I hereby adhere to the Anniversary of Customs and Customs Workers, which is celebrated on June 1st I do so with respect. I was legal advisor to the then Legal Affairs Department of that institution and I have been fortunate to have shared that task with hard-working, honest and efficient officials from whom I learned a lot during a decade of hard work with them.
In these lines I share certain reflections on the complex relationship between those who follow certain political guidelines and those who practice foreign trade. Within the possibilities offered by this space, I will try to objectify the ideas and highlight the need that we Argentines have to follow the path of our heroes, making our country a beacon of trade and progress for our posterity.
A brief history of international trade since the Second World War
Following the victory of the Allied countries in World War II, the United States and the United Kingdom worked hard to establish rules of conduct aimed at ensuring a smooth flow of international trade and peaceful systems for resolving disputes in the area of commercial exchanges, considering that these had been of great importance in the beginning of the armed conflicts that devastated the world in the first half of the twentieth century.
In a novel and extremely important policy for the future of our planet, the United States decided to make a huge investment in the restoration of a Europe devastated by war, both at a material and human level, through the Marshall Plan, in which it did not spare helping countries that were its enemies. At the same time, this was accompanied by other achievements such as the creation of the International Monetary Fund and the World Bank (Bretton Woods, 1944), the consecration of the Charter that created the United Nations Organization (San Francisco, 1945) and the obtaining of the General Agreement on Tariffs and Trade -GATT- (1947). From the entry into force of the GATT, a long period began in which armed conflicts decreased, a phenomenon accompanied by a notable increase in trade between countries of the world.
These initiatives were reflected in an advance in customs techniques aimed at revamping policies that, until then, were characterized by customs measures that were not collaborative with other countries, but instead by constant aggression and defense that involved hostilities parallel to war, in times when differences were normally decided by arms. The Marshall Plan motivated the installation of a cooperation office in Geneva that modernized and harmonized the vocabularies of the countries to unify customs institutions; starting from a single nomenclature for the classification of goods, a system of methods
for the valuation of goods for the purpose of determining customs duties, and similar techniques for the drafting of traditional import and export regulations. This made it possible to rapidly advance the idea of European economic integration and these same tools were used by the nascent Customs Cooperation Council (today WCO), with the aim of establishing a harmonised system of trade at customs level between the various customs authorities of the world.
As can be seen from a reading of the United Nations Charter, the ideas of the new world leaders were based on regulating civilized standards of conduct that would prevent war, achieve peaceful settlements of disputes and facilitate international economic cooperation through regional agreements that would gradually free up suspicions between neighboring countries, making it possible to expand their markets to obtain greater productivity at low costs.
In this context, the Latin American Free Trade Association (ALALC) was created in 1960, which was later modified in 1980 by the Latin American Integration Association (ALADI). The latter, by enabling economic complementarity agreements not subject to most-favored-nation treatment within ALADI itself, generated a rapid reduction in tariffs and trade measures that, at the end of the 80s, gave rise to the Integration Agreement between Brazil and Argentina, which was later expanded in the Mercosur Treaty with Paraguay and Uruguay.
The beginning of these commercial integrations made possible a notable increase in trade between the contracting countries, whose observance was characterized by a system of dispute resolution between countries, through Ad-hoc Arbitration Courts and which was later expanded with an appeal body called the Permanent Court of Review, which is still in force today. It cannot be denied that this evolution in the commercial exchange of South America and ALADI was accompanied by the creation of the World Trade Organization (WTO) created in the Uruguay Round of the GATT that culminated with the 1994 Agreement; which, in turn, contemplated a Dispute Settlement Body at a global level with an appeal body whose judges had greater stability.
In the early years of Mercosur, the differences in interpretation of the Treaty and the decisions of the Common Market Council, Regulations and resolutions gave rise to several arbitration awards that began to establish criteria that gave a certain certainty about its scope. However, from 2002 onwards, the political interests of the most important countries attempted to override the agreed norms, relativizing the rigor of these when they affected their national interests.
Since 2002, the number of cases in which this dispute resolution system was used has been decreasing, to the point where it is now practically inactive, giving rise to the question of what was the reason for this apparent failure of a system that promised to be exemplary at the time of its creation.
Government instability and the difficulties caused by changes in trade policies
The answer to this question, closely linked to a downward trend in respect for the rules of conduct of trade exchange created by the GATT and reinforced by the WTO, can be explained by the instability of the political tendencies that began to emerge, not only in the new governments that were succeeding one another in Latin America, but also in the positions that even some leaders of the most advanced countries began to assume.
In Latin America, countries that had been characterized by maintaining market-based economic policies began to abandon these practices.
