Protectionism

A Colombian Hat Fans Trade Tensions With China


A Colombian Hat Fans Trade Tensions With China

Photograph by Fotolia

Everyone in Colombia knows the black-and-white sombrero vueltiao. Made in the Caribbean village of Tuchín, the iconic hat has been designated a national symbol. Artisans spend up to 15 days cutting, sun-drying, and braiding cane leaves to make one hat. Starting price: 40,000 pesos ($20).

Now Chinese-made imitations of the vueltiao are selling in Colombia for $10, and sales of the artisanal original model are plunging. “The Chinese are stealing our culture like the Spaniards did 500 years ago,” says Eligio Pestana, mayor of Tuchín, where 90 percent of the 34,000 residents depend on the handicraft trade.

Anti-China sentiment is on the rise throughout South America as such businesses as Brazilian automakers and Argentine shoemakers demand protection from foreign competition. The trade tension highlights the downside of the continent’s increasing economic ties with the world’s most populous nation, which has developed a gargantuan appetite for South American commodities from copper to soybeans. Says Colombian Finance Minister Mauricio Cárdenas, “While we’re all happy with one side of the story—enjoying the high price for our commodity exports—the economic impact on the currency and manufacturers can be very negative.”

China’s hunger for natural resources has expanded Latin America’s annual exports to the Asian nation to $86 billion in 2011 from $3.9 billion in 2000, according to the Inter-American Development Bank. Dollar inflows generated by the export boom have driven the region’s currencies higher, making imports cheaper and leaving local manufacturers hard-pressed to compete.

China’s share of the region’s imports reached 13.3 percent in 2010, up from 1.8 percent in 2000, the United Nations Economic Commission for Latin America and the Caribbean reported last year. Across the region, the reaction has been to raise trade barriers in a partial revival of policies that proved disastrous in the 1970s, says Mauricio Mesquita, a trade economist at the Washington-based IDB.

In Tuchín, some merchants are threatening to pelt anyone seen selling the imitation hats with stones. Faride Velasquez Morales says her family-run handicraft wholesaler, Artesanias Divino Niño, has seen sales drop by half to about 300 a month after street merchants began hawking the made-in-China hats at tourist centers and festivals over the past year. “The Chinese are taking us to bankruptcy,” says Morales, 40, as she braids a category 21 sombrero, made with 21 strips of cane leaf. Its stitching is so fine the hat can be folded small enough to carry in one’s pocket.

In January the government banned the sale of the Chinese-made hats after local media reported lower-priced knockoffs being sold in Cartagena. “Free trade of the 21st century has rules. It’s not the law of the strongest,” Trade Minister Sergio Diaz-Granados told indigenous leaders at a January meeting in Montería to coordinate the government’s response.

Reflecting Colombia’s embrace of globalization—a free trade agreement with the U.S. took effect last year—the government has been less hostile to China than its more industrialized Southern Cone neighbors such as Argentina. Colombia President Juan Manuel Santos has cut tariffs across the board to an average 8 percent from 12 percent and has lowered duties on items that Colombia doesn’t produce to zero. Still, even in one of South America’s most open economies, sentiment against the Chinese is building. Santos on Jan. 22 imposed a $4 per kilogram tax on imported apparel and footwear, helping two industries hit hard by the currency gains and Asian imports.

The Chinese have tried to reassure Latin American governments that they want balanced trade with the region and are not out to build a huge trade surplus with Latin countries. For the residents of Tuchín, talk of trade openness falls on deaf ears. “Behind every hat is the history of our people,” says Mayor Pestana. “Free trade can’t be a vehicle for destroying our culture.”

The bottom line: China’s share of Latin American imports has grown twentyfold to 13.3 percent, putting heavy pressure on the region’s manufacturing.

Goodman is a reporter for Bloomberg News in Rio de Janeiro.

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