the side effect that Argentine companies fear

The world is once again shaken by the intensification of the trade war between the United States and China.

A few days ago, President Donald Trump announced that he would impose an additional 10% tariff on imports from China, affecting a trade flow of nearly 300 billion US dollars.

These rates will come into effect on September 1st and will add to the 25% penalty already applied by the White House to punish the Asian giant.

In the face of this attack, the People's Bank of China forced its currency to drop, reaching its lowest level since May 2008, while President Xi Jinping ordered companies in his country not to buy more agricultural products in the United States. United. .

With the crisis between the two installed powers, the badyst Marcelo Elizondo warned that, Beyond some short-term benefits – such as the fact that China buys more soybeans from Argentina – there may be specific risks for Argentina.

"This is not good news for our economy," said the former executive director of Fundación ExportAr.

"The impacts can be multiple and varied: if the dollar gets stronger because there is a scenario of flight to quality, this surely has greater trade volatility, as happened these days"he said.

With regard to flows of goods and services, he explained that "when two of the world's largest powers meet, we can expect a slowdown in international trade and growth in world production." is also positive for no emerging country ".

Elizondo said that the sum of exports from China and the United States does not represent less than 25% of the world total, which explains the impossibility of thinking that there will be no Side effects.

Thus, "a hindrance to trade between them would seriously affect total world trade and the world economy. the trade war can produce surplus stocks that both want to place on other markets"he added.

To put it in perspective, the Asian giant sends clothing and clothing to the world each year for $ 140 billion, the equivalent of all albiceleste exports in almost three years. Also for comparison, Chinese toy factories export for a value 10 to 15 times greater than that all car manufacturers in Argentina sell abroad.

Voice of alert

In this context, the first voices of warning began to be heard. From the Industrial Chamber of Clothing of Argentina (CIAI), they warned that "the brake on the entry of Chinese production in the United States may lead to diversions of trade to other destinations", which could mean for our country the entry of clothes at the liquidation price. "

In addition, they said that the devaluation of the yuan implied a further reduction of Asian goods. In this regard, they stated that the real exchange rate with China – that is, the attenuation of the inflationary effect in the two economies – had hardly any changed in July 2019 compared to July 2018, despite the sharp devaluation suffered by the Argentine peso. at this time.

Faced with this threat, they asked the government to implement "an active foreign trade administration policy, similar to that currently applied in the United States and several European countries".

There are other areas in which the trade war between the two powers is badyzed with great concern. From the Shoe Industry Chamber (CIC), his secretary, Horacio Moschetto, said that "one must be vigilant because China produces more pairs per year than the sum of the world's population. In other words, this country has an overproduction that still threatens markets like ours and more so in a context like this. "

According to the official, an anti-dumping measure is currently in force that prevents shoes from entering the country below 13.38 USD. "This, for the moment, prevents us from receiving all the garbage that circulates in containers around the world," he said.

Moschetto warned, however, that this measure of protection would expire next year. The sector should therefore be informed of the evolving conflict between these two countries and its effects on emerging markets.

In parallel, from the House of Toy Industry, they agreed that the sector was experiencing worrying international tensions.

"We see that China is becoming more and more competitive because of the devaluation and we are having trouble accessing the United States, so it will have to look for other buyers.. And in South America, Argentina is one of the main markets, after Brazil, "they said Professional.

The entity also noted that, if this phenomenon occurred, it would be felt mainly in the segment of low-end toys. "You have to be careful, to avoid getting into products with safety problems.We are afraid that between goods at risk, this does not comply with technical standards," they said.

Coface, a company specializing in credit insurance, wrote a report in which it warned that economic expectations had deteriorated sharply throughout the Asian region and that more than 50% of companies in Hong Kong, China, from Japan, Singapore and Taiwan They are expecting growth in 2019, partly because of the trade war. These factors only ratify a potential scenario of trade diversion.

The reasons for the conflict

For badysts such as Marcelo Elizondo, one of the roots of the problem between the two powers, although not the main one, is linked to the record trade deficit of the United States for imports from China.

According to the Department of Commerce, in 2018, the total of reds reached $ 621 billion, the highest level since 2008. It should be noted that, Of this total, China accounted for 419 billion USD, with an increase of 12% over the previous year.

The main US imports are consumer electronics, clothing and machinery.

However, according to Elizondo, "a much more strategic problem is at stake". Then, connect the bracelet between the two giants with a fight in the background for the technological field.

"The conflict between the United States and China is not commercial, but political and strategic. Therefore, its resolution depends on the political agreement between the leaders of the two superpowershe points out.

For the expert, the issue, rather than the mega-import deficit that Washington is complaining about, is the future management of technology through the intellectual property of US companies. And the White House accuses Beijing of appropriating this strategic information.

According to a report by the DNI consultant, Trump refers to China for applying restrictions on licenses that he considers arbitrary, unfair and abusive technology transfer agreements and even an intrusion into US computers by Chinese organizations .

The central point is that any company wishing to enter or produce in the Chinese market – be it a computer company or a car manufacturer – is obliged to form a joint venture with the Chinese government.

And, as a result of this union, he must share software, patents and technological secrets that, later, supposedly, the Asian giant would appropriate and use them to produce copies losing billions of dollars to American companies.

"The bottom line is that there is a very strong controversy about global leadership, both economically and technologically. With the arrival of Trump and his "Make America Great Again" philosophy, the United States has made it clear that it will not report. Elizondo concluded.

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