Category Archives: Latin America

Argentina’s Trade Gauchos

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On his way to Geneva.

On his way to Geneva.

You have to read between the lines and translate the diplo-speak, but last month’s Trade Policy Review of Argentina must have come close to having blood on the floor. Most TPRs are dry affairs, conducted by the World Trade Organization every few years to allow everybody to have a clear picture of the trade policies of each member state. First, a paper describing a country’s trade policies is prepared by the WTO secretariat, usually balanced and fairly neutral. This goes out to the members, the country being reviewed prepares its own paper in response, and other members may submit questions before the review proper. The actual TPR is usually conducted over a couple of days in Geneva. Although important issues are discussed, the TPR is not a legal proceeding or a negotiation and things rarely get exciting. The latest TPR for Argentina seems to be an exception. See if you can spot the tension in this excerpt from the chairman’s concluding remarks:

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.

When Express Delivery … Isn’t

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We only had 48 hours. My client was in Honolulu, hurrying to finish the bid documents for a project in Somalia, and he was late on meeting the deadline. I called my friend Jimmy Maturo, manager of the old Emery Worldwide in the Pacific, and he put his guys to work delivering the bid documents to Mogadishu. I don’t know what magic they used but they delivered the bid package in Somalia ahead of the deadline. Not an easy thing to do – even in the 1980s.

They made it to Somalia.

They made it to Somalia.

Emery is no longer around, though I think UPS bought the name and uses it for an express freight service. But all of today’s express delivery companies face the same kinds of problems every day. And what irks them most is the global uncertainty of customs clearance. You pay a premium for express service, so you expect your packages to be delivered on time no matter where you are sending them. All that can be defeated by a closed customs office, an arbitrary change in the rules, or even an official with his hand out. The result is lower profits for the express delivery company and an unsatisfied customer. The World Economic Forum/World Bank/Bain & Company study on international supply chain and logistics issues took a careful look at the problems of the express delivery industry.

Most developed countries have made life easier for the express delivery services, automating their clearance systems and employing effective risk analysis strategies in deciding which packages need to be opened up and physically inspected. Developing countries apparently aren’t so trusting or won’t invest in the new risk assessment systems.

In the US, where customs officials target only potentially high-risk parcels for inspection, 92% of Express Delivery Services Co. shipments are cleared prior to shipment arrival at the border, and not all of the remaining shipments are physically inspected. In the Netherlands, officials rely on an analysis of electronic information to determine which shipments will be subjected to physical inspection, reducing the need for examination to just 2% to 3% of parcels. In Mexico by contrast, authorities physically inspect 10% of all shipments and sometimes carry out a secondary inspection by independent contractors to guard against customs errors or wrongdoing. The 10% inspection rate in Mexico is an improvement over the previous regime, where, like in other countries, customs officials inspect 100% of shipments.

Out of 114 countries for which they had information, only 37 use risk analysis to target and limit their inspections. Eighteen inspect every single item that crosses the border, causing massive delays, and the rest inspect inbound express shipments randomly or on the whim of the customs officer on duty. Timely clearance of express shipments is often up to luck in most of the world’s countries.

Another headache is the opening hours of customs offices. In the United States or the European Union, most customs offices at the airports the express delivery companies use are generally open 24/7 year-round. It is not like that in the rest of the world. Express companies complain about unreasonably restrictive hours in China, India and most of Latin America. This forces the delivery companies to schedule their flights around the customs opening hours, often delaying flights. There can be problems even when the customs offices are open because some countries, China and Brazil were named, don’t seem to base their customs staffing on shipping volumes and don’t have enough inspectors on duty. The express companies can sometimes provide extra staff of their own to keep things moving if the customs people will accept their help.

Some problems are surprising. The European Union, for instance, doesn’t have a standard, coordinated clearance process across its member countries, which can lead to confusion when a shipment lands in one country but is bound for another. There can be differences even within EU countries. In the Netherlands, express shipments are greeted by a standard, centralized clearance system that is the same at all points of entry. Further along the Rhine, however, in Germany, that isn’t the case. Germany has no centralized customs clearance, requiring the delivery companies to have people on the spot at each port of entry they might use to fill out the documentation.

