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II. TRADE AND INVESTMENT REGIME:  FRAMEWORK AND OBJECTIVES
(1) INTRODUCTION
1. Since the previous Trade Policy Review of Argentina, important changes have been
introduced in the legal framework for trade and inve stment policies, consolidating and advancing the
reform programme.  New multilateral and sub-regional commitments have been made and the main
agency for trade policy formulation and implementation has been reorganized.  Argentina's
involvement in multilateral trade disputes as a co mplainant, plaintiff or third party has increased.
(2) GENERAL FRAMEWORK
2. The new Constitution of August 1994 brought about significant changes in trade-related
matters.  A new Chapter, entitled New Rights and Guarantees, contains provisions on political, civil,
legislative, environmental, consumer protection and competition matters, which, together with other
changes, should improve the stability of business conditions.
3. Executive power is in the hands of the President, who is elected by universal adult suffrage
for a four-year term.  The possibility of a single re-election of the President and two-round elections
was introduced in 1994.1  The President appoints his eight-member Cabinet, a Secretary-General of
the Presidency and a Head of Cabinet, a post introduced under the new Constitution to moderate
presidential powers.  Ministers need not be members of the legislature nor of the President's political
party.  The next presidential elections are due in 1999.
4. Legislative power is vested in a bi-cameral Congress, which, since 1995, has been composed
of a 72-member Senate and a 257-member Chamber of Deputies.2  Deputies are elected by universal
suffrage for a four-year term;  half of the Chamber is renewed on a draw basis at mid-term elections.
The last national elections for the entire Chamber of Deputies took place in May 1995 and the next
are due in 1999, together with the presidential elections;  the last mid-term elections for deputies were
held in October 1997.  Senators are nominated by the provincial assemblies (three per province as
from 1995) for a six-year term, with one-third of the Senate being renewed every two years.From 2001, senators are to be directly elected by popular vote.
5. In response to the urgent need for an effective and independent judiciary, the 1994
Constitution established the Office of the Attorney -General as an independent entity, and introduced
the appointment of judges by a Council of Magistrates and the removal of judges (other than those of
the Supreme Court) by a judges' jury.  The law establishing the Council of Magistrates, submitted toCongress in 1995, was passed in December 1997;  however, the Council had not yet been established
in May 1998.
3  The acceleration of reforms and independence of the judicial branch, including the
establishment of the Council of Magistrates, formed part of the discussions held with the IMF for the
granting of Extended Credit Facilities to Argentina.  Among the reforms is the establishment of new
courts of first instance to deal exclusively with financial and fiscal cases initiated by the newly-created Federal Administration of Public Revenue (AFI P), section 3(i) of this Chapter).  A large part
                                                     
1 In the past, no re-election was possible;  the re-election amendment under the 1994 Constitution
allowed President Menem to stand for a second term in 1995 (EIU, 1996a, p. 7;  and EIU, 1997b, p. 6).  In early1997 a draft bill aiming to amend constitutional provisions  so as to allow re-election for a third consecutive term
was submitted to the Congress (Latin American Weekly Report, 18 February 1997, 25 November 1997, and
13 January 1998).
2 Europa Publications Limited (1995);  EIU (1996a), p. 7;  and EIU (1996b), p. 4.
3 Latin American Weekly Report, 16 December 1997, Law 24937, 10 December 1997;  and
Decree 1469/97, 30 December 1997.WT/TPR/S/47 Trade Policies Review
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of their work seems likely to involve cases of tax evasion, which is estimated to run at US$24 billion
a year. 4
6. At present, the judicial branch is divided into the nine-member Supreme Court of Justice,
federal courts of appeal (including civil, commercial, criminal, peace, labour, penal-economic) and
province courts.5  Judges of the Supreme Court are appointed by the President, with the approval of at
least two thirds of the Senate, for an indefinite period;  under the new Constitution, the nomination of
other federal judges, currently appointed by the President with the Senate's approval, will be based on
a binding recommendation of the Council of Magistrates, which will select candidates through publiccompetition.
6
7. Argentina's provinces each have their own C onstitution, a directly-elected (four-year term)
legislature (composed of Senate and Chamber of Deputies), a Governor and municipal officials, as
well as a separate judiciary.7  The national Constitution authorizes the provinces to promote industry,
railway and waterway construction, migration, land colonization and capital inflows independent offederal policy, and, under this provision, certain provinces maintain investment incentives
(Chapters III and IV).  Inter-provincial disputes are resolved by the Supreme Court.
8. Provincial and municipal authorities are empowered to levy social security, property,
automobile and consumption taxes; rates and methods of assessment vary.  Except for the exclusive
right of the Federal Government to impose customs duties on imports and exports, the Constitution isnot explicit as to the rights of the Federal Government to impose nationwide taxes and it does not
limit the variety or nature of taxes that the federal and the various provincial governments may
impose.
8  To clarify this situation, the provincial governments have ceded their rights to impose
certain taxes to the Federal Government in consider ation for their receiving an agreed share of the
relevant proceeds (co-participation/revenue-sharing of taxes).  Since 1992 two fiscal pacts, agreed
in 1992 and 1993, have governed public finances including transfers of federal revenues in order to
promote fiscal adjustment and other reforms at th e provincial level (e.g. in health and education,
social security systems, public administration resources and bank privatization).9  In 1996 a new
regionalization scheme was launched to eliminate overlaps between federal and provincial public
sector agencies;  it started with the transfer of branches of State-owned banks ( Banco de la Nación ,
Banco Hipotecario Nacional ) to publicly-owned provincial banks.10
(3) STRUCTURE OF TRADE POLICY FORMULATION
(i) Legislative and executive branches of government
9. The Congress has authority, inter alia , to legislate on foreign trade (including import and
export duties), taxation, national loan, debt, budget and currency issues;  it must also approve decrees
                                                     
