Study On The Competitiveness And Complementarity Of The Bilateral Trade Between China And Argentina

As the second largest economy in the world, China has been playing a very important role in the global economy. Argentina is the third GDP in Latin America, member of Mercosur and of G20. In pace with China’s ‘Go Out’ Plan, the bilateral trade cooperation between China and Argentina has been amplifying to more areas and the trade intensity of both countries has been deepening day by day. The rich and various natural resources of Argentina satisfy China’s enormous demand because of its fast economic development,and the Chinese mature manufacturing industry also complements the relatively slow paced industrialization of Argentina.Although the bilateral trade has been growing rapidly, there are still some obstacles which prevent enlarging the commerce among these two countries. First, the cooperation status to each other is not reciprocal in the bilateral trade. From Argentina’s side, China is the second foreign trade country after Brazil. However, from China’s side, Argentina still remains in the middle of the ranking. Second, the trade development is not balanced between both countries and Argentina has an enormous foreign trade deficit with China,which may deteriorate the domestic economic situation as Argentina is facing grave inflation and souring prices. Third, Argentina’s industry protectionism frequently initiates anti-dumping investigations towards Chinese goods, which seriously affect the exports of Chinese mechanical, electrical and chemical products as well as textiles to this Latin American country.In this research, the Index of Revealed Comparative Advantage and the Index of Export Similarity are used to analyze the trade competitiveness. The Index of Trade Complementarity and the Index of the Intra-Industry Trade are used to analyze the trade complementarity between both countries. From the aspect of competitiveness, the analysis points out that China’s comparative advantage exists on textile, mechanical and electrical products but not on natural resources-intensive goods. Therefore, Argentina’s comparative advantage stands on natural resources but not on manufactured products. The most competitive products of these two countries are iron and steel goods and road vehicles among other products. Regarding the index of Export Product Similarity, the road vehiclesof both countries are very competitive with each other, but on iron and steel they are less competitive. As to the Index of Export Market Similarity, iron and steel products of both countries are very competitive in NAFTA Market and their road vehicles are more competitive in the South American market. From the complementarity point of view, the bilateral trade between China and Argentina is still giving priority to the factor endowment differences. China principally exports capital or technology-intensive products plus labor-intensive products to Argentina while the Argentine exports are concentrated in natural resources-intensive products. The intra-industry trade between both countries still has a very low performance.Suggestions based on this study: first of all, both countries should completely apply the trade complementarity concept to deepen the inter-industry trade by improving the division of labor specialization and optimizing the resources distribution. Second,reinforce China’s ‘Industry Exports Plan’ which would accelerate the Chinese industrial upgrade and adjust the industrial structure accordingly. Meanwhile, it would also enable the promotion of the industrial capacity cooperation between China and Argentina. Last but not the least, encourage further negotiations on a potential free trade agreement between China and Mercosur.