Argentina Loses Local Sourcing Case again in WTO Appellate Forum

Argentina’s controversial import restrictions were dealt a resounding blow last week, after the WTO’s highest court confirmed late on Thursday that these policies are in violation of global trade rules – upholding all of the main findings issues by a previous dispute panel in August.

The dispute was first filed over two years ago, with claims lodged by the EU, the US, and Japan alleging that Argentina’s various “trade-related requirements” (TRRs) under its comercio administrado, or managed trade, policy were restricting imports and creating an unfair advantage for domestically-produced goods over their foreign equivalents. (DS438, DS444, and DS445, respectively).

These TRRs included that domestic companies export at least as much as they import, by value; that such companies limit their level of imports by volume or value; that investments be made in Argentina; that companies increase local content in Argentine-produced goods; and that companies do not repatriate revenue or other funds abroad.

Thus Hyundai, the automobile manufacturer, which “reportedly committed to exporting peanuts, wine, biodiesel, and soy flour from Argentina,” Thursday’s report noted.

The complainants had also challenged a specific measure enacted in 2012 known as the Declaración Jurada Anticipada de Importación (DJAI) in Spanish, or Advanced Sworn Import Declaration in English. This policy requires importers to file sworn affidavits to Argentine tax agency AFIP and then wait for approval or rejection.

Argentina said the TRRs are “not stipulated in any published law, regulation, or administrative act,” as the Appellate Body itself acknowledged.

However, despite being “unwritten measures,” these requirements are reflected in individual agreements between companies and the Argentine government, or in letters that the former receives from the latter, with the WTO judges noting “extensive evidence” of such arrangements in play through sources such as domestic laws and policy documents and statements by Argentine officials, among others.

The Appellate Body clarified that when tasked with assessing a challenge against an unwritten measure, the specific measure challenged and how a complainant describes it will determine the kind of evidence required and the elements that a complainant must prove in order to establish that the measure is in place. The WTO judges ultimately found that the panel was not incorrect in the legal standard they used.

Complainants note injury, call for action

The complainants in the case were quick to issue statements condemning the Argentine policies, and urging officials in Buenos Aires to take swift action in removing them.

“Argentina should now renounce its practices, allowing European companies to resume normal business with their Argentine partners,” the EU said in a statement. The measures, the EU added, have created a “severe burden” for Argentine importers of European products and have made it difficult for foreign firms to operate in the South American country.

US Trade Representative Michael Froman similarly remarked that such “protectionist measures” by Argentina have already hurt a significant segment of US exports, to the tune of potentially “billions of dollars in US exports each year that support high-quality, middle class American jobs.”

Furthermore, Capitanich said, the Appellate Body finding “does not require any immediate modifications in [Argentina’s] trade administration policies,” while defending the DJAI as a “basic element that helps customs offices to guarantee protection of the domestic market.”

The Argentine cabinet head also claimed that his country has, over the past 11 years, ranked among the 10 countries that “most increased its imports,” while arguing that the complainants are among those WTO members who lose trade disputes the most often.

Under WTO dispute settlement practices, if Argentina cannot immediately bring the cited measures into compliance, the parties can seek a mutual agreement on the reasonable period of time for doing so. Otherwise, the parties can then resort to arbitration.