4 Clarín digital, 16 July 1997;   Ámbito Financiero , 22 July 1997;  La Nación Line, 16 and 22 July 1997;
Latin American Weekly Report, 18 November and 9 December 1997;  and Latin America Economy & Business ,
December 1997.
5 Provincial courts have their own Supreme Court and a system of subsidiary courts;  they deal with
cases within and confined to the provinces (Europa Publications Limited, 1995).
6 Paragraph 4 of Article 99 of the Constitution;  EIU (1996a), pp. 7 and 8;  EIU (1996b), p. 4; EIU
(1997b), p. 4;  and Europa Publications Limited (1995).
7 EIU (1996b), p. 4.  Argentina consists of 23 provinces, one autonomous federal district (the Federal
Capital of Buenos Aires), and the Islands of the South Atlantic.
8 Price Waterhouse (1995).
9 World Bank (1996b), p. 7;  and World Bank (1996c).
10 Latin American Weekly Report, 3 October 1996.Argentina WT/TPR/S/47
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(including the Executive's "emergency and necessity" decrees11 as well as treaties.12  B i l l s  m a y  b e
introduced in both chambers of the Congress by individual members or  the Executive, as well as by
popular initiative;  however, bills related to constitutional reforms, international treaties, taxation,budget and penal issues cannot be introduced by popular initiative (Constitution Article 39).  After
being debated and approved by both chambers, they are passed to the Executive for approval within
ten days, and promulgation.  The Executive may return bills passed by Congress to be revised;  after
being amended and re-approved by a two-thirds majority in both chambers, the law must be enacted
by the Executive.
10. The Executive concludes and signs international treaties, but it may not introduce
implementing legislation without prior authorization by the Congress except in emergency, necessity
or exceptional circumstances;  thus, in principle, the Executive only issues implementing
regulations.
13  However, in recent years recourse to "decrees of necessity and emergency" seems to
have been a regular practice in order to over come blockages in the Congress;  between 1989
and 1994, more than 300 such decrees (mainly related to state reforms) were issued.  By defining a
specific framework for such action, the 1994 constitutional reform seems to have curbed the
President's powers to rule in this area;  nevertheless, certain recent reforms (e.g. the privatization of
the post company (Encotesa) and of airports, the de-regulation of the health care system, labour
reforms, and the increase in telephone charges) have been introduced in this way.  This has led to aseries of court challenges, including to the Supreme Court of Justice, but so far only one decree
(relating to taxes on videotapes) has been found unconstitutional.
14
11. Since the previous Trade Policy Review, Argentina has continued with its practice of having
relatively few Ministerial positions, but under these Ministries there are a number of distinct
secretariats and Under-secretariats as well as other agencies.  These are the Ministries of:  the
Economy, Works and Public Services;  External Relations, International Trade and Worship;
Defence;  Education and Culture;  Public Health and Social Action;  Labour and Social Security;Interior;  and Justice.  On the basis of the constitutional reform, in 1996 four secretariats (culture;
social development;  sports and tourism, and, natural resources and the environment) were given
independent ministerial status.
15
12. The Ministry of Economy, Works and Public Services (MEOSP) has vast powers due to the
wide range of economic issues administered by its secretariats.  MEOSP's secretariatsare responsiblefor designing, conducting and implementing virtually all trade and trade-related policies, although
responsibility for trade negotiation and representation activities at multilateral and regional level is
shared and coordinated with the Ministry of External Relations, International Trade and Worship.
16
The latter Ministry is responsible, inter alia , for Argentina's trade negotiations, regional integration
and export promotion;  its Secretariat of International Economic Relations is responsible for relationswith the WTO.
13. Since 1992 the organizational structure of MEOSP secretariats has been revised on several
occasions to reflect, inter alia , policy priorities arising from reforms (e.g. privatization, public sector
                                                     
11 Such decrees must be sanctioned by the Permanent Bicameral Commission of the Congress
(Article 100 of the Constitution).
12 GATT (1992);  and Europa Publications Limited (1995).
13 Articles 76 and 99 of the Constitution.
14 Latin American Regional Reports-Southern Cone, 4 March and 15 April 1997;  Latin American
Economy & Business, issues of April and August 1997;  Latin American Weekly Report ,  issues of 1 January,
7 January, 14 January, 21 January and 9 December 1997;  Ur uguayan newspaper El  País, 18 December 1997.
15 EIU (1996a), p. 7.
16 Law 22250, 12 March 1992;  Decree 660/96 published on 28 June 1996.WT/TPR/S/47 Trade Policies Review
Page 22
and restructuring.17  Changes within MEOSP include:  the creation in May 1994 of a National
Commission on Foreign Trade to analyse, investigate and rule on injury to domestic production in the
context of safeguards, anti-dumping and countervailing actions (Chapter III);  the establishmentin 1997 of the Federal Administration of Public Revenue (AFIP) comprising the Customs (ANA)
which was merged with the Directorate General of Taxation (DGI) in October 1996.
18
14. The Central Bank of Argentina (BCRA) formulates and implements monetary and financial
sector policy.  Since 1992, the Bank has been independent from the Executive.  The scope for
monetary policy actions is severely limited under the quasi-currency board arrangement (Chapter I).
(ii) Advisory bodies
15. At present, there is no formal governmental advisory body;  cooperation with the private
sector is principally maintained through informal consultations.  In the past, the private sector
contributed to the formulation and evaluation of trade policy through the Advisory Council on
Foreign Trade (CACE), formed in 1985.
(4) TRADE POLICY OBJECTIVES
(i) General trade policy objectives
16. Since 1991, Argentina's main trade policy objective has been to raise the competitiveness of
the economy.  The principal means has been to reduce the anti-export bias resulting from earlier
policies by tariff reductions and the elimination of non-tariff measures on trade in goods.Deregulation and the opening of the economy has similarly helped the competitiveness of the services
sector and fostered foreign investment.  Argentina has also sought to improve access to foreign
markets in the context of multilateral and regional negotiations.  Although there has been no major
policy reversal, the pursuit of these objectives has been influenced by fiscal constraints, which have
led to frequent tax and trade policy changes, particularly between 1993 and 1995 (Chapters I, III and
IV).
19
17. Regional agreements, particularly membership of MERCOSUR, are a priority element in
foreign and trade policy.  These are seen as means to diversify export markets as well as to strengthen
economic cooperation and complementarity.  However, other objectives are the consolidation and
strengthening of the multilateral trading system (see below), as well as the growth of trade and
bilateral relations with other countries, including in Asia.
(ii) Sectoral trade policy objectives
18. Sectoral trade policy is intended to be neutral and raise efficiency through the implementation
of a horizontal approach, and, in general, there has been no reversal toward import substitution or
"picking winners".20  Nevertheless, in addition to MERCOSUR-based tariff escalation, sector-specific
                                                     
