Bloomberg News

EU Planning WTO Complaint Against Argentine Import Curbs

April 23, 2012

The April 16 expropriation of YPF, Argentina’s largest crude producer, by Argentinean President Cristina Fernandez de Kirchner is emboldening the EU to act over the separate question of the country’s import restrictions. Photographer Walter Moreno/Bloomberg

The April 16 expropriation of YPF, Argentina’s largest crude producer, by Argentinean President Cristina Fernandez de Kirchner is emboldening the EU to act over the separate question of the country’s import restrictions. Photographer Walter Moreno/Bloomberg

The European Union intends to complain to the World Trade Organization about Argentinean import restrictions that the bloc says violate global rules, according to a person with knowledge of the plan.

The EU will probably file its legal challenge at the Geneva-based trade arbiter in the coming weeks, spurred by a separate dispute over Argentina’s nationalization of the YPF SA (YPFD) unit of Spanish oil company Repsol YPF SA (REP), said the person, who declined to be identified because work on the plan is continuing. Other WTO members opposed to Argentina’s import curbs may join the action, the person said.

Argentina has subjected a growing number of imports ranging from tractors and tires to irons and kitty litter to licensing regulations since 2008, a policy the EU and 18 other WTO members including the U.S. and Japan said on March 30 hinders trade and violates global regulations. Governments and businesses say the Latin American country’s import-substitution rules, which force foreign companies to produce goods in Argentina or lose market access, are protectionist.

“The high and increasing number of import-restricting measures implemented by the Argentine government in application of its discriminatory import-substitution policy is a cause of considerable concern,” EU Trade Commissioner Karel De Gucht said in an April 19 letter to Argentine Foreign Minister Hector Timerman. “You are certainly aware of the very serious legal considerations these measures raise from a WTO perspective and the growing concern among WTO members affected by this policy, which is manifestly incompatible with WTO rules.”

Protectionism

The April 16 expropriation of YPF, Argentina’s largest crude producer, by Argentinean President Cristina Fernandez de Kirchner is emboldening the EU to act over the separate question of the country’s import restrictions. Together, the issues highlight growing concerns about protectionism in Argentina, whose $448 billion economy is South America’s second biggest.

The seizure of YPF isn’t covered by Argentina’s commitments under the WTO and the EU can’t impose unilateral sanctions without going through the trade arbiter’s complaint process. The European Commission, the EU’s executive in Brussels, ruled out a WTO filing over YPF on April 17 and said Spain would break European and international law by unilaterally imposing trade curbs on Argentina.

“I wish to express the EU’s serious concerns about the overall business and investment climate in Argentina and, in particular, certain recent decisions by the Argentine government,” De Gucht said. “The situation is now at a point where it risks jeopardizing our overall trade and investment relations.”

Export Market

The 27-nation EU is Argentina’s No. 2 export market and its top foreign investor, accounting for more than half of foreign direct investment in the country. The EU shipped 8.3 billion euros ($11 billion) of goods such as machinery, chemicals and transport equipment to Argentina last year and bought 10.7 billion euros of Argentine products, mainly agricultural goods and raw materials.

Governments that endorsed the statement urging Argentina to modify its policy also include Australia, Israel, Mexico, New Zealand, Norway, Panama, South Korea, Switzerland, Taiwan, Thailand and Turkey. China, Chile, Colombia, Peru, Singapore and Malaysia have also expressed concerns.

WTO Director-General Pascal Lamy said on April 20 that the import curbs may breach global commerce rules.

To contact the reporters on this story: Jennifer M. Freedman in Geneva at jfreedman@bloomberg.net; Jonathan Stearns in Brussels at jstearns2@bloomberg.net.

To contact the editor responsible for this story: James Hertling at jhertling@bloomberg.net


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