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backEUROtalk May, 2012

Europe Fights Argentina's 'Protectionist' Import Rules

The European Union on Friday launched a challenge against Argentina's import restrictions at the World Trade Organization, calling the Latin American country's trading and investment system "protectionist and nationalistic."

The EU, which exported 8.3 billion euros ($10.4 billion) worth of goods to Argentina last year and took in 10.7 billion euros worth of imports from the country, said the restrictive measures include Argentina's import licensing regime, particularly procedures to obtain an import license as well as forcing companies to balance imports with exports.

EU Trade Commissioner Karel De Gucht told CNBC that Argentina's actions have resulted in uncertainty whether an import license will be issued or not and in placing the burden of ensuring the country gets imports on the shoulders of each company.

"So when you want to export to Argentina you should make sure that you can also import in Europe, which is of course not a burden that we should put on an individual company," De Gucht explained.

"All this results in a completely arbitrary imports system. What it really means is that when you produce something in Europe and have a client in Argentina you're never sure whether your products will ever reach your client. This is a very disruptive system that we cannot live with," he added.

Last year, the restrictions affected only imports of automotive parts and components, but since they were extended this year they affect all products across the board, according to De Gucht.

Cars and parts make up 50 percent of the EU's exports to Argentina, followed by chemicals, with 20 percent. Food and live animals make up 53 percent of Argentina's exports to the EU, followed by chemicals with 16 percent and raw materials with 14 percent.

Repsol's Prominent Case

"Argentina is a member of the WTO, if you are part of that club you have to respect the rules of the club," De Gucht said.

"They can put in a safeguard clause if they are within the conditions but they cannot simply move away from the obligations that have been undertaken when they became a member of the WTO."

Earlier this year, Argentina's government seized control of energy company YPF, owned by Spanish Repsol, causing analysts to slash their expectations regarding the Spanish company's results.

At the time, Repsol described the move as "clearly unlawful and seriously discriminatory" and Spain promised to retaliate.

On May 15, Repsol, which is seeking compensation of around $10.5 billion, sued Argentina at the World Bank’s arbitration tribunal, ICSID. Argentina has said the nationalization was justified.

De Gucht said the Repsol case is a separate one although it is "yet another proof of the protectionist and nationalistic investments and trading systems of the Argentinians."

He said that last week all the world's major trading countries criticized Argentina's import restrictions and that it was possible that others will also challenge the country at the WTO.

"I would not be surprised if in the coming days, in the coming weeks, others will follow suit because all the major trading partners in the world have about the same opinion on Argentina," he said.

Source: CNBC.com - GAI

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