Chinese Knockoff Sombrero Drags Colombian Tribe Into Trade Fight

in In the News
January 28th, 2013

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From Bloomberg
By Joshua Goodman
January 27, 2013

In the Caribbean village of Tuchin, Colombian families who’ve woven straw hats for generations are seeing their livelihoods threatened by competition that shows China’s double-edged impact in Latin America.

Chinese-made imitations of the black-and-white sombrero vueltiao, as the hat is known, sell for half the $20 price of the least expensive originals. In response to plunging sales by artisans who spend up to 15 days cutting, sun-drying and braiding cane leaves to make a single hat, the government is rushing to protect one of the nation’s symbols and ban plastic, machine-made rip-offs.

“The Chinese are stealing our culture like the Spaniards did 500 years ago,” said Eligio Pestana, mayor of Tuchin, where 90 percent of the 34,000 residents, descendants of Zenu Indians, depend on the handicraft trade.

An anti-China backlash is on the rise throughout South America as businesses, from automakers in Brazil to shoemakers in Argentina, 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, fueled by China’s appetite for commodities from copper to soybeans.

“There’s high sensitivity to China throughout the region,” Colombian Finance Minister Mauricio Cardenas said in a Jan. 15 interview in Bogota. “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.”

Embracing Globalization

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. President Juan Manuel Santos, shortly after taking office in 2010, cut tariffs across the board to an average 8 percent from 12 percent and has since lowered to zero duties on items that Colombia doesn’t produce.

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 an industry that has been one of the hardest hit by the currency gains and imports from Asia.

China has grown more sensitive to complaints that trade benefits are one-sided. Premier Wen Jiabao, in a speech in Chile last June, said China is seeking more “balanced” trade with Latin America and offered a $10 billion credit line to fund infrastructure development in the region.

“It was a sign that the conversation has shifted,” said Kevin Gallagher, an economist at Boston University and author of “The Dragon in the Room: China & the Future of Latin American Industrialization.”

Read the full article at Bloomberg.com.