Industry support at high cost We provide in this summary one example of the support the government of Argentina has provided for selected industries or regions, the incentives for the assembly of certain electronic products in the southernmost province of Argentina, the island of Tierra del Assemblers on Tierra del Fuego are exempt from tariffs on inputs and taxes on production that are applied on the continent. (Protection against imports of assembled telephones includes a requirement that each visitor entering Argentina identify his or her cellular telephone, by brand and model, on the customs entry form.) Following creation of these incentives in late 2009 the assembly of cellular phones on the island jumped from 400,000 units in this year to 4,900,000 in 2010. As to the effects of these incentives, manufacturing employment in Tierra del Fuego increased by around 2,800 in 2010; at a cost we estimate of US$230,000 per job per year. The program has not brought new technology to Argentina, to qualify for the tax exceptions it is sufficient that the user manual and the warranty card be provided locally, along with packaging and labeling materials. Export restrictions During the last decade Argentina implemented widespread export taxes. These rates reached a peak around mid-2008 and are still high for major cereal products: wheat 23%, maize 20% and soybeans 35%. Starting in early 2006, these barriers were reinforced with quantitative restrictions on exports of wheat, maize and bovine meat. The restrictions on exports have brought about a significant shift of cropland from bovine cattle, wheat and maize to soybean cultivation; soybean exports not being subject to quantitative restrictions. These restrictions, like the imports restrictions, have been administered through informal procedures but in this case questions about administration prompted some members of the lower house of Congress (Cámara de Diputados) to propose the creation of a special investigation commission to look into possible irregularities of the administrative office responsible for the allocation of export quotas and the distribution of food subsidies to processors. Export taxes are escalated e.g., higher on wheat than on flower or bread. As this – implies, farm gate prices have declined by more than food prices, suggesting that the rents created by the export restrictions have been in significant part captured by processors. Domestic political support More by default than public debate, domestic politics have generally supported the restrictive measures. The Government lost its majority in the lower chamber mid-term elections in 2009 but retained control of the Senate. In October 2011, the President was
Industry support at high cost We provide in this summary one example of the support the government of Argentina has provided for selected industries or regions, the incentives for the assembly of certain electronic products in the southernmost province of Argentina, the island of Tierra del Assemblers on Tierra del Fuego are exempt from tariffs on inputs and taxes on production that are applied on the continent. (Protection against imports of assembled telephones includes a requirement that each visitor entering Argentina identify his or her cellular telephone, by brand and model, on the customs entry form.) Following creation of these incentives in late 2009 the assembly of cellular phones on the island jumped from 400,000 units in this year to 4,900,000 in 2010. As to the effects of these incentives, manufacturing employment in Tierra del Fuego increased by around 2,800 in 2010; at a cost we estimate of US$230,000 per job per year. The program has not brought new technology to Argentina, to qualify for the tax exceptions it is sufficient that the user manual and the warranty card be provided locally, along with packaging and labeling materials. Export restrictions During the last decade Argentina implemented widespread export taxes. These rates reached a peak around mid-2008 and are still high for major cereal products: wheat 23%, maize 20% and soybeans 35%. Starting in early 2006, these barriers were reinforced with quantitative restrictions on exports of wheat, maize and bovine meat. The restrictions on exports have brought about a significant shift of cropland from bovine cattle, wheat and maize to soybean cultivation; soybean exports not being subject to quantitative restrictions. These restrictions, like the imports restrictions, have been administered through informal procedures but in this case questions about administration prompted some members of the lower house of Congress (Cámara de Diputados) to propose the creation of a special investigation commission to look into possible irregularities of the administrative office responsible for the allocation of export quotas and the distribution of food subsidies to processors. Export taxes are escalated – e.g., higher on wheat than on flower or bread. As this implies, farm gate prices have declined by more than food prices, suggesting that the rents created by the export restrictions have been in significant part captured by processors. Domestic political support More by default than public debate, domestic politics have generally supported the restrictive measures. The Government lost its majority in the lower chamber mid-term elections in 2009 but retained control of the Senate. In October 2011, the President was
Michael_Finger_Sustaining_Trade_Reform_Working_paper_draft_Nov09_12.docx