17 In 1998, MEOSP comprised the following secretariats: Economic Planning;  Coordination;  Finance;
Industry, Trade and Mining;  Public Works and Services;  and Agriculture, Livestock, Fisheries and Food,(Decree 660/96, published on 28 June 1996).
18 Le Monde, 11 October 1996;  La Nación Line , 15 July 1997;  Decree 1156, 14 October 1996;
Decree 1589, 19 December 1996;  Decree 618/97, 10 July 1997.
19 It is claimed that such frequent changes have had a negative impact on exports and investment
potential, as uncertainty has affected their profitability and assigned higher value to rent-seeking activities(World Bank (1996b), p. 43).
20 Chapter IV and UN/ECLAC (1997), p. 35.Argentina WT/TPR/S/47
Page 23
trade-related measures have maintained border protection and encouraged domestic supplies for
certain domestic industries, and encouraged investment, production, modernization or environmental
protection (including natural resource conservation).  Tobacco, sugar, forestry, fisheries, motorvehicles, pharmaceuticals, paper, textiles and clothing, and the footwear industries are among the
sectors benefiting to varying extents from such measures, while unprocessed oilseeds, raw hides and
skins are subject to export taxes (Chapter IV).  In  services, promotional measures apply to the film
and advertising industries as well as construction;  a few special conditions affect certain activities in
insurance, telecommunications and transport services (Chapter IV).
(iii) The Uruguay Round and the WTO agenda
19. Argentina, a GATT contracting party since 1967, was an active participant in the
Uruguay Round;  it ratified the Marrakesh Agreement on 15 December 1994 and became a founding
member of the World Trade Organization (W TO) on 1 January 1995 (see also section (6)).
21
20. In the Uruguay Round most tariffs were bound at ceiling levels substantially higher than
applied rates (Chapter III).  The range of WTO obligations constitutes a challenge for Argentina's
economy and for policy-making at the federal and provincial levels:  the WTO has already required a
number of legal and regulatory changes in order to meet commitments, and this process will continue
through the implementation period.  Similarly, full implementation of the provisions on TRIPS and
TRIMS will require important industrial adaptation to new regimes in the pharmaceuticals andautomobile industries.  Overall, the resulting chan ges in the trade regime are expected to benefit
investment, technological innovation and produc tivity.  In the Uruguay Round, Argentina also
obtained improved market access conditions for a large number of its agricultural exports to major
world markets such as the EU and the United States (Chapters III and IV);  nevertheless, the
authorities consider that remaining non-tariff barrie rs in foreign markets, very high "tariffication"
levels, and subsidized exports continue to affect the expansion and competitiveness of Argentine
agricultural exports.
22
21. At the first Ministerial Meeting of the WTO in Singapore in December 1996, Argentina
stressed the need to reinforce WTO commitments  to help counter pressures for unilateral and
discriminatory restrictive action. Argentina believed that these could be further strengthened by
accelerating ongoing accession negotiations.  The authorities considered that modest progress had
been made in the implementation of market access and export subsidization commitments inagriculture, a vital sector of the economy.  Argentina's objective was the full integration of this sector
under the rules of the multilateral trading system.  Argentina also took the view that WTO-consistent
regional integration initiatives contributed to trade liberalization and were a positive response to new
economic challenges;  and considered it essential to study the links between trade and environment,
investment, technology, competition policies and government procurement as well as to debate labourstandards.
23
22. At the second WTO Ministerial Conference in Geneva in May 1998, Argentina expressed
faith that at the next Conference a broad and comprehensive negotiating process would be initiated on
the basis of consensus and a balance of interests over the entire range of  negotiating issues.24  I n
Argentina's view the amendment of existing prov isions should be considered only within the
                                                     
21 Law 24425, 7 December 1994;  and WTO doc ument WT/L/113/Rev.6, 5 December 1996.
22 Ministry of External Relations, International Trade and Worship;  Presentation to the authorities of
the province of Córdoba by Mr. Nestor Stancanelli on the Results of the Uruguay Round ( Los Resultados de la
Ronda Uruguay del GATT ) in May 1994.
23 WTO document WT/MIN(96)/ST/4, 9 December 1996.
24 WTO documents WT/MIN(98)/ST/21, 18 May 1998, and WT/MIN(98)/ST/97, 20 May 1998.WT/TPR/S/47 Trade Policies Review
Page 24
framework of the new negotiations.  Negotiations in agriculture should encompass a roll-back of
export subsidies, as well as finding ways to eliminate domestic price support, rationalizing "green
box" subsidies, striking a balance between agricult ural and industrial tariffs, eliminating the dual
exemptions presupposed by the special safeguards and simplifying the pattern of tariff quotas
established in the Uruguay Round.  Argentina, along with other members of the International Textiles
and Clothing Bureau (ITCB), also expressed concer n that, although a few quantitative restrictions had
been eliminated, new barriers (e.g. repeated anti-dumping actions, customs and administrative
formalities) had increased developed countries' import restrictions in this sector, and, as a result, theimproved market access possibilities for small suppliers and least-developed countries (provided for
in the Agreement on Textiles and Clothing, ATC) had not materialized.  Further extensive and
in-depth work on the complementarity and consistency between regional and multilateral measures
was seen as an essential step towards ensuring the functioning of the WTO.  Argentina was also
concerned about the consistency of WTO commitments with macroeconomic provisions undertakenin the context of the International Monetary Fund and the World Bank;  it emphasized  that such
disciplines should be mutually supportive.  Argentina also felt that the WTO Dispute Settlement
mechanism, which was broadly satisfactory, required some fine-tuning.
23. Since the early 1990s, Argentina has participated in GATT and WTO work on trade and
environment.
25  It has expressed its concern on the absence of multilateral provisions on this matter,
underlined the importance of the WTO's role in avoiding the use of environmental measures for
protectionist purposes, emphasized the links between further agricultural trade liberalization and the
environment, and highlighted several problems relating to packaging rules.  Argentina also
participated actively in the negotiations in financ ial, maritime transport and basic telecommunication
services (Chapter IV).  However, it expressed no interest in participating in the Information
Technology Agreement (ITA);  on the contrary, under MERCOSUR's tariff protection pattern, import
duties on several items covered under this Agreement were increased ahead of schedule in 1995(section (6)(ii)(b) of this Chapter, and Chapter III).
24. Concerning electronic commerce, in April 1998 Argentina indicated that proposals in this
area (e.g. for creating a tariff-free zone for electronic commerce or concluding a duty-free pact) were
covered neither by GATS Article V nor by Article XXIV of GATT 1994;  as such commerce (defined
as neither a good nor a service) was not part of  WTO Agreements, there was no obvious legal basis
for a decision and dispute settlement in this area.
26  Although supporting fast Internet growth,
Argentina needed time to study the impact of electronic commerce on trade flows and how WTO
disciplines could be adjusted while retaining stability and confidence in the system.
25. Since July 1997, Argentina has participated in the work of the Working Groups on the
Interaction between Trade and Competition Policy and on the relationship between Trade andInvestment and Transparency in Government Procurement (Chapter III).
26. At the June 1997 Cairns Group Ministerial Meeting in Rio de Janeiro, the Argentine
authorities presented a study on the trade policies of WTO-acceding or aspirant countries;  they also
expressed concern over what they saw as the inadequate trade concessions offered by such countries
(mainly China and the Russian Federation).  At the WTO Singapore Ministerial meeting, the Groupemphasized the need to monitor the implementa tion of the Uruguay Round commitments and agreed
to the preparation of an agenda for the next round of multilateral trade negotiations.  At the 18
th Cairns
Group Ministerial Meeting (Sydney, 1-3 April 1998), specific objectives in the key areas of export
                                                     
