MONTEVIDEO: Leaders of the South American trade bloc Mercosur agreed here to temporarily raise tariffs on products coming from outside of the trade zone, to offset "trade imbalances" caused by the global financial crisis.
Argentina, Brazil, Paraguay and Uruguay -- the core Mercosur nations -- late Tuesday authorized tariffs to be raised to up to 35 percent, the maximum allowable under WTO rules.
Supporters insist the move was needed to protect local products from cheap foreign imports, with Brazilian President Dilma Roussef saying Mercosur countries face "very unfair competition" due to the crisis.
"It is a brave and wise decision, and one that respects the rules of the game set by the World Trade Organization," Rousseff said Wednesday, a day after the measure was approved at a summit of the group's presidents in Montevideo.
Mercosur should build a "better union" to defend itself from an "invasion of products from abroad," Brazilian Finance Minister Guido Mantega said Monday.
Latin American countries worry that trade pressure could undermine the region's strong economic growth, expected to be about 4.3 percent.
The tariff increase, pushed by Brazil and Argentina, was intensely debated at the Tuesday presidential summit. The bloc's two smaller members, Uruguay and Paraguay, approached the measure with caution.
Both Argentina and Brazil had already taken unilateral measures to protect their industries.
Argentina imposed anti-dumping measures and other restrictions on Chinese products, while Brazil in September slapped a 30 percent tax hike on imported vehicles with content that is less than 65 percent produced in the Mercosur region.
Uruguay supported the measure after receiving a "total commitment" from Rousseff that there will be no problems with Uruguayan exports to Brazil, its largest trading partner, Uruguayan Industries Minister Roberto Kreimerman told AFP.
Kreimerman said Uruguay "understands" that the two larger nations need the higher tariffs to defend themselves against an unpredictable global situation. "But it is the region as a whole that will grow or not grow," he said.
Considering the rise in tariffs as protectionism "is a mistake," said Vera Thorstensen, an economist with the Getulio Vargas Foundation Global Trade Center.
Thorstensen argued that countries like South Korea, the United States and China have undervalued currencies, and said: "If they are using currency exchange (to defend their economies), then Brazil has the right to raise tariffs."
Economist Martin Burgos cautioned that a tariff increase has "two important limitations" -- first, that tariffs can only go up to 35 percent under the WTO rules and second the difficulty of setting the same tariff for all Mercosur members.
This "implies an important decrease in individual sovereignty," Burgos said. "The different economic structures of the four countries tend to clash with the mere idea of a single tariff structure," he said.
Copyright AFP (Agence France-Presse), 2011
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