March 6, 2021

The EU-Mercosur agreement reopens the eternal Argentine debate on protectionism

The sealed free trade agreement between the European Union (EU) and Mercosur, far from generating political consensus in Argentina, has reopened the eternal debate on whether the southern country should open its commercial borders or hold on to tariffs to protect its national industry .

After closing last Friday a commercial alliance in which both blocs have worked for twenty years, the euphoria of the Argentine Government, which speaks of a "historic" fact, contrasts with the alarmism exhibited by the opposition, which doubts that many of the sectors of the country's industry can withstand European competition.

From the moment the announcement was made public in Brussels, the EU-Mercosur pact began to emerge as one of the key issues of the Argentine electoral campaign, which will culminate with the presidential elections next October.

Proof of this is the audio in which Argentina's chancellor, Jorge Faurie, excitedly communicated the news to the president, Mauricio Macri: "In his presidency it was achieved", he emphasized.

For his part, the opposition Alberto Fernández, candidate for the presidency by the Peronist Frente de Todos, did not take long to criticize the agreement, stating that it generates "many reasons" for the concern.

"It is not clear what the concrete benefits for our country would be, but it is clear what the damages would be for our industry and Argentine work," Fernandez said.

Failing to know the "fine print", the EU-Mercosur agreement states that Europeans will liberalize close to 100% of the trade in their industrial goods, while Argentina, Brazil, Uruguay and Paraguay will apply this measure to 90% of their products.

Although Mercosur has a term of up to 15 years to gradually liberalize its sensitive sectors, the director of the Center for Argentine Political Economy (Cepa), Hernán Letcher, told Efe that the alliance with the EU means "to shoot yourself in the foot" for the country.

"The disproportion in the industrial development of the EU with respect to Argentina, without any kind of protection or complementary production planning, will lead basically to European industry to expand its markets towards Mercosur and conversely, the experience will not be very similar ", said Letcher.

For the analyst, who is also a Kirchner councilor in the Buenos Aires city of San Martín, the powerful Argentine agricultural sector is the only one that can be benefited by the agreement, which will eliminate 81.7% of import tariffs for this type of products and will offer quotas or fixed preferences for 17.7% of them.

In any case, the alliance must undergo a long process of ratification by the parliaments of the nations involved, and the spokesperson of the French Government, Sibeth Ndiaye, has already said that her country is not ready yet.

This fact reinforces the opinion of Jorge Arias, an analyst at the consultancy Polilat, who believes that the rush of the Argentine government to close the agreement was due to the need to achieve a declaration of good intentions and generate a "false debate" between opening and protectionism in the face of elections.

False or not, this discussion has been dormant for a large part of Argentina's history and contributes to divide society into two radically opposed blocks, a phenomenon popularly known as "the crack".

"Argentina is torn between those who interpret that Peronism and its industrialization (during the first two governments of Juan Domingo Perón, between 1946 and 1955) was a stage of progress and social inclusion, and those who understand that the prior to that process was the Argentina prosperous, which was the fifth world power only providing meats and grains to the world, "said Arias.

Macri, who aspires to reelection, has sought during his term to open international trade, with the signing of the EU-Mercosur agreement as a cherry, while Cristina Fernandez de Kirchner promoted during his term (2007-2015) a country with a strong protectionist character .

"This debate has not been settled at historical level (…) It has not been possible to build a consensus or a development project that clearly establishes the model in which we Argentines believe," said Polilat's analyst.

Now, the general elections that the country will live in less than four months have a new incentive: to know if the population welcomes the agreement between the European Union and Mercosur with open arms or, on the contrary, shows its protectionist vein again.

Tono Gil

. (tagsToTranslate) agreement (t) UE-Mercosur (t) reopens (t) argentino (t) protectionism

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