The World Customs Organization (WCO) partially addressed the standardization issue by identifying a set of best practices. Under the WCO’s Kyoto Convention guidelines, countries should aim to create simplified custom procedures that can be carried out in a predictable, consistent and transparent environment. Customs should make maximum use of information technology and risk analysis to speed up the clearance process and maintain its integrity through the application of objective tests and procedures. WCO recommends that customs agencies use “single window” electronic procedures, whereby documents are submitted once and are easily transferred across agencies and borders. Just 81 of WCO’s 178 member states have signed on to these common sense procedures, although many others adhere to its recommendations.

Sometimes the express companies run up against infrastructure limits. The United States is covered with efficient airports and has its excellent Interstate Highway system that speeds internal deliveries once the border is crossed. Brazil just doesn’t have that. Airport coverage of the country is one-third of the density in the United States, and the Brazilian road system is woeful. The companies can sometimes invest in their own infrastructure at sub-standard airports, but they can’t realistically build highways for the last mile of deliveries.

Delays at border crossings and the need to hire extra staff in many countries can drastically alter the cost of making express shipments. The company in the study reports that Venezuela and Kenya, in particular, cause them to increase the handling charges they pass on to their customers, making these countries less competitive. On the other hand, handling charges for express shipments are especially low in places like Mexico and Qatar. And Singapore may be the easiest of all.

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Jimmy did a fabulous job of getting that bid package to Somalia, so I owed him one. He is a wonderful French chef, and has run a cooking school in his checkered career, so you are always nervous cooking for Jimmy. But I make a killer Caesar salad. Jimmy knew the original Caesar (of salad fame, not the Roman) and tells me that mine is the closest he has had to the original. He has one complaint. I don’t much care for anchovies and don’t put them in, but Caesar always used anchovies. I think Jimmy delivered them.

Can You Hear Me Now?

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You may have noticed my recent fascination with international supply chain issues. This is partly because they are so common, because they often cause companies to give up, and because they can usually be easily fixed. The latter, of course, assumes that the governments and companies involved are willing to make changes – a very big ask.

Today’s story concerns a major multinational in the mobile phone business, once again courtesy of the WEF/World Bank/Bain report on supply chain management. As usual, the report does not identify the company, but it is said to operate on six continents with revenues of $5.7 billion last year. The company has 43,000 customers including operators, manufacturers and retailers of its phones. They clearly know something about managing supply chains, but issues in Latin American and African markets still baffle them.

Can you deliver to Brazil? How about Nigeria?

Can you deliver to Brazil? How about Nigeria?

Let’s take Latin America first. I hear more and more complaints about how tough it is for foreigners to do business in Brazil. Brazil’s 16% customs duty is stiff enough, but more taxes are piled on top of that – and most of the supplemental taxes are NOT faced by local manufacturers of competing products. Let’s see, there is the value-added tax, and the social integration tax (!), and then state and local taxes. It becomes a tax cascade that drives the cost of imported phones up by 83%. Locally-made phones face taxes of about 32%, so there is blatant discrimination against imports. This may seem to encourage companies to produce in Brazil in spite of local production costs running about 10-14% higher than elsewhere. In any case, all these extra costs end up being paid for by Brazilian consumers.

Tariffs and taxes are far from the only issue in Brazil or the rest of Latin America. There are frequent customs bottlenecks, labor disputes and transport snafus to cope with, too. Customs clearance in Argentina can take more than three weeks, while Colombia is relatively speedy at eleven days. Colombia comes out exceptionally well when compared with Brazil. Our company calculates that it costs them only 50 cents per handset to bring phones into Colombia. The equivalent cost in Brazil tops $20 for each phone!