25 GATT documents TRE/5, 4 June 1992, TRE/7, 30 October 1992, and TRE/10, 6 April 1993;  WTO
document WT/CTE/W/24, 20 March 1996.
26 WTO document WT/GC/M/28, 8 May 1998.Argentina WT/TPR/S/47
Page 25
subsidies, market access and domestic support for agriculture, were agreed ("Vision Statement");
action in various fora was to be pursued for, inter alia , promoting such objectives, as well as the
implementation of existing commitments in the area of agriculture.27  The Group's next meeting will
be held at Mar del Plata (Argentina) in 1999.
(5) TRADE LAWS AND REGULATIONS
27. The provisions of international agreements th at are ratified and published in the Official
Bulletin are implemented directly, unless their implementation requires the adoption of national
regulations.  They supersede existing domestic legislation and cannot be affected by subsequentdomestic laws.  MERCOSUR decisions, directives a nd resolutions have similar status but, under
certain circumstances, do not require legislative approval;  these legal texts, are published in the
Official Bulletin of MERCOSUR.  Some of th ese MERCOSUR regulations are adopted by law,
decree or resolution and implemented after publication in the national Official Bulletin.
28
28. The provisions of the WTO Agreements, now in corporated into national legislation, are
constitutionally superior to those of domestic le gislation and MERCOSUR rules affecting trade with
third countries.29  The WTO Agreements can, therefore, be directly invoked before the courts,
including the Supreme Court;  such a case, for safeguard measures against footwear imports, was
proceeding at the time of preparation of this report.
29. Since the previous Trade Policy Review, the issue of a single foreign trade law (Draft
Law 23101) has been pending.  Some of the draft law's mechanisms have begun to be put in place, but
details were not available at the time of completion of this report.30
30. Trade policy guidelines are increasingly based on multilateral or MERCOSUR provisions
(Chapter III), which are themselves in a process of evolution.  In this context, several laws on trade
matters have been promulgated since 1992, for example, on preshipment inspection (1997), patents
(1995/1996), data exclusivity, industrial design a nd utility models protection (1996).  At the time of
completion of this report, legislation was being prepared at the national or MERCOSUR level in areassuch as customs clearance, standards, government procurement, anti-dumping, subsidies and
countervailing measures, patents and copyrights, and competition policy.
31. The Constitution guarantees environmental protection and prohibits the entry of dangerous
wastes or radioactive material;  it mandates consumer protection and undistorted competition
(Chapter III).
32. While Argentina has met most of the regular WTO notification requirements, transparency
would be improved at the international level th rough prompter communication to the WTO of the
introduction or modification of trade measures (Tables AII.1 and AII.2 and Chapter III).
31  Areas
where there have been delays in or a lack of notifications include the introduction of specific duties on
                                                     
27 Details on these matters may be found in WTO document WT/L/263, 21 April 1998.
28 National Standards, must also be published in the official bulletins of the provinces.
29 Commenting on the status of the Marrakesh Agreement in the Argentine legal system, the authorities
confirmed to the WTO the guarantees on the primacy of international treaties and law over domestic legislation(except for the Constitution) (WTO document G/SG/W/139, 19 March 1996).  Paragraph 22 of Article 75 of the
Constitution stipulates that treaties are supe rior to domestic laws and case law (1992).
30 GATT (1992).
31 This type of obligation, originally adopted in November 1979 and reiterated in Part I of the WTO
Ministerial Decision on Notification Procedures (o n 15 December 1993), covers the adoption of any trade
measure.WT/TPR/S/47 Trade Policies Review
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textiles, clothing and footwear (section 7(i)(a) of this Chapter), variable import levies on sugar
(since 1992), quotas on paper products (in force during 1993 and 1994), "mirror" export subsidy
scheme (1992-93), changes in the statistical tax rate and legislation on free-trade zones and specialcustoms areas (since 1994, Chapter III).
(6) T
RADE AGREEMENTS AND ARRANGEMENTS
(i) Multilateral agreements
33. Under the Agreement Establishing the WTO, Argentina assumed, as part of the Single
Undertaking, all commitments under the Multilateral Tr ade Agreements.  It also signed the plurilateral
International Bovine Meat and the International Dairy Agreements, which were discontinued at the
end of 1997.  It has maintained observer status in the plurilateral Committees on Government
Procurement, since February 1997, and on Trade in Civil Aircraft, since November 1996.32  Observer
status in the Committee on Government Procurement is intended to help Argentina become
acquainted with its rules and activities, as well as to appraise the possibility for accession;  the lack ofdirect commercial interest explains non-adherence to the Agreement on Trade in Civil Aircraft.  
34. Since 1971, Argentina has been a beneficiary under various GSP (Generalized System of
Preferences) schemes, which in 1997 covered more than 28% of total exports to donor markets, with
the EU and the United States being the most important destinations in value.
33  In 1997, Argentina's
degree of utilization of such benefits (defined as share of covered exports to total exports to themarket) ranged from about 10% (Japan) to about 78% (average level for central and eastern European
markets).  Despite subsequent changes to the 1995 graduation-related amendments to the EU scheme
(when Argentina lost GSP status for 50% of expo rt items including raw hides and skins, leather,
aluminium wire, dyes, chemicals, and lead pellets) the degree of utilization for this market increased
by more than one third to about 33%.
34  Despite the reduction of Argentine benefits from the U.S.
GSP scheme, by the application of the "competitive needs limit" and punitive action affecting more
than 50% of Argentine exports (agricultural, chemical, pharmaceutical material and othermanufactured items) because of allegedly poor efforts to strengthen protection of intellectual property
rights for pharmaceuticals (Box III.1), the degree of utilization of the scheme was not affected
in 1997, remaining at about 15%.
35. Argentina is involved in the second round of negotiations under the Agreement establishing
the Global System of Trade Preferences (GSTP), where MERCOSUR countries negotiate as a singletrading entity.
(ii) Regional agreements
(a) LAIA
36. Argentina is a member of the Latin American Integration Association (LAIA).
35  T h e
long-term objective of the Montevideo Treaty, which provides the legal and institutional basis for theconclusion of economic and trade agreements among signatories, is the gradual and progressive
                                                     
