Brussels, 25 May 2012
Q&As: EU's challenge to Argentina's import restrictions at the WTO
Brussels, 25 May 2012 - The EU today launched a challenge to Argentina's import restrictions at the World Trade Organisation (WTO) in Geneva, in a bid to have these measures - which negatively affect the EU's trade and investment - lifted.
What is the problem?
Importers are currently confronted with a number of restrictions when entering Argentina's market.
Non-automatic import licenses: WTO Members have the right to ask importers to apply for an import license as a prior condition for importation of goods, so-called automatic licenses. They are granted automatically upon submission of the application. In Argentina, a lot of licenses labelled as "automatic" are however used in a non-automatic manner.
Non-automatic import licenses are not WTO compatible, unless they are justified by certain exceptions under WTO rules. These exceptions can be granted for security reasons, under safeguard rules, or for balance of payment reasons and development. In addition to be justified under WTO rules, a non-automatic license must also comply with various procedural rules, for instance a license must be processed within 60 days. However, Argentina's licenses are not covered by any such exception and therefore they are a prohibited quantitative restriction and WTO-incompatible. Furthermore, Argentina appears to issue non-automatic import licenses in a discretionary way with burdensome procedures, long delays up to six months and under unacceptable and non-transparent conditions.
Pre-approval requirements: Since February 2012, Argentina introduced a new pre-approval requirement covering all imports. Products subject to non-automatic import licensing have to also follow the new import pre-approval procedure which creates long delays and results in significant costs for many companies.
Further restrictions: In addition, importers of certain categories of goods are required to undertake to limit their imports, to balance them with exports or invest in production facilities in Argentina. This appears to be a systematic, unwritten practice and is often used as a pre-condition to the release of imported goods at the border.
These measures are at odds with the non-discriminatory trade framework to which WTO members, including Argentina, have signed up to. In particular, the EU is looking at the apparent incompatibility of these rules with the prohibition to institute quantitative restrictions as well as the obligation of non-discrimination and national treatment principle under the GATT 1994 and the rules of the Agreement on Import Licensing Procedures.
Which products are affected?
Since February 2012, the pre-approval requirement covers all imports.
Since 2005, an increasing number of goods were required to obtain non-automatic import licences. In early 2011, this requirement affected more than 600 tariff lines, including toys, bicycles, motorbikes, electrical machinery, textiles and footwear, tyres, iron pipes, machinery and mechanical appliances, base metal and articles of base metal, premium cars, auto parts, other automotive, furniture, household machines, heaters, interior decoration, paper, electrical appliances, food products, pharmaceuticals, glass products, chemical products, mobile phones .
What is the impact of the measures?
Argentina's measures are blocking imports into the country and discourage investment.
The distortive nature of Argentina's measures is confirmed by the reports of companies which have to wait periods of up to six months in order to receive an import license, or which have been denied import licenses without justification. Businesses have also reported about certain supplies that are no longer available on Argentina's market and about the unstable, opaque and discriminatory business environment.
In 2011, the Argentinian non-automatic import licences affected EU exports worth about EUR 500 million. This value however underestimates the trade potentially affected because it does not include the trade flows that have been blocked by the restrictions. However the 2012 escalation of measures and the extension of the pre-approval to all products raise the value of the potentially affected trade to about €8.3 billion, the total value of EU exports to Argentina in 2011.
What is the link with the Repsol case?
The EU has had concerns about Argentina's import licensing measures for many years, well before Argentina's decision with regard to Repsol. Import licensing measures are part of the means used by Argentine to achieve its broader trade policy aims, including import substitution and re-industrialization.
While the EU's WTO action on import measures is separate from and independent to Argentina's Repsol case, the EU is responding to Argentina's broader and systematic economic restrictions. The Repsol case, like the trade restrictive import measures the EU challenges today, is rather to be seen as an expression of the same worrying policy pursued by Argentina.
The EU has closely monitored the evolution of the import restrictions it is challenging today in the WTO. It is equally closely monitoring the developments in the Repsol case.
Aren't the measures justified to protect Argentina's economy?
Argentina's import restrictive measures are part of Argentina's approach to support its economy, including its objective to reindustrialise the country, control the trade deficit and use import substitution measures.
However, their implementation has led to major disruption in trade and investment.
Internal policy choices are sovereign matters, but they cannot be achieved to the detriment of WTO members and in breach of international trade rules. If more WTO Members adopted this kind of discriminatory measures, the damage to world trade and growth would be devastating.
Import substitution policies have historically been ineffective and also have a beggar-thy-neighbour effect on other countries.
What has the EU done so far?
The EU has raised the issue with Argentina repeatedly at both multilateral and bilateral level.
The EU's complaints have been joined by many others, since Argentina's measures affect world imports. Many WTO members, including the EU, expressed their concern about Argentina's measures repeatedly between 2008 and 2012.
For instance at the latest World Trade Organization Council for Trade in Goods of 30 March 2012, at least 19 WTO members expressed concern about Argentina's measures, underpinning a public joint statement signed by 14 WTO Members.
A number of countries complained at the WTO Committee on Import Licensing of 27 April 2012, which covers matters related to the operation of the WTO Agreement on Import Licensing Procedures.
The EU has also raised the issue bilaterally with Argentina on various occasions, such as at the last Joint Committee with Argentina which took place on 28 September 2010 as well as a follow-up meeting on trade issues, which took place on 21 March 2011. It also had bilateral contacts at every level with the Argentinean authorities.
What happens next?
A request for consultations is the first formal step in the WTO dispute settlement process.
The EU is willing to use the WTO consultation process to achieve a mutually satisfactory solution with Argentina and avoid litigation. If these consultations fail to reach a satisfactory solution within 60 days after the receipt of the request for consultations, the EU can pursue the dispute by requesting the establishment of a WTO Panel, which will rule on the legality of Argentina's measures.
It is possible for other countries to join the EU's complaint at a later stage.