At the same time, in Asia, the People's Republic of China managed to receive a huge investment from multinational companies based in the United States. These, for reasons of lower costs, installed some factories with relevant technology in that country. This was parallel to the opening of free market rules in important provinces of the Chinese coast that generated the confidence of the free world that China had abandoned the criterion of state centralization of the economy. However, after China was accepted into the WTO and managed to be considered a country with a market economy, measures began to be seen such as the appropriation of technology obtained by foreign subsidiaries in its country, its use in competition with those who had been the source of these production methods, the maintenance of certain behaviors that curtailed freedoms and civil rights of Chinese subjects, etc. This led the then brand new President of the United States, Donald Trump, to establish tariffs so that the production of elements essential for national defense would not be affected. This seriously affected Argentine exports of steel and aluminum to that country, which fortunately was able to be resolved because our country is considered an ally in supporting the resolution of the United Nations Security Council in the conflict generated by Iraq's aggression against Kuwait in 1990.
However, Trump's policy considered that China's disloyalty, by disguising itself as a lamb to decimate the flock once inside the corral, deserved special sanctions that did not go through the prior authorizations of the WTO dispute settlement system. This attitude, together with the fact that President Trump vetoed the nominations of replacements in the WTO Appellate Body because he considered that it did not provide sufficient satisfaction to his country's claims, broke in a certain way the policy expressed by the United States, of respect for the rules that that same country had enshrined seventy years earlier. It was a bad example for other countries that were waiting for that opportunity to relax the proper compliance with the rules of conduct, in order to assert the specific weight of their power within the organization.
The Mercosur Crisis
As for the integration of Mercosur, which was so important for Argentina, the enthusiasm of the member countries was waning. It was not surprising, then, that the new President of Brazil, Jair Bolsonaro, perceived himself as the leader of an important industrial country that would allow him to go beyond the conduct not permitted to other South American countries. Other examples could also be found in leaders of important countries. This resulted in a relaxation of the disciplines that should guarantee respect for the trade rules of the member countries of the WTO and other institutions, such as regional ones.
Integration agreements, including Mercosur, are based on expanding markets as a way of reducing costs through profitable volumes. This implies dealing with competitive prices; that is, “market prices,” which means that they are the result of supply and demand in relation to dimensions that go beyond the internal trade of a country. In other words, participating in a regional economic integration organization implies sharing criteria compatible with the market economy. This has become difficult in Latin America because the political instability of our countries is affected by radical changes in government policies that follow one another, going from left to right and from right to left. This is not only happening in our country, but has also happened in Chile, Uruguay, Paraguay, Bolivia, Peru, Ecuador and Colombia.
The need to open the economy and do so with due caution
With respect to our country, with all due respect to our authorities, I would like to consider that it is not possible to expect anything fruitful from a country that closes itself off economically within its own borders, isolating itself from the world. This situation prevents it from negotiating with other countries under advantageous conditions that enable profits for commercial agents and for the country itself. The consequence is the abandonment of the National State of the legitimate concern it should have for international trade. This not only affects the profitability of the merchant, but also the growth of the country's Gross Domestic Product.
Let us remember that at the dawn of the May Revolution, Mariano Moreno in his famous Representation of the Landowners addressed Viceroy Cisneros expressing: “There are truths so evident that reason is insulted by trying to prove them. Such is the proposition that it is in the country's interest to freely import goods that it does not produce or have, and to export the fruits that abound until they are lost due to the lack of an outlet… Nothing is more convenient for the happiness of a country than to facilitate the introduction of goods that it does not have, and the exportation of the artifacts and products that it produces.”.
Our current administration responds: Faced with the lack of foreign currency, with the closure of imports; and faced with the increase in public spending with the increase in taxes. This, far from solving our problems, makes them worse. This is aggravated by the fact that the bulk of the income to the National Treasury in terms of exports comes from the countryside and that one of its most lucrative products is soybean production, whose tax is intended to be applied at a level of 30% (having reached 35%), to which we must add an official exchange rate in which the exporter must sell a currency that was worth $200 not long ago for the modest sum of $100.
These attitudes merit the following reflections:
1°) The State, through the Central Bank, has adopted a monopoly on the purchase and sale of foreign currency, not allowing individuals to freely buy or sell it at the market value. However, it is not in a position to meet the requirements of this monopoly, as it lacks the foreign currency required to meet its commitments, thus frustrating the function it itself assumed.
2°) It suffocates the agricultural producer with export duties (which are intended to be levied at a level close to 30%), plus taxes on profits (35%), plus provincial and municipal taxes, plus the invisible hidden taxes that we call “exchange rate differences” (approximately over 60%), and the inflationary tax (approximately 5% monthly), the latter unfairly shared by all the inhabitants of Argentine territory. If Argentine justice decided to face the issue of confiscation by accumulation of taxes from different jurisdictions and organizations, it could end with a terrible plunder that cries out for the clear recognition of article 17 of our National Constitution.
