Trump’s ‘America first’ policy hits Argentine biodiesel producers, ‘good friend’ Macri

Trump’s ‘America first’ policy hits Argentine biodiesel producers, ‘good friend’ Macri

December 4, 2017 21:49 - To workers in this sleepy riverside town fueled by agriculture exports, President Trump’s promise to focus on “jobs, jobs, jobs” sounds more and more like he is coming for theirs.

PUERTO GENERAL SAN MARTIN, Argentina

Their worries stem from what, aside from the Trans-Pacific Partnership withdrawal, amounts to Mr. Trump’s most tangible “America first” moment on foreign trade: the Commerce Department’s move last month to slap a 70-plus percent tariff on imports of Argentine biodiesel because of what U.S. officials say are unfair government subsidies.

That decision to effectively cut off Argentine producers, who the department says benefit from “unfair government subsidization,” was widely seen as a slap in the face of center-right President Mauricio Macri, a fellow businessman whom Mr. Trump has called a “great leader” and “my good friend for many years.”

The debate over biodiesel, a renewable fuel made from vegetable oils, animal fats or old restaurant grease, is shaping up as a classic case study of how Mr. Trump’s aggressive moves to reshape U.S. trade policy are clashing with other priorities, complicating relationships with longtime allies such as South Korea, Japan, Canada — and Argentina.

Amid the thick smell of soybean oil at Puerto General San Martin’s Terminal 6 — a sprawling industrial complex and port that each day processes some 1,650 tons of biodiesel fuel — workers fret less about Mr. Trump’s willingness to cross an ally and more about what “America first” means for their own future.

“We’re very worried about the situation with the American market,” 30-year-old chemical technician Maximiliano Martina, a 10-year industry veteran, said as he monitored a console with a half-dozen computer screens. “I don’t know much about the [trade] barriers and all that, but I’d like [Mr. Trump] to buy from us.”

Mr. Martina’s boss, Juan Carlos Vilanova, goes out of his way not to scare his employees. But production has taken a big hit — it’s down to 60 percent of pre-tariff-hike levels — and in the two biodiesel plants he oversees, up to 40 jobs could be in danger.

“When the workers see the plants idle, they begin to worry; it creates uncertainty,” Mr. Vilanova said. “Besides, they read the newspapers. And when they read somewhere that the doors are closing for biodiesel, they worry, without a doubt.”

So the ubiquitous hard hats and chemical goggles do little to hide faces of palpable apprehension, along with a glimmer of hope that somehow — and sometime soon — Mr. Macri will change minds in Washington and Terminal 6 will pick up where it left off.

The U.S. tariffs have “halted everything you’d think about doing post-biodiesel, [or] on the basis of biodiesel, to develop new products. In fact, we’ve filed away a number of investments,” Mr. Vilanova said. “All industries generate a heap of activities that you cannot limit to 40 people who would be left behind.”

Boom and bust

In a town of 13,000 inhabitants dominated by massive soybean silos and 7,000-ton biodiesel tanks, Mayor Carlos De Grandis frets about the outlook for the local economy and municipal tax revenue as he reminisces on the 10-year biodiesel boom.

“Businesses catering to the industry’s needs — for example in engineering, maintenance, transport, logistics, metallurgy, hardware, catering and personnel transport — flourished,” he said. And “it is worth mentioning that both agricultural producers and local employees spend much of their income in the area.”

The trouble with the new tariffs, though, goes far beyond Puerto General San Martin. Biodiesel is big business in Argentina, the world’s fourth-largest producer and its largest exporter. Shipments to the United States last year accounted for some $1.2 billion, one-fourth of all local exports into the American market.

“For us, the soybean sector is very important,” said Victor Castro, executive director of the Argentine Biofuels Chamber. “It truly is one of the pillars of the Argentine economy.”

But the latest tariffs are far from the first scare for local biodiesel exporters, who have been haunted by legal trouble before. The very reason 96 percent of Argentine fuel last year ended up on the U.S. market was a four-year trade war with the European Union, which had long accused Buenos Aires of dumping and unfair subsidies.

The Argentine government took the case to the World Trade Organization, which eventually ruled in its favor. But this time around, the industry wants to stay away from that slow, bureaucratic route.

Argentina remains open [to negotiations], knowing that we are not incurring in any unfair trade practice — none,” Mr. Castro said. “The highest Argentine authorities have talked about the issue with [U.S. Commerce Secretary Wilbur L. Ross Jr.]. … The Argentine government is very committed.”

