International Trade
The history of Argentina in the international trade relations in the 20th Century is highly critical.
Across the board, it has experienced downfalls and developments from the implicit thresholds propagated by international trade. The international trade has been though various economic integrations with other countries on both bilateral and multilateral scales. Various trade relationships have left the country in a state of various economic states some of which are imbalance of payments due to high imports than exports, high external borrowing to refuge its low state of economic situation in the late 1990s and early 2000s. Either, various trade relations have also provided tools for various economic relations with the global trade partners both on the positive and negative image.
The foundation of Argentina has its roots in the year 1516. The country, however, experienced a slow growth rate in its early ages under the colony of Spain. Various economic situations and political scenarios describe the state within the 20th century.
The political system can be described as being highly volatile and experiencing various dimensional changes since then. Either, great economic exploitation went in the 20th century to mark various historical regimes in economic activity. However, in all its economic dispensations, international trade had been highly attributable in describing the current situation of the country. Economic integration and international trade have provided it with an exploration of the global economic phenomenon with various impacts both of positive and negative capacities.
The Economic activity within the country was provided by its foreign trade activity. This is mainly the MERCOSUR partnership. The percentage contribution of its GDP by foreign exchange was around 11% in 1990. Through the development of international trade structures, the same grew up to 17% in 1999.
The exports provide 7% of its GDP. The high increase in economic growth and development which has even lead to a reduction in the trade deficit (balance of payment) has been mainly through the effects of reduced tariffs above that of an imposed industrial activity within the domestic situation. For instance, the existing deficit of 5 billion US dollars in1998 reduced to 2.2 billion in the year 1999. Either an economic surge developed in 1999 when its exports reduced y 12% with imports falling by 19% on the other side.
However, the largest trade deficit among its trade partners is the 2.4 US dollars owed to the United States. Towards the late 20th century, its main exporting partners included 24% for Brazil, 21% for the EU and 11% for the United States. Either, its importing partners were 22% for the United States, 21% for Brazil and 28% for EU.
To Argentina, MERCOSUR is the main path through which its exports pass through. This organization comprises of Argentina, Paraguay, Uruguay and Brazil, Bolivia and the Chile Republic. The dominant member of this organization is Brazil with an account of 70% in the total GDP value of this organization. Elsewhere, Argentina has evaluation of 27%. Through MERCOSUR, adequacy in the intra-trade led to an increase in its GDP from $ 4 billion to $23billion in 1991 and 1998 respectively.
Down the line since 1975, Argentina has continued to enjoy the benefits of increasing economic activity.
For instance, it had the US $ 2.96 and 3.947 exports and imports respectively I n 1975. In 1980, the same balance was the US $8.02 and 10.54 respective before getting to the US $8.39 and 3.81 in 1985. In 1990, Argentina enjoyed the least trade deficit with US$12.53 in exports and US$4.076 in imports. However, in the period between 1990 and 1995 trade was not highly favorable and the trade deficit went surging down to provide an almost equal state of exports (US$20.967) and imports (US$20.122) in 1995. However, distortion in the foreign trade saw the country at a relatively poor state in the balance of payment exports being US$25.227 and imports as US$31.402 in 1998. The increase in international trade can be allied to the effects of reduced tariff rates.
This marked a close to 90% duty free trade relations in the intra-MERCOSUR activities. However, this was imposed on those goods which come outside the organization. To the company, the total imports subject to tariffs is close to 85%.
During the late 20th century, it had various negotiations for entering into agreements of trade with Mexico, the Andean Pact and the EU. Since its existence, its high support has been levied to develop Free Trade Area for Americas (FTAA), where all the nations within the Americas Western Hemisphere would participate. Either, the greatest agreement was a bilateral relation that was signed for investment purposes between it and the United States.
The aim of agreement was an invitation in the investment within its economy by US companies. Currently, the country has more than 56 other trade treaties with various global states. The high scale of its foreign trade is however attributable to the epochs of fixation of its currency as been the United States dollar. According to late 20th statistics, Spain occupied the greatest part in its investment holdings with the US voted as the second. In 1999, $16 billion were the direct foreign investment by the US, with huge concentration is the manufacturing sector ($3.65 billion) real estate, petroleum ($1.565 billion) banking and finance. (Johnson, Turner, 2003)
To attract mort foreign investment within its contemporaries, the country uses the free trade zones which give incentives to such investors. According to statistics, its economy is comprised of 3 such large zones above various minor zones. The major is in a Plata Free Trade Zone (largest) with its establishment been in 1997.