3°) The “exchange rate difference” on the price received by the exporter and appropriated by the Central Bank of the Argentine Republic, has the same effects as a tax on the producer’s profits, without any respect for the legal reserve established in articles 4° and 75, paragraph 1° of our National Constitution, which categorically require the prior sanction of the National Congress. It is not admissible that the fact of calling this exaction by the name “exchange rate difference” or another similar one, prevents a judge of the Republic from noticing that we are facing a payment obligation made by a body of the Public Administration without a law that authorizes it, because as our Supreme Court says, the judge must be aware of the essence of the institute that he analyzes more than the name that we assign to it.
4°) The Central Bank, through its Communications, arrogates to itself the issuance of legislative regulations, prohibiting imports or, in other words, suspending, for periods equivalent to six months or more, the payment abroad of the sale price to the foreign supplier, placing the Argentine consumer in the situation of not importing or guaranteeing and paying the financial cost that the delay in payment implies. In our constitutional order, the prohibitions on the activity of the inhabitants of the Nation must be supported by law (art. 19 of the National Constitution), and can never be admitted through a regulatory route that also does not comply with the essential requirements of valid administrative acts such as those of competence, justification and prior publication.
5°) These measures imply preventing or, at least, making imports or exports more difficult on the basis of rules that are not justified by international treaties that, according to art. 75, paragraph 22 of the National Constitution, have constitutional hierarchy, such as the GATT and the WTO.
6°) Beyond the legal aspect, it is unreasonable that a country that lacks the necessary foreign currency to pay the international debts of the State itself and of its individuals, should close itself the doors to the entry of what it so badly needs. What it gains in taxes to cover the expenses, it loses to a greater extent in maintenance, eventual opening of new markets, and income from abroad, which is what the country needs. It does not seem a decision compatible with the public office that must be honored, to privilege an eventual electoral advantage in exchange for the basis of the future ruin of our own Nation.
7°) When our Constituents of 1853 drafted our Constitution, the drafting Commission composed of the representatives Pedro Díaz Colodrero, Martín Zapata, Juan del Campillo, Manuel Leyva, Pedro Ferré, Juan María Gutierrez and José Benjamín Gorostiaga, stated in their meeting on April 18, 1853: “It is necessary that the practice of the constitutional regime to which we aspire, at least for our successors, provide security for life and property, means of work, value for our lands and products, and facilities for trading with foreign peoples…”
8°) We consider it necessary for our leaders (and I am not referring only to the current ones) to take into account that closing trade with the outside world is shrinking our economy. Opening up does not imply that it should be done indiscriminately and without clear criteria of the reciprocity that should be obtained in each particular case. We are not of the idea that free trade areas should be agreed with any country. We must know what risks we expose our country to when we establish a trade agreement, since it could affect production already established in our territory.
Only with more exports will we be able to make more imports and generate a greater supply of inputs for production at reasonable costs that will allow us to compete on price and quality with foreign products. Refusing to trade means becoming increasingly stuck in the past and falling behind other countries, losing precious time to increase our own improvement and commercial expansion.
Criticism of merchants for the fact of being merchants
Finally, we repeatedly hear government officials criticize merchants for not looking out for the interests of the State. This is equivalent to the criticism that the inhabitants make of government officials for not looking out for the interests of the State rather than the interests of the government. We must bear in mind that for merchants, the motive of their profit is decisive. It is the reason for the existence of commerce. Commerce implies a relationship with antagonistic interests between buyers and sellers that generate a competition in which both parties involved try to gain the maximum and lose the minimum. This struggle takes place in the field of supply and demand. The loss is related to the decrease in the profit margin and the corresponding increase in operating costs. This makes the technique of commerce consist of obtaining a greater profit at the lowest cost.
The merchant obviously seeks his personal benefit, since he is a person whose function is to make a profit. Referring to certain qualifiers that reflect a higher value of certain individuals that become their defining characteristic, Husserl, in his Logical Investigations, said that the characteristic of a warrior was “to be brave”, because that is the most notable characteristic that makes up the concept of a “good” warrior. Well, the notable characteristic of the “good” merchant is to be the one who loses the least, so whoever does not comply with this guideline cannot be considered a good merchant. In exchange relations (buying and selling) justice is based on the proportionality between the benefits. For this reason, the criticisms that were already made in England in the times before Adam Smith regarding merchants who did not care about the interests of the Nation were criticized by expressing that this implied ignoring the nature of people, with the addition that the personal interest of the merchant in making money is not incompatible, but is usually convenient for the general welfare. Free trade is desirable, not only because it is the lesser of two evils, but because it is positive for the general welfare.
Enrique C. Barreira is a lawyer, he was senior advisor to the Legal Affairs Department of the National Customs Administration, he was a member of the Drafting Commission of the Customs Code, he is a postgraduate professor at the UBA and other universities in the country, a member of the Argentine Institute of Customs Studies and a founding member of the International Academy of Customs Law (ICLA).