Mindful about future talks, the industry spokesman is even willing to give the Trump administration a pass.

“We can’t say that this has happened because of a new trend or a new protectionist impulse since President Trump took over,” he said. “With a different administration, it could have been the same. I don’t know.”

On the ground at Terminal 6, though, such diplomatic statements are harder to come by.

“When this new administration got started, it prohibited the import of [Argentine] lemons for 60 days, and those 60 days turned into more than a year,” Mr. Vilanova said. “So without a doubt, there’s an impulse in the current administration to close borders.”

Mr. Ross, in announcing new biodiesel tariffs on Argentina and Indonesia on Nov. 9, made no apologies.

“The unfair government subsidization of products is something the department takes very seriously,” Mr. Ross said at the time. “While the United States is committed to free, fair and reciprocal trade with all countries, the Trump administration will stand up for American workers and companies being unfairly harmed.”

U.S. biodiesel producers who petitioned the government to act echoed Mr. Trump’s rhetoric about the need to level the international trade playing field.

“The biodiesel industry has been injured for the past several years due to unfairly traded imports from Argentina and Indonesia,” said a statement by Doug Whitehead, chief operating officer of the National Biodiesel Board, calling the proposed duties on biodiesel imports “a step forward in ensuring the product that supports nearly 64,000 jobs is not undercut by unfair imports.”

The U.S. ruling may be new, but many Argentines feel it’s part of an old recipe to keep developing countries down — ironic, perhaps, since Puerto General San Martin sits just a couple of miles upriver from San Lorenzo, where its famous namesake in 1813 won a crucial battle over the Spaniards.

Although San Martin’s forces were able to eventually throw off the colonial shackles, economic independence escapes Argentina to this day, Mr. Vilanova said.

“Without a doubt, [industrial countries] don’t let you pass the barrier of basic production, of initial industrialization. … If you export crude oil, they let you in; if you export refined oil, they don’t let you in,” he said. “The level of tariffs said: ‘I don’t buy from you anymore. I don’t want you to sell.’”

Defining dumping

It’s an underhanded game in which the numbers speak for themselves, Mr. Castro said.

“In the case of Europe, to send biodiesel, they have a tariff of 6.5 percent. If you want to send oil for industrial use, the tariff is 3 percent. And if you want to send grain, the tariff is 0 percent,” he said. “But when you mirror that policy and apply higher export duties to products with lower added value to be able to compete, it’s ‘dumping,’ it’s a ‘subsidy.’”

To Rep. Alicia Ciciliani, whose constituency includes Puerto General San Martin along with the rest of Santa Fe province, such selfish strategies have no place in a global economy, and the Trump administration upping the protectionist ante was “short-sighted” and “very worrisome” for Argentina.

“One could look at it … as a trade balance problem, but it’s much more: You are forcing a country to return to production of primary products across its economy,” Ms. Ciciliani said. “And that is a great injustice.”

In her province alone, no fewer than 363 towns and villages rely primarily on soybean production, the lawmaker said, and taking competitively priced Argentine biodiesel out of foreign markets is bad for all sides.

“Why will consumers in the United States have to pay a higher price for biodiesel just to protect their producers with this type of a privilege?” Ms. Ciciliani wondered. “[Mr. Trump] could protect his citizens or his producers in many other ways. There is a long menu, and you have to be very creative in the 21st century.”

But as she praises Mr. Macri’s handling of the tariff controversy, the congresswoman, whose Socialist Party has long governed Santa Fe but, on the national level, is part of the opposition, acknowledges that the Trump administration has accomplished the unlikely feat of uniting Argentine politicians of all stripes.

In backing Mr. Macri’s decision to halt a planned $430 million purchase of four naval patrol boats from France over that country’s refusal to ease biodiesel trade barriers, Ms. Ciciliani even comes close to quoting from “The Art of the Deal.”

“That’s a negotiation,” she said. “That’s an efficient, permissible, legal and common-sense negotiation process.”

Thanks to a bounty of local media coverage and abiding unease about the U.S. government’s trade intentions, the fight over biodiesel has also brought common Argentines together in the way normally only the national soccer team can.

“At one point, I got on a taxi and the driver says, ‘You’re the biodiesel guy,’ ” Mr. Castro said. “And he says, ‘Oh, those Yankees, how they’re messing with us on that right now.’ Well, yes, it’s a very important matter for Argentines.”

www.prensa.cancilleria.gob.ar es un sitio web oficial del Gobierno Argentino