Q&A: EU's challenge to Argentina's import restrictions at the WTO

European Commission

MEMO

Brussels, 6 December 2012

Q&As: EU's challenge to Argentina's import restrictions at the WTO

The EU today requests the World Trade Organisation to establish a Panel, in an effort to have Argentina's import restrictions - which are negatively affecting EU's trade and investments - lifted.

The EU has closely cooperated with Mexico, Japan and the US to achieve today's decision. The three partners challenged the same restrictive measures imposed by Argentina.

What is the problem?

Imports have long been confronted with a number of restrictions when entering Argentina's market.

1. Non-automatic import licenses: In principle, WTO Members may require importers to apply for an import license as a prior condition for importation of goods. When licensing requirements are automatic, they must be granted upon submission of the application. In Argentina, however, the licenses at issue are non- automatic.

   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 30 days. Argentina, by contrast, 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.

2. Pre-approval requirements ("Declaración Jurada Anticipada de Importación", DJAI): Since February 2012, Argentina introduced a new pre-approval requirement covering all imports. Products subject to non-automatic import licensing have also to follow the new import pre-approval procedure which creates long delays and results in significant costs for many companies.

3. 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 take the form of 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 adhered. In particular, the EU considers that these rules are incompatible with the prohibition to institute quantitative restrictions, as well as with the rules of the Agreement on Import Licensing Procedures.

Which products are affected?

As of 2005, an increasing number of goods have been subject to non-automatic import licences. As of early 2011, this requirement affects over 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, and mobile phones.

Since February 2012, the pre-approval requirement (DJAI) covers all imports.

What is the impact of the measures?

Argentina's measures are blocking imports into the country and discouraging trade and 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 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 escalation of trade-restrictive measures in 2012 and the extension of the pre-approval procedures to all products have raised the value of the potentially affected trade to about €8.3 billion, the total value of EU exports to Argentina in 2011.

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 trade deficits and use import substitution measures.

However, their implementation has led to major disruption in trade and investment and has been carried out to the disadvantage of Argentina's WTO partners.

Internal policy choices are sovereign matters, but they cannot be achieved to the detriment of WTO members and in breach of international trade commitments. 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 has 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.

At WTO level, the EU's complaints have been joined by many others, since Argentina's measures affect imports from everywhere. Many WTO members, including the EU, have repeatedly expressed concern about Argentina's measures between 2008 and 2012.

1. For instance at the World Trade Organization Council for Trade in Goods of 30 March 2012, at least 19 WTO members expressed concern about Argentina's measures

2. At least 15 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 requested WTO dispute settlement consultations on 25 May 2012 (IP/12/503). Consultations were held on 12 and 13 July 2012. The US, Guatemala, Turkey, Ukraine, Mexico, Canada, Japan and Australia joined as third parties. Consultations did not help achieve a positive solution.

The US and Japan also filed a consultation request on 21 August 2012; followed by Mexico's consultations on 24 August 2012. Joint US, Japan and Mexico consultations were held on 20 and 21 September in Geneva. The European Union, Guatemala Australia, Canada and Turkey requested to join the consultations. These consultations did not bring a positive solution.

The EU has closely co-operated with the United States, Japan and Mexico since then. Today's decision is also the offspring of this close co-operation.

What happens next?

Since WTO dispute settlement consultations held during the summer did not solve the issue, the EU has decided to request the establishment of a WTO panel, which will rule on the legality of Argentina's measures.

The EU has cooperated very closely with the United States, Japan and Mexico to prepare today's decision. Today, the United States and Japan equally decided to request the WTO to rule over the dispute; Mexico had preceded the move by requesting the establishment of a panel on 21 November 2012.

The EU, US, Japan and Mexico's requests for the establishment of a Panel will be for the first time on the agenda of the WTO Dispute Settlement Body on 17 December 2012.

At that meeting, Argentina can, under the dispute settlement rules of the WTO, object to the establishment of the panel. The panel will then automatically be established at the following meeting of the Dispute Settlement Body in January 2013. After the establishment of the panel, the parties and/or the WTO Director-General will compose the panel, i.e. select the three persons serving as panellists who will then start the actual adjudication procedure.

It is possible for other countries to join today's complaint at a later stage.

Further information

On the EU's trade relations with Argentina

On the EU's role in WTO Dispute Settlement

Trade statistics EU-Argentina