Trade agreement: Milei and His Majesty Trump

• As has been happening with economic policy developments in recent months, this Thursday it was announced through the White House that the United States and Argentina agreed on a “Framework for an Agreement on Reciprocal Trade and Investment.”

• The Framework for an Agreement was announced simultaneously with other similar ones that the United States reached with El Salvador, Ecuador and Guatemala. This reveals that Argentina operates as another piece on the board of the United States in its strategic dispute with China in the territory of Latin America.

What has been announced so far?

• For the benefit of the United States, the White House reported that there will be preferential access to the Argentine market for “certain medications, chemicals, machinery, information technology products, medical devices, motor vehicles and a wide range of agricultural products.”

• He also highlighted that Argentina “has opened its market to live U.S. cattle, has committed to allowing the entry of U.S. poultry within one year, and has agreed not to restrict market access for products that use certain terms related to cheeses and meats.”

• Additionally, “facility registration requirements will not apply to dairy products imported from the US. Both countries will work together to address non-tariff barriers that affect trade in food and agricultural products.”

• What has been announced so far exhibits a great asymmetry between the detailed benefits that the United States will receive and those that Argentina will receive, where there are few details.

• The statement generically states that the “United States will eliminate reciprocal tariffs on certain unavailable natural resources and unpatented products for pharmaceutical applications.”

• However, there are expectations in several areas, among them that the United States will increase the quota of Argentine meat that can enter its market from the current 20 thousand tons to 80 thousand tons.

• If this increase occurs, an additional 2% of Argentina’s annual beef production would go to the northern country, to a market with higher prices. Therefore, it will imply upward pressure on meat prices in our country. Argentine meat exports currently pay a 10% tariff in the northern country, which could be reduced to 0%.

• In the poultry sector there is a lot of caution because the White House statement talks about the entry of poultry meat from the United States to our country, but did not indicate any reciprocity for local poultry meat to be exported to the north. In pigs there is a similar situation as in poultry.

• Where the agreement seems most cloudy is in relation to the commitment to stabilizing the “world soybean trade.” It is not clear what this commitment refers to, but there are those who suspect that it could imply a benefit for American producers, who compete with Argentina and Brazil in the Chinese market, with whom the United States maintains a trade war.

• As for biodiesel, which in our country is obtained mainly from soybean oil, entry to the US market has been blocked since the previous government of Donald Trump, due to the tariffs that it applied in 2016.

• Citrus exports are also blocked. In the sector there is an expectation that Argentine lemons can enter the US market with a 0% or 10% tariff.

• On steel and aluminum, products whose imports from the United States are taxed with a 50% tariff, it is expected that for Argentina there will be a reduced tariff with an import quota.

• The expectations about what Argentina can obtain, to be precise, include the expectations that the country’s richest businessmen can obtain, such as Madanes Quintanilla, owner of Fate and Aluar, which has a monopoly on the production of aluminum. The same can be said with exports of lemons or meat, which would benefit barons from the province of Tucumán or the large meat processing plants that concentrate exports.

What is the current business relationship like?

• Regarding the content of trade, as of September the main export products were crude oil and gold for non-monetary use, which represented 58.0% of total sales to that destination. Likewise, the main products acquired were airplanes and other aircraft; and bituminous coal, which is used as fuel and as raw material in the steel industry.

• As of September of this year, Argentina exported US$5,689 million and imported US$5,264 million. Therefore, it obtained a trade surplus of U$425 million. This is important because Trump’s policy is to reduce its trade deficit with the rest of the countries, so the agreement could lead to Argentina losing its surplus.

• Currently, the northern country is Argentina’s third trading partner, behind Brazil and China. In the 1990s, the United States surpassed China, but it lost that place, which it surely now wants to regain.

A new Roca-Runciman Pact?

• The announcement of the Framework for an Agreement was reminiscent of the Roca-Runciman Pact that Argentina reached in 1933 with Great Britain. It was signed by Sir Walter Runciman, the British Trade Minister, and by Julio Argentino Roca (Jr.), the Argentine envoy to London.

• Why is that pact remembered? Because it was also signed in the middle of a trade war, like the current one unleashed by Trump, but at that time with a strong impact on the breakdown of trade relations on a global scale.

• But, also, because that was a totally beneficial pact for Great Britain: this country would buy Argentine meat as long as the prices were lower than those of other suppliers and through British meatpackers. Not only that: Argentina promised not to authorize the installation of new Argentine refrigerators.

• In addition, imported British products were exempted from taxes. By 1935, the Central Bank was created with a strong presence of English officials. The foreign currency that Argentina obtained from exports was mainly destined to pay debt and imports to Great Britain. Among other details, the pact had a background of fraud and corruption that was denounced by Lisandro de la Torre.

• Let us remember that the Framework for an Agreement is part of a deepening of relations between Milei and Trump, which includes the “swap” of currencies, the intervention of the US Treasury in the Argentine exchange market and its intermediation in a buyback of public debt that the Minister of Economy, Luis Caputo, negotiates with JP Morgan.

• It must also be remembered that Trump is offering fundamental support to Milei in exchange for Argentina limiting China’s entry and facilitating the access of Yankee capital to mining resources and strategic infrastructure, such as nuclear energy, or paving the way for the installation of a US base in Tierra del Fuego.

• Milei seeks a regressive restructuring of the economic structure, based on the interests of imperialist financial capital to consolidate a more backward, more primarized and more dominated Argentina.

• Guillermo Leguizamón, another of the negotiators of the Roca-Runcima pact, stated that “Argentina is one of the most precious jewels of his gracious majesty” of Britain. History finds common patterns: today Milei kneels in front of His Majesty Trump. But also in the face of a power in decline, such as the British crown was then.