Our company ships to more than twenty countries in Africa, but it has no African distribution center. This is because the supply chain problems in the continent are so daunting that it makes better sense to base its African distribution out of Dubai in the Persian Gulf. Indeed, many sales to African customers actually take place in Dubai, putting the delivery problems on the clients’ shoulders. Many African countries, like Brazil above, have boosted customs duties and other fees to build government revenue and perhaps to force companies to invest in local production. But a phone plant in every country simply isn’t going to happen. Nigeria, for example, applies a 5% duty, a 7% port charge, a 1% import charge and other fees to total 13.5%. This has priced our company’s handsets out of the market, and they no longer ship to either Nigeria or to the Democratic Republic of the Congo (for similar reasons).

Using Dubai as its African distribution center may add 4-5% to the company’s costs in Africa, but it avoids the manifold problems of insufficient infrastructure and of dealing directly with some very small markets to which shipping, by air or sea, can be difficult and service well-nigh impossible.

Yes! We Have No Bananas!

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The world’s longest-running trade war is over! Combatants are celebrating with banana daiquiris, eating banana bread, lapping up banana pudding … The banana war is finally over – after twenty years of slippery peels.

This is a truly historic moment. After so many twists and turns, these complicated and politically contentious disputes can finally be put to bed. It has taken so long that quite a few people who worked on the cases, both in the Secretariat and in member governments have retired long ago.
~ WTO Director-General Pascal Lamy

It started in the 1960s when the then-European Community thought it was doing a good thing by creating special trade preferences (with both physical quotas and preferential tariffs) for former French and British colonies. Nobody who wasn’t included in the club said much in the beginning, but the preferences became more of a permanent feature of the trade landscape in 1975 when the beneficiary countries were formally organized into the African, Caribbean and Pacific Group of States (ACP). This was when countries that were not included in the preference schemes for the ACP states began to take notice. Being largely restricted to former French and British colonies (I don’t know how Cuba sneaked in), the ACP preferences by the Europeans left out one huge piece of the planet: all of Latin America except for some small Caribbean countries. The Latins began to stir in opposition, but they didn’t have much economic clout back then.

Costa Rica dared to speak up in 1991 when the Europeans announced a new plan to favor importing bananas from the ACP countries. The Costa Ricans argued in the GATT that what seemed like aid to the ACP countries was actually discrimination against Central America’s banana producers. Colombia, Honduras, Peru, Venezuela and Mexico muttered similar thoughts, consultations were requested with Brussels, and there was even a proposal to negotiate free trade for bananas in the Uruguay Round. Neither the consultations nor the Uruguay Round proposal accomplished anything, and – just in time for Christmas in 1992 – the European Union announced a “common banana regime” (slippery concept that) to go into effect by mid-1993. In other words, the EU was plowing ahead with its banana preferences for the former colonies.

Earlier banana war

The five Central American countries made their case to two successive GATT dispute settlement panels, which both found that the European Union and its member states were in the wrong. Not that the Europeans cared. The Central Americans looked around for an ally and got one in 1996: the United States. This caused some anxious moments, but the Central Americans decided to ignore the earlier neo-colonialist role (see below) of U.S. companies in the Central American banana trade. Washington was interested in promoting economic development and political stability in the region – and knew how to play the dispute settlement game in the new WTO.

Not that it was easy. The Central Americans, with the added heft of U.S. trade lawyers, took the Europeans to Geneva again and got a new finding that the EU was in the wrong. Brussels changed a few things and established a new protective banana regime in 1999, but this one was ruled to be just as bad. That’s when the United States and Ecuador started playing hard ball. They got WTO approval to apply sanctions against imports from the EU totaling $393 million a year. You can buy a lot of bananas for $393 million. Brussels caved in, but only partially, agreeing to get rid of the the country quotas under their banana regime, but maintaining tariff preferences for the ACP countries. The Central Americans continued to press the Europeans about the tariffs, but made little headway.