32 WTO documents TCA/W/1, 4 November 1996 and WT/L/247, 26 November 1997.
33 MEOSP (Secretariat of Industry, Trade and Mining) estimates based on applications for the issue of
certificates of origin.
34 Comisión Nacional de Comercio Exterior (1996), p. 107;  and WTO (1995).
35 LAIA membership does not cover all Latin American countries;  LAIA countries (i.e. Argentina,
Bolivia, Brazil, Colombia, Chile, Ecuador, Mexico, Paraguay, Peru, Uruguay, Venezuela) are also WTOMembers and, except for Ecuador, have each been subject to at least one Trade Policy Review.Argentina WT/TPR/S/47
Page 27
establishment of a Latin American Common Market.  The instruments used to attain LAIA objectives
comprise two main categories of agreements:  regional-scope agreements, where all member countries
participate according to their level of development,  and partial-scope agreements that bind only their
signatories.36
37. The establishment, operation and expansio n of the LAIA-derived MERCOSUR has
necessitated the adjustment of past LAIA trade agreements and has affected the significance of its
institutional setting;  the LAIA General Secretariat seems now to have treaty depositary and
administration and advisory functions, as well as the responsibility for maintaining a database for
trade negotiation purposes.  In accordance with the Sao Paulo Guidelines, all trade preferences
contained in existing bilateral LAIA agreemen ts involving MERCOSUR and other LAIA members
have to be renegotiated on the basis of the MERC OSUR Common External Tariff (section (b) below
and Chapters III and IV) and deposited with LAIA as Partial-Scope Agreements.  Since 1995, an
ad hoc MERCOSUR-LAIA group has pursued such negotiations;  while those with Chile and Boliviawere concluded (section (b) below), negotiations with other Andean Community countries and
Mexico continued in 1998.
37
38. At present Argentina is a signatory to various partial-scope agreements, including38:
- Bilateral economic complementarity ag reements with non-MERCOSUR members
(Colombia, Ecuador, Peru and Venezuela; in force until 30 September 1998, andMexico until 30 June 1998, and covering tariff preferences and/or other economic
issues (e.g. physical integration, establishment of mixed enterprises).
- Bilateral economic complementarity agreements with Brazil and Uruguay covering
products where duties on intra-MERCOSUR trade have not yet been reduced to zero.
- Bilateral hydrocarbons trade agreements with Bolivia, Chile and Uruguay.
- Other agreements involving several LAIA members such as the River Transport
Agreement for the Paraguay-Paraná Waterway, the Agreement on Unified BasicRegulations Governing Road Traffic;  the Agreement on Cooperation and Trade in
Goods Used for Environmental Conservation and Protection;  the Agreement for the
liberalization and expansion of intra-regional trade in seeds (comprising non-LAIA
members too).
Sectoral trade agreements with several other LAIA members expired at the end of September 1997.
                                                     
36 ALADI/AR.PAR/4 of 1 August 1990, Regional Scope Agreement No. 4 and Amending Protocol of
12 March 1987.  Countries are classified in three categorie s:  most-developed;  those at an intermediate stage of
development;  and least-developed.  Argentina is a most-developed LAIA country.  Countries higher in the
classification are expected to grant more benefits than those standing lower and make an effort to grant deeper
preferences to least-developed countries as well as on pr oducts of special export interest to them in the context
of the Regional Tariff Preferences Agreement (PAR).  In addition to the PAR, Regional Market-OpeningAgreements in favour of least-developed LAIA countries based on non-reciprocity and cooperation, provide forthe immediate elimination of all tariff and non-tariff restrictions on imports of certain items (specified in eachagreement between the donor and the beneficiary) into other LAIA markets.  Argentina is a signatory to
Regional Market-Opening Agreements Nos. 1, 2 and 3 in favour of Bolivia, Ecuador and Paraguay,
respectively.
37 WTO document WT/COMTD/1/Add.4/Rev.1, 11 April 1997, p. 21.
38 For a list of sectors, see WTO document WT/COMTD/7, 30 September 1996;  and LAIA document
ALADI/SEC//di 971, 14 July 1997.WT/TPR/S/47 Trade Policies Review
Page 28
39. Two reports to the WTO on LAIA activities were submitted in 1996 and 1997 and cover
developments until 1996;  similar reports had been presented to the GATT.39
(b) MERCOSUR
40. Argentina is a member of the MERCOSUR, established in March 1991 under the Treaty of
Asunción;  its objective is, inter alia , the creation of a common market and the free circulation of
goods, services, capital and labour among member countries as from 1 January 1995.  MERCOSUR,
initially only an agreement within the LAIA framework, now has an independent institutional status,
which, inter alia , enables the group as such to undertake international commitments, and membership
is now open to other LAIA countries.40
41. MERCOSUR's institutional structure, established under the 1994 Protocol of Ouro Preto (in
force since December 1995), comprises, in hierarchical order:  the Council of the Common Market,
which meets at least every six months;  the Common Market Group, an executive body;  the
MERCOSUR Trade Commission, which monitors the application of the common trade policy
instruments, reviews issues relating to common tr ade policies, intra-MERCOSUR trade and trade with
third countries, and meets at least once a month;  the Joint Parliamentary Commission, an advisory
body;  the Economic-Social Consultative Foru m, an advisory body;  and the MERCOSUR
Administrative Secretariat.  At the Fortal eza meeting of the Common Market Council in
December 1996, plans to set up a MERCOSUR development bank to finance infrastructure projects inthe sub-region were announced.
Intra-zone trade liberalization
42. Under the Trade Liberalization Programme,  between June 1991 and 31 December 1994
barriers to trade among MERCOSUR partners cove ring close to 95% of intra-regional trade were
eliminated.  A regime of adjustment, agreed in August 1994, is to lead to a progressive phase-out of
remaining tariffs on intra-regional trade.  Sensitive items, which are contained in individual
exception/adjustment lists, are being phased in between 1 January 1995 and 31 December 1998 forArgentina and Brazil, and between 1 January 1996 and 31 December 1999 for Paraguay and Uruguay.
Argentina's exception/adjustment list contains 209 eight-digit HS items for which duty-free treatment
is to apply as of 1 January 1999 (Chapters III and IV).  Paraguay and Uruguay benefit from
preferential rules of origin within MERCOSUR (Chapter III).
43. The adjustment regime was extended by waiver to permit longer progressive adjustment
periods for the sugar and automotive sectors to MERC OSUR rules.  At the time of completion of this
report in June 1998, negotiations for the establishment of a common automotive regime in the
year 2000 were at an advanced stage.  The issue of a sugar regime was still under examination
(Chapter IV).
44. A framework agreement for freeing trade in services within MERCOSUR over a ten-year
period was signed in December 1997 (Chapter IV).
                                                     
