European Union Challenges Argentina’s Import Curbs at WTO

The European Union challenged Argentine import restrictions at the World Trade Organization, highlighting EU anger over Argentina’s takeover of a unit of Spanish oil company Repsol YPF SA. (REP)

The legal challenge against Argentine curbs on foreign goods ranging from glassware and irons to food processors and kitty litter reflect growing EU concerns about protectionist policies enacted President Cristina Fernandez de Kirchner. Those worries came to a head in April when Argentina seized Repsol’s YPF unit. That act can’t be challenged under WTO rules.

The curbs are among what EU Trade Commissioner Karel De Gucht today called “unfair and protectionist trade practices that are simply there to prop up the Argentine economy at the expense of Europe and other economies.” De Gucht has also censured Argentina for seizing the YPF unit.

“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 EU said in a statement. “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.”

Today is an Argentine national holiday and no one was available at the country’s mission to the WTO in Geneva to comment on the EU complaint.

Exports, Jobs

Argentina has subjected an increasing number of imports to licensing regulations since 2008. Some governments and businesses say the import-substitution rules, which require foreign companies to produce goods in Argentina or lose market access, are protectionist.

“Argentina’s trade policy has become rooted in unfair trade practices,” De Gucht told journalists in Brussels. “These restrictive measures by Argentina are illegal under WTO rules. They harm our exports, they hurt our exporters and they cost us jobs.”

Fernandez’s April 16 expropriation of YPF, Argentina’s biggest crude producer, is emboldening the EU to act over the separate question of the country’s import curbs. Together, the issues highlight growing concerns about protectionism in Argentina, whose $448 billion economy is South America’s second largest after Brazil.

Pre-Approval Regime

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 ($10.5 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.

The EU is challenging Argentina’s decision to subject all imported goods to a pre-registration and pre-approval regime and its requirement that all importers balance imports with exports, increase the local content of the products they manufacture domestically or not transfer revenue abroad. The bloc also says hundreds of goods need import licenses, resulting in systematic delays or rejection.

Argentina “tightened the screws again” in February by requiring pre-approval to cover all imports, making it “urgent” for the EU to turn to the WTO, said De Gucht, who held out the possibility that other governments will make similar challenges. At least 19 WTO members including the U.S., Australia, South Korea, Switzerland and Taiwan have endorsed a statement urging Argentina to remove the curbs.

Today’s request for consultations is the first step in WTO dispute proceedings and means the two governments must now hold talks for at least two months in a bid to resolve the dispute. If the talks fail, the EU can ask WTO judges to rule.

To contact the reporter on this story: Jennifer M. Freedman in Geneva at jfreedman@bloomberg.net

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

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