Reinforcements arrived again. In 2005, Brazil came into the fight, and joined Colombia, Costa Rica, Ecuador, Guatemala, Honduras, Nicaragua, Panama, and Venezuela in requesting international arbitration. Successive arbitration panels found against Brussels which began to gradually reduce its banana tariff – but slowly. Honduras, Panama and Nicaragua all asked for dispute settlement consultations, keeping the pressure on. Over the next couple of years, Ecuador, Colombia and Panama each opened dispute settlement cases in Geneva, as did the United States. The Europeans began to realize they needed to take their banana restrictions seriously and started to informally negotiate with the Central Americans.

Talks continued bilaterally and on the fringes of the Doha Round, once Brussels figured out that the Central Americans weren’t going to give up. The Geneva Banana Agreement (GBA) was negotiated in 2009 between the European Union, the Central Americans and the United States, but still was not implemented by Brussels. Finally, last week, an agreement that appears to end the dispute was finally announced. The European Union pledged to implement the GBA and signed an agreement with Brazil, Colombia, Costa Rica, Ecuador, Guatemala, Honduras, Mexico, Nicaragua, Panama and Venezuela. The two agreements together will reduce Europe’s banana duties, not to zero, but to 114 €/ton by 2017. Not perfect, but the Central Americans think it is enough to allow them to compete in EU marketplaces. Given the long, convoluted history of the banana war, one wonders if it is really over – but victory has been declared.

For something truly amusing, see Pravda’s take on the banana war. The fun begins when Pravda describes the rising popularity of bananas in the United States as “… one of the most successful operations of brainwashing.” And then there is this howler:

The war with the assistance of the WTO was conducted between the U.S.-based Chiquita Brands with Dole Fruit on the one hand, and on the other hand – Geest, Fyffs (UK), Bargosa (Spain) and smaller companies, whose interests were defended by the EU.
~ Pravda, Brutal banana wars to end after two decades, November 13, 2012

Debating Trade

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One week to go – and then the campaign ads can stop. It might be instructive to look back at what President Obama and Governor Romney said about international trade in their three debates. I earlier examined the Democratic and Republican party platforms, but wanted to see what the candidates themselves are pushing. I wish I could say there were some surprises, but the platforms offered more detail and less vitriol. The debates were simply an opportunity to regurgitate quotes from stump speeches.

I couldn’t stand to listen to everything again, so I simply searched on “trade”, “export” and “imports”. Despite their immense importance in controlling inflation and keeping prices down for the people the candidates profess to care about, imports were mentioned only three times. All were references by President Obama to declining oil imports, though he seemed unsure of his timeframe. Once he said our oil imports are at their lowest level in 16 years and twice he said 20 years. And there was one place where Obama said “exports” when I think he meant “imports”, saying that developing clean energy will allow us to cut our exports in half by 2020. Oh well, these trade things get complicated. Romney never mentioned imports at all.

Governor Romney relied on his mantra of five points for reviving the U.S. economy, the second of which is to increase trade. I could not discover how he plans to proactively grow trade, but got the feeling that improved trade with Latin America might be meant to replace trade lost through a trade war with China.

Number two, we’re going to increase our trade. Trade grows about 12 percent year. It doubles about every — every five or so years. We can do better than that, particularly in Latin America. The opportunities for us in Latin America we have just not taken advantage of fully. As a matter of fact, Latin America’s economy is almost as big as the economy of China. We’re all focused on China. Latin America is a huge opportunity for us — time zone, language opportunities.
~ Mitt Romney, 3rd debate

Romney’s language on China got tougher with each debate. In the first debate, he said he would “Crack down on China, if and when they cheat“. “If” was dropped by the second debate: “Cracking down on China when they cheat“. Romney hit his stride in the second debate, arguing that China cheats by manipulating the yuan so that Chinese export prices are artificially low, thus enhancing their ability to sell and hurting America’s ability to do the same. (Notice, there is no discussion of other countries, some of whom may well take up the slack in our imports if the yuan appreciates further. This is a zero-sum game between Washington and Beijing, with no notice by Romney that the yuan has appreciated to its highest point in 19 years. Obama tried to claim that his toughness on China caused some of that appreciation.) Romney’s conclusion, no surprise, is that he should declare China a “currency manipulator” on his first day in office and start raising tariffs – without considering the consequences of such an act. One of the moderators couldn’t stand it and queried: “If you declare them a currency manipulator on day one, some people are — say you’re just going to start a trade war with China on day one. Is that — isn’t there a risk that that could happen?” Romney shrugged that off by saying that we already have a “silent” trade war with China. New concept, that.

