This is how US trade decisions affect Latin America

President Donald Trump announced that the list of countries considered to be developing, whose last update had been in 1998, is obsolete and countries such as Colombia, Brazil and Argentina, in South America, did not belong to that group.

According to El País de Cali, “ the objective of the Trump Administration is to lower the threshold at which the World Trade Organization, WTO, allows a country to subsidize products or industries (from 2% to 1%), in order to initiate countervailing duty investigations that allow action if the US authorities find that local businesses are being affected by unfairly subsidized exports . ” This, since the countries that were on this list received subsidies that favored that country in its commercial relations with the United States.

Thus, the US government considered it pertinent that some of the economies that have grown in the last 20 years (since the last revision was made), do not benefit from these subsidies . The decision, which affects some Latin American countries, was taken as part of a package of trade changes that the country is making. Its objective is to reduce the threshold to facilitate the penalty to other nations such as India and China, countries that are obtaining subsidies and benefits although their GDP is high.

This, beyond being an action against countries such as Colombia, Brazil, and Argentina, although they were also included in the changes, is shown more as a strategy against its great commercial rival: China , with whom it leads months disputed between sanctions and tariffs. This, since the list was so "outdated", that China was still benefiting, which the US government did not see viable.

The reactions

In the southern cone, the first reaction was that of the Brazilian government, which responded negatively and described the decision as "negative and illegal." The National Confederation of Industry (CNI, in Spanish) stated that this was a unilateral decision that did not take into account the considerations and parameters of the WTO.

Brazil, under the administration of Jair Bolsonaro, has a vision of sovereignty of its country, reason why it has rejected in many opportunities some commercial and diplomatic decisions of other countries. In the case of the latter fact, it stated that "the measure reduces the importance of the multilateral trading system and Brazil needs that system," according to DW. For Brazil, the fact that the decision has been taken unilaterally is a risk for what may happen next, as it considers that it should have been put to consideration by the WTO. Otherwise, the WTO authority is delegitimized and "for the Brazilian industry it is essential that the WTO remains strong and active," said Carlos Abijaodi, director of Industrial Development of the CNI.

Unlike Brazil's reaction, Colombia stated that, although being considered as a developing country brings some commercial benefits, having left the list would not represent drastic changes in trade relations.

The Minister of Commerce, Industry and Tourism, Jose Manuel Restrepo, told the economic magazine Dinero that "this decision is due to a change in internal regulation and that this applies only in the specific case of investigations to export subsidies." The decision only seeks to investigate certain exports to avoid affecting the US domestic market, so it has no effect on other scenarios.

Although the measure does open the door for future changes, Restrepo said it is not a matter of this moment and may not even happen. Colombia has a firm and stable FTA with the United States, in addition to favorable diplomatic relations.