39 LAIA reports to the GATT and WTO are found in GATT documents L/6946, 20 December 1991,
L/6985, 5 March 1992, and L/6985/Add.1, 9 April 1992;  and WTO documents WT/COMTD/7,30 September 1996, and WT/COMTD/11, 8 October 1997.
40 Economic Complementarity Agreement No. 18.Argentina WT/TPR/S/47
Page 29
Common External Tariff
45. The Common External Tariff (CET) of MERCO SUR has been in force since January 1995,
covering 85% of goods traded within the group;  the CET affected 65% of Argentina's imports fromoutside the region or 70% of the tariff lines (Table III.1).  As discussed in Chapter III, full
implementation of the CET (all members, all items) is to take place by 2006;  in principle, Argentina
is to apply the CET fully (including sugar and automotive items) by the year 2001, except for certain
informatics and telecommunications products for which the CET is to enter in force in 2006
(Table III.1).  The phase-in of the CET consists of a gradual convergence (increase or reduction) inrates, depending on:  the country;  the items contained in the common list, namely capital goods,
informatics, telecommunications items;  and the national exception lists.  Tariff reductions for
products contained in national exception lists may only be accelerated, not delayed.  MERCOSUR
CET rates may only be modified with the consent of all MERCOSUR partners.
46. A temporary increase of the CET by three percentage points on most tariff items, with the
precise product coverage varying across MERCOS UR members, was agreed in December 1997 to
accommodate Brazil's external imbalance and allow Arge ntina to reduce the level of its statistical tax
(section 7(i)(a) of this Chapter and Chapter III).  While this change had not been notified to the WTO
by June 1998, the authorities indicated to the Secretariat that the notification was being coordinated
with other MERCOSUR partners.
41  In the context of the Committee on Regional Trade Agreements,
certain WTO members have requested more detailed information on the increase.42  Uruguay and
Paraguay are to exempt certain sectors (e.g. capital and telecommunications goods, and inputs) from
the increase.43
Sectoral policies
47. Negotiations are under way for the harmonization of remaining restrictions on internal trade
in agricultural products;  in March 1998, the scope of work was expanded to include the coordination
of national positions in international fora and the analysis and discussion of individual agriculturaland agro-industrial policies with a view to ensuring the rational development of regional output and
an increase in productivity.  Production-sharing arrangements, which, inter alia , are aimed at fostering
the rationalization of investments and raising the competitiveness of companies, may be negotiated by
the private sector;  the approval of MERCOSUR's Common Market Group is required.  Bilateral
arrangements between Brazil/Argentina, Argentina/Uruguay and Brazil/Uruguay govern trade in theautomotive sector
44 (Chapters III and IV), while a steel production-sharing arrangement was applied
between Argentina and Brazil for the period 1992-94.  Discussion was recently initiated on ways to
foster sub-regional trade in leather and footwear (Chapter IV).
Macroeconomic and other policies
48. MERCOSUR ministers meet periodically to coordi nate their position on areas such as foreign
investment and trade, and the adoption of common positions in international fora.  Coordination is
also being strengthened in other areas, as MERC OSUR encompasses a diversified agenda including
environment, justice, education and labour issues.  In the context of long-term major macroeconomic
                                                     