We have to say to our friend in China, look, you guys are playing aggressively. We understand it. But this can’t keep on going. You can’t keep on holding down the value of your currency, stealing our intellectual property, counterfeiting our products, selling them around the world, even to the United States. … I want a great relationship with China. China can be our partner, but — but that doesn’t mean they can just roll all over us and steal our jobs on an unfair basis.
~ Mitt Romney, 3rd debate

Obama struck back, of course, branding Romney as one of the people who made things bad for American workers in China:

When he talks about getting tough on China, keep in mind that Governor Romney invested in companies that were pioneers of outsourcing to China, and is currently investing in countries — in companies that are building surveillance equipment for China to spy on its own folks. … Governor, you’re the last person who’s going to get tough on China.

… When I said that we had to make sure that China was not flooding our domestic market with cheap tires, Governor Romney said I was being protectionist; that it wouldn’t be helpful to American workers. Well, in fact we saved 1,000 jobs. And that’s the kind of tough trade actions that are required.
~ Barack Obama, 2nd debate

Uh, all the evidence I have seen indicates that Obama’s punitive duties on Chinese tires only resulted in fewer tire-making jobs in China – and increased U.S. imports of higher-priced tires from other countries, thus hurting U.S. consumers. But that doesn’t fit with the zero-sum game these two are playing with China. Obama brought the tire case up again in the third debate, using it to show how tough he is, arguing that stopping inexpensive Chinese tires had “saved jobs throughout America“, surely a small touch of hyperbole. He also argued that another trade case had enabled steelworkers in Ohio and Pennsylvania to sell steel in China, perhaps forgetting that their companies might have something to do with sales, too.

There is more rhetoric about China, but you get the picture. There is also a presumption by both candidates that the whole world is out to cheat us, an uncritical assumption that the United States is the only country that actually obeys trading rules. There is no mention, of course, of all the cases that WTO dispute settlement panels have found against us. Good thing, because they both would have likely called that an infringement of American sovereignty, rather than celebrate the global rule of law. But I am putting words in their mouths, and there are enough words there already.

So we’re going to make sure that people we trade with around the world play by the rules. But let me — let me not just stop there. Don’t forget, what’s key to bringing back jobs here is not just finding someone else to punish, and I’m going to be strict with people who we trade with to make sure they — they follow the law and play by the rules …
~ Mitt Romney, 2nd debate

… businesses and workers [were] not getting a level playing field when it came to trade. And that’s the reason why I set up a trade task force to go after cheaters when it came to international trade. That’s the reason why we have brought more cases against China for violating trade rules than the other — the previous administration had done in two terms. And we’ve won just about every case that we’ve filed, that has been decided.
~ Barack Obama, 3rd debate

Death Of A Trade Agreement?

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The Andean Trade Preference Act is not strictly a trade agreement because it is a unilateral gift, but it seems to be dying nonetheless. Enacted in 1991 to help four Andean countries (Bolivia, Colombia, Ecuador and Peru) fight drug production by boosting their economic development, the Act has had mixed results. The idea was that, by offering duty-free access to the U.S. market, Andean farmers and entrepreneurs would be less likely to resort to drug production, thus reducing drug traffic to the United States. The Act was superseded for Colombia and Peru when full-fledged free trade agreements were negotiated with those countries. We’ll put those two in the success column.

Bolivia was a definite failure. The Obama Administration decided in 2009 that the Bolivians were not living up to their side of the bargain and not making serious attempts to curb drug flows. Bolivia got kicked out, leaving Ecuador as the sole beneficiary of the Andean Trade Preference Act. The score stands at 2-1, but Ecuador looks likely to make it a tie game.

