The European Union filed a suit against Argentina's import restrictions with the World Trade Organization (WTO) today (25 May), intensifying the disputes between the South American nation and its trading partners.
The EU's executive Commission said the case followed restrictive measures by Argentina, including an import licensing regime and an obligation on companies to balance imports with exports.
"Argentina's import restrictions violate international trade rules and must be removed," EU Trade Commissioner Karel De Gucht said in a statement. "These measures are causing very real damage to EU companies – hurting jobs and our economy as a whole."
The suit is not directly linked to Argentine President Cristina Fernandez's April decision to seize control of its biggest oil company, YPF, a subsidiary of Spain's Repsol, EU officials said (see background).
But that case too led to a dispute over Argentina's policies on trade and investment. "The trade and investment climate in Argentina is clearly getting worse," De Gucht said.
As a first step in the case, the European Union is "requesting consultations", or formally demanding negotiations to try to settle the matter. If talking does not work, 60 days after the initial complaint the European Union can ask the WTO to set up a panel of three arbitrators to judge the case.
The process is likely to take about a year, but either side could appeal, which would then add another three months or more. The time scales can stretch in such cases and many take years to resolve.
Argentina expected the EU move
An Argentine trade official said the move was not a surprise.
"It was expected," the official said. "For the time being we did not receive any formal notification."
If the European Union were to win, the WTO may tell Argentina to bring its regulators into line with WTO rules, but it would be up to the European Union to make sure Argentina complies. That could turn into a further trade case that could add another year or more to the dispute.
The import restrictions have already prompted criticism of Argentina from at least 14 of its trade partners, including the United States, Japan, South Korea and Australia.
US Ambassador to the WTO Michael Punke led the criticism at a 30 March meeting of the WTO's Goods Council, where he said Argentina had put a blanket restriction on trade by requiring import licenses on all imported goods from 1 February this year.
Argentina was further limiting imports with a "trade balancing" policy that required importers to export goods of the same value, he said, adding that the practices were "unbefitting", for a member of the WTO and the G20 group of nations.
Argentina's top trade official said at the time that Punke's allegations had "no basis in objective facts".
In April, De Gucht wrote to Argentine Foreign Minister Hector Timerman saying bilateral contracts had failed to resolve the problem.
He said that "Argentina has not presented any valid justification for these measures nor taken any real steps to remedy the situation," and urged its government to "revise or remove… all formal and informal measures which unduly hinder imports".
Cristina Fernández de Kirchner, who still wears the black of mourning 18 months after the death of her husband and predecessor as president, Nestor Kirchner, stunned investors in 2008 when she nationalised private pension funds at the height of the global financial crisis.
She has also renationalised the country's flagship airline, Aerolíneas Argentinas.
Then, last April, she seized control of leading energy company YPF, which is controlled by Spain's Repsol, with the aim of expropriating it, on the grounds that energy is a “vital resource”. YPF's market value is $10.6 billion (€8 billion).
Such measures are popular with ordinary Argentines, many of whom blame free-market policies such as the privatisations of the 1990s for the devastating economic crisis and subsequent debt default of 2001-02.
Kirchner's administration also heaps pressure on Britain over oil exploration off the disputed Falkland Islands, over which Argentina claims sovereignty.
- Commission: EU challenges Argentina's import restrictions