilities in Brazil agree to start manufacturing in Argentina.
Time will tell whether this is real peace or just a truce in a trade relationship full of ups and downs. Most of the agreements reached have been attempted before and bought only a short-lived peace before problems erupted again. In any event, the agreement shows that Mercosur's promise of a fully integrated free trade area is becoming ever more difficult to achieve.
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Esteban P Rópolo