41 Reuters, 14 December 1997;  and Latin American Weekly Report , 18 November 1997.
42 WTO document WT/REG/M/15, 13 January 1998.
43 More information may be found in the forthcoming Trade Policy Review of Uruguay.
44 Having notified  to the WTO their trade and investment measures for the automotive sector prior to
the implementation of the WTO Agreements, Argentina and Uruguay benefit from the transition periodprovided under the Agreement on TRIMS;  thus, their existing regimes may remain in force until31 December 1999 (WTO document G/L/68, 6 March 1996).WT/TPR/S/47 Trade Policies Review
Page 30
decisions within the group, the adoption of a co mmon currency for MERCOSUR was raised in an
informal manner.45  Several analysts consider that structural reforms and completion of the customs
union must precede any move towards a single currency.  Moreover, efforts are being made for theharmonization of the financial (convergence of individual regulatory frameworks to Basle
recommendations), investment (section (8) of this Chapter) and fiscal (forthcoming negotiations)
regimes, which constitute other major obstacles to such move.
Regional expansion process
49. MERCOSUR members have renegotiated existing preferential agreements within the LAIA
framework with a view to establishing free-trade areas within the same framework.  The process of
extending sub-regional agreements is considered as part of the "building block" approach for the
establishment of a South American Free-Trade Area.  In most of the negotiations with individual
countries and sub-regional trading blocs, MERCOSUR's main concern has been the opening of
markets.  The so-called "four plus one" met hod (MERCOSUR members negotiating as a group with
individual countries) has been used and, in this context, individual free-trade area (FTA) agreements
were concluded with Chile and Bolivia (formally LAIA partial scope agreements), but negotiations
with the Andean commun ity (without Bolivia) are being conducted as group-to-group negotiations.
50. Under the free-trade agreemen t with Chile, which entered in force on 1 October 1996,
duty-free treatment applies between Chile and MERCOSUR and is expected to cover about 90% oftraded goods within eight years;  for the remaining 10% of items (sensitive and very sensitive items)
the tariff elimination period is set at 10, 15 and 16 years, except for wheat, which will require
18 years.  The reduction of Chilean import duties ahead of schedule on more than 165 MERCOSUR
export items was being negotiated in May 1998;  these talks, which were initiated in early 1997, are
aimed at offseting the potential impact of preferences under the 1996 Chile/Canada free-trade
agreement on MERCOSUR exports.
46  The LAIA Regional Tariff Preference Agreement (PAR)
applied between Argentina, Brazil and Chile was set at 30%, except for a few items where it ismaintained at 12%;  Chile grants tariff cuts of 50% and 40% to Paraguay and Uruguay.  Areas such as
rules of origin, intellectual property, transportation, communications, services, investment and dispute
settlement are also covered by this agreement (Cha pter III).  Argentina sees in this agreement an
opportunity for increasing and diversifying progressively its exports, mainly of cereals, oilseeds, beef,
dairy and vegetable oils, to Chile.
47
51. The agreement with Bolivia was concluded in December 1996 and came into force on
2 March 1997.  It is to lead to a free-trade area within a period of ten years.  Argentina's interest in
this agreement has been the lowering of Bolivian duties on imports of wheat, flour, canned peaches,
cheese, chocolate, biscuits, plastic goods and steel;  however, these are exempt from tariff cuts
until 2005.48
52. Since 1996 trade negotiations have also been initiated with Mexico (currently suspended) and
the Andean Community (excepting Bolivia).  A Framework of Understanding with the Andean
Community signed on 16 April 1998, is to lead to the conclusion of an agreement for the extension
("multilateralization") of existing preferences to sign atories, possibly also extending coverage to new
items by October 1998, and a second agreement for the establishment of an FTA from
                                                     
45 Statements made by the Argentine President Menem and the Brazilian Finance Minister
(Pedro Malan) and discussions at an inter-ministerial meeting in Brazil in early 1997 (Latin American Weekly
Report, 10 June 1997;  Wall Street Journal , 21 July 1997;  and Reuters , 15 December 1997).
46 Dow Jones Newswires, 20 February 1998.
47 MEOSP/ Secretaría de Agricultura, Pesca y Alimentación (1996) , p. 11.
48 Latin American Regional Reports- Southern Cone, 27 December 1996.Argentina WT/TPR/S/47
Page 31
1 January 2000.  A framework agreement to work towards free trade and cooperation was also signed
with the Central American Common Market (CACM)  in April 1998.  Preparatory discussions are
being held with the EU for the launching of negotiations for an association agreement.  Reportedly,talks on future negotiations may be initiated with other countries and regional groups including
Canada, the Caribbean Common Market (CARICOM) and Panama.
49
53. MERCOSUR members have developed a common position on the action programme and the
negotiation process for a Free Trade Area of the Americas (FTAA).  According to the Plan of Action
agreed at the Second Summit of the Americas in Santiago de Chile in April 1998, negotiationslaunched in 1998 are to be appraised by the y ear 2000 and concluded by 2005.  Nine negotiating
Groups are to deal with issues such as market access, anti-dumping, subsidies and countervailing
measures, government procurement, intellectual property rights, competition policy, agriculture,
services, investment and dispute settlement.  The negotiations are to lead to a comprehensive single
undertaking, which is to be WTO-consistent and co-exist with bilateral and sub-regional agreementsalready in force.  Furthermore, at the Second Su mmit of the Americas, a series of proposals were
made, aimed at deepening the process of economic integration and creating opportunities for the full
participation of all countries, to advance the modernization of financial markets, programmes of
science and technology, energy cooperation, and hemispheric infrastructure (i.e. transportation and
telecommunications).  At the fourth FTAA Trade Ministers' Meeting, held in March 1998 inCosta Rica, an Administrative Secretariat for the FTAA negotiations was established to provide
technical support.
54. MERCOSUR countries maintain an agreement wi th the United States for the promotion of
trade and investment (Agreement relating to a Council on Trade and Investment, established in
June 1991).  A Framework Agreement on Inter-regional Cooperation with the European Union in
December has been in force since 1995;  this agreement is intended to pave the way for negotiations
for an association agreement, as mentioned earlier, as well as to extend existing economic and tradecooperation to other fields, such as science and technology, environmental protection,
communication, investment promotion, and the fight ag ainst illegal drugs trade.  Discussions aimed at
strengthening economic relations with India, Japan, the Russian Federation and the
Australia-New Zealand Closer Economic Relation s Trade Agreement (ANZCERTA) have also been
launched since 1996.
50
Appraisal and challenges
55. Some concerns have been expressed about the possible trade diverting effects of the
MERCOSUR integration scheme, in particular the boosting of intra-regional trade in inefficient
sectors.51  However, while intra-MERCOSUR trade expand ed faster than trade with third countries or
other regions, trade with third countries also grew strongly between 1990 and 1996.52  Changes in the
trade pattern for certain product categories (e.g. those relating to agriculture and agro-industry) toward
MERCOSUR countries may also reflect shifting co mparative advantage and increased competition
within the region, but tariff escalation and a higher than average incidence of non-tariff barriers on
inputs from the rest of the world may also be a contributing factor.  As discussed elsewhere in this
report, Argentina's export dependence on MERCOSUR  markets (mainly Brazil) has increased for
virtually all products, and for certain sectors MERC OSUR has become the main destination;  while
                                                     