In the past month, the U.S. Chamber of Commerce, the National Association of Manufacturers, the National Foreign Trade Council, the U.S. Council for International Business and the Emergency Committee for American Trade each asked the Obama Administration to kick Ecuador out of the Act’s coverage. This, of course, would leave it applying to no one, though it would likely remain on the books until the Act expires in July 2013. But why this concerted effort against a small country like Ecuador? Nothing to do with the drug war, as it turns out. The story is about pollution and big oil.

Ecuador has repeatedly failed to respect the rule of law, private property, and the sanctity of contracts in ways that impact a wide variety of companies in numerous sectors.
~ Jodi Bond, vice president, U.S. Chamber of Commerce

Oil in the Amazon

Texaco had big operations in Ecuador and was accused (rightly or wrongly, I can’t say) of violating Ecuador’s anti-pollution laws. The case was settled in 1998 and Chevron, which took over the property in 2001, thought the case was ancient history. Zombie-like, it rose from the grave and Chevron was slapped with an $18.2 billion fine by an Ecuadorean court in February 2011. Chevron charged that the ruling had been re-opened and achieved by fraud, and appealed. That only succeeded in getting the damages rounded up to $19 billion this August. Chevron has obtained an international arbitration ruling that Ecuador should not attempt to collect these amounts, but says Ecuador is ignoring the finding. Chevron is continuing its campaign to prove the new rulings are fraudulently-based, sending subpoenas last month to Google, Microsoft and Yahoo for nine years of email for 101 addresses. For Chevron’s side of the story, go here. There is a site called ChevronToxico that begs to differ with the oil company’s version.

Chevron, supported by the business organizations named above, has now asked the White House to immediately suspend Ecuador’s benefits under the Andean Trade Preference Act. They have probably already achieved that goal, even without action by the Obama Administration, because it seems highly unlikely, given this concerted opposition, that Congress would renew the Act for only one country by next July anyway.

So, despite the fact that the Act was born as a tool in the war on drugs, the present ruckus concerns treatment of foreign investors. One wonders what Ecuadorean drug lords think about all this. Ecuadorian farmers seem to have been lost in the shuffle.

Lemonade In Buenos Aires

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Argentina has picked up on the Beijing-Washington school of tit-for-tat trade disputes. I reported back in April about a complaint brought against Argentina by fourteen, count ‘em, fourteen countries in response to an acceleration in the Gaucho Republic’s massive protectionism. Argentine protectionism isn’t imagined; the country came to the forefront of perpetrators in Global Trade Alert’s Débâcle report on protectionist measures, reported here.

If you can’t sell lemons …

Apparently irritated that the rest of the world has noticed what they are doing, the political leadership in Buenos Aires is striking back with its own cases in Geneva. Mad at the European Union, which was already upset at Argentina’s high-handed theft of the Argentine assets of a Spanish oil company, Buenos Aires filed a WTO case August 20 against purported EU restrictions on imports of biodiesel. This was followed by an August 30 case filed against the United States for restrictions on Argentine beef – and on September 3 charging that Washington is blocking imports of fresh lemons from Argentina.

We are concerned with a disturbing trend in which countries engaged in actions that are inconsistent with their WTO obligations retaliate with counter-complaints rather than fix the underlying problem raised in complaint.
~ Nkenge Harmon, Office of the U.S. Trade Representative

One wonders how many complaints Buenos Aires will file against the other twelve WTO members who objected to Argentina’s practices last spring. But don’t think those countries are sitting still and waiting for it. The European Union filed a complaint against Argentina’s import licensing practices in late May, and was rapidly joined by Australia, Canada, Guatemala, Japan, Mexico, Turkey, Ukraine and the United States. The United States and Japan filed their own separate cases against import licensing restrictions in Argentina on August 21, and Mexico followed suit three days later. One wonders when Buenos Aires will file retaliatory cases against Tokyo and Mexico City.

Ah, it is a good time to be an international trade lawyer.