Saturday, April 10, 2010

China bans Argentina soy-oil imports

Financial Times – Latin American leaders look to China / Financial Times – Argentina soya rift with China grows / BBC – China soya ban angers Argentina / Business Week – Argentina Soy Growers ‘Optimistic’ on End to China Oil Blockade / Merco Press – China allows unloading of Argentine soybean oil / Merco Press – China enthusiastic about reaching agreement over Argentine soybean oil / Merco Press – Argentina protests Chinese sanitary restrictions on soy-oil imports

The trade dispute between China and Argentina entered a new phase on April 1, as China imposed sanitary restrictions on all soy-oil imports. The new restrictions have resulted in an effective ban on Argentina soy-oil imports. Argentina Foreign Minister, Jorge Taiana, summoned Chinese ambassador, Gange Zeng, to Buenos Aires immediately to negotiate a resolution of the dispute. Experts view China’s new restrictions as a retaliatory response to Argentina’s recent allegations of China’s violation of anti-dumping trade laws. As a result of these allegations, Chinese footwear and textile goods became subject to import taxes. Chinese officials have viewed the anti-dumping charges as cover for Argentina attempting to protect domestic producers from competition. Chinese officials have denied that the move was retaliatory, insisting instead that it was purely a matter of safety. China, however, has built significant reserves in the first four months of this year, a move China likely made in anticipation of imposing an import ban on Argentina. China also has expressed a desire to lower imports by increasing domestic production of soya oil.

This recent response from China could prove to have a significant impact on Argentina’s economy. Latin American Countries are increasingly becoming dependant on trade with China. Reports show that Latin American Countries with higher integrated economies with Asia experienced less of a downturn during the financial crisis than their less integrated counterparts. In 2009, China imported 1.84 million tons of soy-oil worth $1.4 billion; the import ban could end up costing Argentinean famers upwards of $2 billion this year.

The ban has increased soy-oil prices in US and China. US producers will likely benefit with increased exports to China. One oilseeds analyst stated, “If it went on long enough, it probably would (benefit US soy oil experts) because Argentina is by far the largest exporter of soybean oil in the world and China is by far the largest importer. But that combination tells me that this situation might not last very long.” Analysts have also noted that the ban will likely be short-lived since China imports 50% of its soy-oil demand from Argentina and finding replacements for this amount of produce would not be easy.

On Thursday April 8, Argentina Agriculture Secretary, Carlos Cheppi, and Carlos of The National Food Health Service reached an agreement with Chinese officials to allow cargo ships already bound for China to unload soy-oil. Analysts see this agreement as a gesture of good faith and an indicator that the countries will likely resolve the dispute in the coming weeks.

Discussion Questions:

Is the ban a signal that China can and will impose its will on Latin American Countries, or merely a proportionate response to Argentina’s ban on certain Chinese goods that Argentina viewed violated anti-dumping trade laws?

What are the biggest risks facing Latin American countries with increasing dependence on trade relations with Asia?

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