This zone comprises of mainly commercial activities with various huge companies such as the Zenith sharp, ford, Nike, General Motors, Pioneer, Nissan, Daewoo and Mazda.
Generally, the export and import commodities are diverse with the basic export commodities being agricultural commodities; Soya bean products make 22.25% of its export capacity. Either, cereals which include both maize and also wheat goes to being 8.5%. Either the country exports petroleum products which make 20% of its exports amounts.
Export on Bovine products which include milk, beef and leather make 7% for each to its total exports. Other manufacturing industries provide 11% in exports. Elsewhere, it exports fruits, copper, grapes, fish, sheep products, timber, papers, tobacco, aluminum and cotton. Its major imports are medical products, chemicals, machines, expert services and above others.
The 20th Century has been a hallmark great trade inflow event in this country. A threshold of low trade outflows than inflows considerably marked its foreign trade in the period from 1950 to 1975. This was due to the un-favorability of the macroeconomic structures which provided high imports than exports. Various trade relations and agreements such as high tariffs from the importing against free zones in its domestic economy.
However, since 1975, the country experienced relative good conditions in its trading activities. Trade inflows were now increasing than the outflows. (Kline, 2005) This was from its new structure in trade policies which restructured the cost of inflows to become more affordable to foreign investors. Either various ties of economic integrations invited in more inflows. Various trade relations both of bilateral and multilateral capacity have been operational in Argentina.
Within the international trade system, the tariff systems have also been changing considerably to operate within considerable standards of economic activity. However, the unfavorable trade deficit between1950 and 1975 was a result of relatively high tariffs which were disincentives to the foreign investors.
High export tariff within the domestic level was also an inhibitor for the high scale of exports. Since 1975, economic integration through economic blocks where duty-free trade was provided by it. The general duty-free trade and reduced tariffs for exemplary import commodities provided grounds for high trading relations. (Dunninq, 1999)
The aspect of exchange rates has done a lot in developing the international trade system and capital movement in and out of the country. The relationship between fixed exchange rate and floating exchange rate has been evident in the Argentina economy. However, fixed exchange rates in the past have been the benchmark for speculative attacks.
With speculative attacks both domestic and foreign investors have engaged in the behavior of pulling out capital from the country to the foreign/neighborhood due to the economic thresholds of fixed exchange. These have been due to the mobility of capital from one country to another and also the international possibilities of trade between countries. The final impacts of speculative attacks were high capital outflows from Argentina in search of higher benefits for capital investments (monetary).
However, the development of float exchange rate since early 1980’s have provided conditions with which investors can change with the economic situation in the investments. Changes in the economies provide structures with which the rate of investment benefits can change according to the demand of economic situation. Investors can therefore adjust the investment in relation to the situation so as to reap the most optimal benefits. Floating exchange rate has been a factor of importance in every circumstance which leads to change in the investors’ condition. However, floating exchange rates have helped to provide mobility into the investment pattern by foreign investors. (Boyer, Young, 2005)
Currently, the country is embracing a good economic climate provided by positive trade relations. However, the good economic situation and international trade relations are only improvements from the massive economic recession between 1999 and 2001. The foreign exchange sector is highly growing and compounded by various variables which shape its context. High export overhauls the imports which provide a solid support of benefits in the foreign exchange. Economic integration is also a continued phenomenon with various ties under development.
Generally therefore, Argentina does not hesitate to comprehend of the role of foreign exchange to its economic activity.
Reference
Argentina: International Trade. Web.
Boyer, J & Young, W (2005) Mondell’s International Economics. Adaptations and Debates. IMF Staff Paper, Vol. 52.
Dunninq, J. (1999) Governments, Globalization, and International Business. Oxford, Oxford University Press.
Johnson, D & Turner, C. (2003) International Business: Themes and Issues in Modern Global Economy. London, Routledge.
Kline, J. (2005) Ethics for International Business: Decision Making in a Global Political Economy. London, Routledge.