Members welcome Argentina’s resolve to reduce public debt, increase employment, enhance its productive capacity and manufacturing competitiveness, fighting poverty, improving income distribution, etc. It is not these objectives, but the manner in which Argentina is — and has been — using some specific trade policy measures to further these objectives that Members have raised questions or expressed concerns about. As in the previous review in 2007, this includes the use and impact of export taxes, the granting of incentives contingent on local content and use of import licences, and Members have once again in this review asked Argentina to reassess the efficiency of applying these measures.
The participation of a large number of delegations in this meeting and the large number of questions posed during this Trade Policy Review indicated the clear importance of Argentina as a trading partner for WTO Members. Similarly, it is telling that so many Members underlined the importance of their two-way trade with Argentina, while stressing that this trade — despite many times impressive growth in the last few years — still fell short of its full potential. I hope, therefore, that this review will be of use for Argentina to reflect on its importance in, and responsibility for, the multilateral trading system so that it will continue to shape its trade policy accordingly both for its own benefit as well as for the benefit of all who are part of the system.
If this seems bland to you, read it again and you will find that most of it is barely veiled criticism of Argentina’s trade policy decisions. This is as rough as it gets in international organizations outside of an official dispute settlement case.
Argentina has had a tough time of it economically the past few years, like many countries. In coping with macroeconomic problems, however, the Argentine government has shown a predeliction for piling on a whole series of microeconomic trade measures to keep prices low and foreign competition minimal within Argentina. These become beggar-thy-neighbor policies which pass some of the costs of fixing Argentina’s problems off on others. Other countries tend not to appreciate being treated that way and the TPR gave them a chance to vent about it.
Nothing encourages trade and business development like consistency and predictability in official actions. This implies that trade policy measures are least harmful when restrictions are imposed as part of a transparent long-term policy, rather than as quixotic short-term measures. Unfortunately, Argentina tends to use too many of the latter, creating uncertainty in the market place for exporters and importers alike. Should world prices for a product be trending higher, Argentina will suddenly announce new export duties to keep the product in the country and keep local prices artificially low. But such short-term measures counter the export promotion intent of longer-term tax exemptions to make exporting more attractive to domestic producers. The obverse may be short-term measures to keep import prices low for consumers while subsidizing local production to substitute for imports. Confused already? Everybody else is.
The uncertainty is exacerbated by Buenos Aires’ fondness for declaring “necessity and urgency” decrees on trade that avoid due process and are immediately applicable, even to shipments already in motion.
… Argentina’s use of non-tariff restrictions has increased, mainly related to registration requirements, import and export procedures, and import licensing. Moreover, the clarity of the regime has tended to be undermined by the apparent lack of transparency in the application of some measures.
Argentina applies something called “precautionary criterion values” to create minimum import values to which customs duties are applied. They may accept your invoice value, but customs officials will also look at price databases used elsewhere and arbitrarily pick the price that nets the most customs revenue.
There is good news and bad news on import duties. In 2010, Argentina finally simplified its duty structure, going completely to ad valorem (percentage) duties – something the United States and many others haven’t done yet. That eliminated the “minimum specific import duties” that previously were applied to about 8% of Argentina’s imports. The bad news is that the average ad valorem duty was raised from 10.4% in 2006 to 11.4% in 2012. The highest tariff protection goes to textiles and clothing, footwear, certain vehicles and oil seeds. Piled on top of customs duties, imports are also subject to a 0.5% statistical tax (with a cap of US$500) and a verification of destination charge up to a maximum of 2% of the customs value.
Argentina requires import licenses for many imports. Requirements for non-automatic import licenses have risen since 2006. Most of these are for products that must meet technical standards and you are most likely to encounter them on things like textiles, machinery and mechanical appliances. Requirements for automatic licenses (the easy kind) were greatly reduced last year.
Anti-dumping duties are a favored measure in Buenos Aires, where 57 such duties were imposed between 2006 and 2011. That makes Argentina the world’s 4th most prolific user of anti-dumping duties. That said, Argentina has not imposed countervailing duties in recent memory.
Argentina is unusual in its love affair with export duties and taxes. While most countries are obsessed with making their exporters more competitive, Argentina’s obsession is with keeping prices low at home by discouraging exports. Export duties for agricultural products, for instance, can range from 5% to 32%. Mining products are hit by 5% to 10%. Duties on crude oil exports vary between 25% and 45%. Exports of natural gas and propane have been effectively stopped by duties of up to 100%. This is often at odds with the country’s dependence on export duties for government revenues, which requires duties at a level that produces revenue without shutting off the exports. Argentina is such an important world supplier of products such as oilseed cake, cereals and soya that its export duties and taxes can skew world prices. Running counter to the export-inhibiting duties and taxes are numerous investment promotion and export-enhancing subsidies. The cumulative effect may be simply to transfer resources from one export industry to another, though there seems no coherent industrial policy to direct this.
Government procurement laws contain “buy national” or “buy local” provisions that provide margins of preference of 5% to 7% for small and medium-sized enterprises. There may also be a 7% preference for Argentine suppliers that also export.
It doesn’t appear to be what Argentina does that has everybody so upset. What seems to be ticking other countries off is that Argentina’s trade practices, more often than not, are imposed with little or no warning and seemingly capriciously.