TRADE-ARGENTINA: President Heads to China to Boost Ties

By Marcela Valente Reprint | | Print |

Marcela Valente

BUENOS AIRES, Jun 24 2004 (IPS) - Argentine President Néstor Kirchner and 200 business leaders from South America’s Mercosur trade bloc begin a visit to China next Monday, with the aim of expanding exports, now based on soybeans, to industrial products and services.

Brazilian President Luiz Inácio Lula da Silva made a trip to China with a similar goal last month.

Nine provincial governors, lawmakers, cabinet ministers and other officials will accompany the (mainly Argentine) business representatives, on Kirchner’s first official mission to China.

The president and his entourage leave Argentina Thursday. They will stay in China, visiting Beijing and the eastern city of Shanghai, until Jul. 3.

Kirchner’s agenda includes meetings with President Hu Jintao and Prime Minister Wen Jiabao, as well as a ceremony in which he will receive an honorary doctorate from Fudan University in Shanghai.

But the main objective is to expand trade from commodities (basically soybeans) to other sectors of the economy, especially manufacturing, tourism and educational services, as Foreign Minister Rafael Bielsa proposed to China’s Commerce Minister Bo Xilai in late May, when they met in Buenos Aires to plan next week’s tour.

Among the aspects of greatest interest to the local business community is selling the Asian giant products like computer software, wood flooring, packaging machines, car parts, steel, cereals, and cattle genetics technology, Ernesto Fernández Taboada, executive director of the Argentine-Chinese Chamber of Production, Industry and Commerce, told IPS.

There is also great interest in sales of pharmaceutical products, red wine, and tourism and educational services.

China, a country of nearly 1.3 billion, imported 412 billion dollars worth of goods in 2003, and Argentina supplies just 0.4 percent of that total, said Fernández Taboada.

Kirchner’s tour will be the second of its kind by a Mercosur (Southern Common Market – Argentina, Brazil, Paraguay and Uruguay) – leader.

The first was the May 23-27 visit by Brazilian President Lula, who travelled with more than 450 business executives – that country’s biggest trade mission abroad ever.

Brazil, Latin America’s giant, and Argentina, the region’s number three economy, have quadrupled their exports to China in the past 10 years.

The visit to China by another Mercosur leader forms part of the bloc’s thrust to boost South-South trade, which also took Lula to India in January, where a market access accord was signed.

That agreement established tariff preferences between India and Mercosur, which was also represented in January by former Argentine president Eduardo Duhalde (2002-2003) as secretary general of the trade bloc’s Committee of Permanent Representatives.

Last week in the Brazilian city of Sao Paulo, concrete steps were also taken towards bolstering trade between developing nations, at the XI United Nations Conference on Trade and Development (UNCTAD), in which 192 countries took part.

The third round of the Global System of Trade Preferences (GSTP) talks, in which 43 developing countries are negotiating a reduction in tariffs and an increase of trade among themselves, was launched at UNCTAD-XI.

According to an UNCTAD study, if import tariffs in the developing world were reduced 50 percent, South-South trade could grow by 15.5 billion dollars a year. That would contrast sharply with the barriers imposed by the industrialised North on imports from developing countries in the global talks on trade liberalisation.

Brazil, India, China, Argentina and the other developing countries that make up the Group of 20 (G20) – an alliance created shortly before the September 2003 World Trade Organisation (WTO) ministerial conference in Cancun, Mexico to oppose the farm policies of the United States, European Union and Japan – also met in Sao Paulo.

The Chinese market presents ”enormous possibilities,” said an enthusiastic Fernández Taboada, whose Argentine-Chinese business chamber represents 120 medium and large companies in Argentina.

To illustrate, he said per capita milk consumption in China stands at just seven litres a year, far below the global average of 100 litres, and representatives of cattle genetics laboratories that have the know-how to improve dairy production are travelling in Kirchner’s business entourage.

But Fernández Taboada admitted that increasing trade with China is not a simple proposition, and that difficulties exist due to cultural differences.

In his view, small companies, which make up a majority of Argentina’s businesses, do not stand a chance unless they group together in consortiums that would allow them to cut costs.

”We Argentines are very impatient. We want immediate success, and that is not possible in China, where it is necessary to invest during a certain mutually agreed-upon period, which can last up to a year,” he warned.

”It’s necessary to read Confucius, become familiar with the basics of Chinese philosophy, business rituals, their customs,” said the businessman.

According to the Foreign Ministry’s Centre on the International Economy, trade between Argentina and China expanded 400 percent from 1992 to 2003, at the same time as China’s economy took off, growing at an average of nine percent a year over the past decade.

China, which in the 1990s mainly exported to Argentina final consumption products like textiles, footwear and toys, has principally exported inputs for industry since the early 2002 devaluation of the Argentine peso. China’s exports to Argentina now total 447 million dollars a year.

But Argentina exports to China six times that amount: nearly 2.8 billion dollars worth of goods, 86 percent of which are comprised of soybean oil, soymeal and soy flour. Soybeans are the main export product of Argentina, which is the world’s top exporter of soybeans.

Brazil’s exports to China are also mainly comprised of soybeans.

The recent drop in international soy prices was a direct consequence of a Chinese ban on imports from Brazil, aimed at driving down the price already agreed on by the two countries.

”That is something you have to understand. The Chinese do not feel obligated to live up to a contract that is no longer convenient to them, and they force you to renegotiate,” said Fernández Taboada, alluding to the irritation caused by China’s recent decision to block shipments of Brazilian soybeans, on the basis of supposed health concerns.

Apart from soybeans and soybean oil, Argentina exports products like leather, hides, frozen fish, wool, steel pipes and wine to China, which purchases 14 percent of this country’s exports.

”Argentine companies could double their exports to China, to a total of 5.6 billion dollars, in just three or four years – not at the expense of soybeans, but by increasing trade in products with greater added-value,” said Fernández Taboada.

He said that it was in the field of software and other computer products and services that the greatest strides have been made towards agreements that would facilitate the creation of joint ventures between companies from the two countries.

There is also nuclear energy, an area in which Foreign Minister Bielsa and his Chinese counterpart have discussed the possibility of increasing sales and technology transfer in the production of cobalt 60, heavy water and nuclear fuel, and in the manufacturing of nuclear reactors and centres of nuclear medicine in China.

With respect to tourism, Argentina is keen on attracting a share of the 30 million Chinese who travel abroad every year, and the Kirchner administration will seek an agreement to get Argentina included on the list of destinations approved by the Chinese government.

The Foreign Ministry will also promote Spanish language courses and a new certificate of Spanish language skills to be offered by Argentine universities, similar to the DELE certificate, the most widely recognised Spanish language qualification, which is offered by Spain’s Cervantes Institute.