49 Journal of Commerce, 13 September 1997;  La Nación Line ,  13 September 1997.
50 WTO document WT/COMTD/1/Add.4/Rev.1, 11 April 1997.
51 Yeats (1997).
52 In this period, MERCOSUR imports from other MERCOSUR countries grew at an annual average
rate of 26% in U.S. dollars, while imports from other countries grew at 18%;  EU trade with MERCOSURvalued in ECU has stagnated, while growing in U.S. dollar terms (WTO, 1997).WT/TPR/S/47 Trade Policies Review
Page 32
the impact on imports was not as pronounced as fo r exports, the share of MERCOSUR-origin imports
for certain items that benefit from increased border protection against MFN sources has increased
markedly (e.g. footwear and office machines).53
56. The deepened links with MERCOSUR make Argentina sensitive to policy developments and
economic conditions in Brazil.54  Sensitive issues have included the sugar trade, access delays for
exports of pharmaceuticals, state and federal investment incentives in the automotive sector (expected
to be eliminated by the end of 1998)55, constraints on banking operations, restrictions on short-term
import finance, as well as plans for the introduc tion of new prior import authorization requirements.
In this context, the need for improved coordination of macroeconomic policies and harmonization of
regulatory environments with in MERCOSUR is apparent.
WTO examination
57. Since February 1996, MERCOSUR has been examined  in the light of the relevant provisions
of GATT 1994, including Article XXIV (on customs unions and free-trade areas), by the new WTO
Committee on Regional Trade Agreements.  Until then, the GATT Working Party on MERCOSUR,
set up in May 1993, had been examining the operation of the Treaty of Asunción, which was first
notified under the Enabling Clause in July 1992.  MERCOSUR countries have supplied to the GATT
and the WTO detailed information on:  the elimination of tariff and non-tariff restrictions;  the
establishment of the CET and the adoption of a common trade policy in relation to third States orgroups of States;  the coordination of macroeconomic policies;  rules of origin;  measures affecting
imports from third countries;  the application of  national treatment;  issu es relating to commitments
under LAIA;  accession;  dispute settlement;  services;  trade data and studies on trade
creation/diversion;  and the institutional structur e.  The MERCOSUR agreements with Chile and
Bolivia were communicated to the WTO in April 1997 and discussed at the May 1997 meeting of the
Committee.
(iii) Bilateral and other arrangements
58. Since 1982 Argentina has maintained bilatera l agreements with the following non-LAIA
countries from the region:  Costa Rica, Cuba (extended until 31 December 1998) and El Salvador;
any concessions under these agreements will be extended to the relatively less-developed LAIA
members, as required by the Montevideo Treaty.
56  More recently, bilateral trade and cooperation
agreements have been signed (with Armenia, the Russian Federation, and Saudi Arabia) or are in the
process of negotiation (Croatia).   Argentina has also subscribed to a fisheries agreement with the EU
(Chapter IV) and signed meat export agreements with several countries.
                                                     
53 Growth of more than 70% was recorded in the share of MERCOSUR-origin imports of product
categories such as animal and vegetable fats, coal, gas,  medical products, leather items, office machines and data
processing equipment, metal working machinery, and footwear (UNSD, Comtrade database).
54 Chapters III and IV of this report;  World Bank (1996b), pp. 21 and 42;  Latin American Regional
Reports-Brazil, 11 March 1997;  El País , 23 February 1998.
55 La Nación Line, 28 and 30 March 1998.
56 Annex 12 of WTO document WT/COMTD/7, 30 September 1996.Argentina WT/TPR/S/47
Page 33
(7) TRADE DISPUTES AND CONSULTATIONS
(i) Dispute settlement under the GATT/WTO
(a) Complaints against Argentina
Argentina - certain measures affecting imports  of footwear, textiles, apparel and other items
59. Following unsuccessful consultations initiated in October 1994, a panel was established in
February 1997 upon request of the United States to examine certain measures maintained by
Argentina affecting imports of textiles, apparel and other items.57  These measures comprised:
minimum specific duties on various footwear, textiles and apparel in excess of the bound rate of 35%ad valorem ;  a statistical tax of 3% ad valorem  on imports from all sources other than MERCOSUR
countries;  and measures imposing, inter alia , labelling requirements related to affidavits of product
components.  The EU, Hungary and India reserved th eir rights to participate in the proceedings as
third parties, and all presented arguments to the Panel.
60. The Panel concluded that:
- the minimum specific duties imposed by Argentina on textiles and apparel were
inconsistent with the requirements of Article II of GATT;  and
- the statistical tax of 3% ad valorem  imposed by Argentina on imports was
inconsistent with the requirements of Article VIII of GATT.
61. On 21 January 1998, Argentina notified its intention to appeal certain issues of law and legal
interpretations developed by the Panel.
58
62. In January 1998, Argentina reduced the statistical tax rate to 0.5% ad valorem  and raised by
3 percentage points the tariff rate affecting imports subject to the tax (Chapter III);  it also appealed
certain issues of law covered and legal interpretations developed in the Panel Report.  In March 1998
the Appellate Body virtually confirmed the findings of the Panel, and, more specifically, its report,
adopted on 22 April 199859:
- concluded that the application of a type of duty different from the type provided for in
a Member's Schedule is inconsistent with Article II:1(b), first sentence, of the
GATT 1994 to the extent that it results in ordinary customs duties being levied in
excess of those provided for in that Member's Schedule. In this case, Argentina had
acted inconsistently with its obligations under Article II:1(b), first sentence, of the
GATT 1994, because the minimum specific duties regime, by its structure and design,resulted, with respect to a certain range of import prices in any relevant tariff category
to which it applies, in the levying of customs duties in excess of the bound rate of
35% ad valorem  in Argentina's Schedule;
                                                     
57 WT/DS56/R, 25 November 1997.  The Panel decided not to review the consistency with the WTO
Agreement of the minimum specific duties with respect of footwear;  these were revoked on 14 February 1997
(WT/DS56/AB/R, 27 March 1998, and Chapter III of this report).
58 When a Panel Report is appealed to the Appellate Body, it is not considered for adoption by the
Dispute Settlement Body until completion of the appeal.
59 WT/DS56/AB/R, 27 March 1998;  and WT/DS56/11, 23 April 1998.WT/TPR/S/47 Trade Policies Review
Page 34
- concluded that the Panel did not err in finding that Argentina had acted inconsistently
with its obligations under Article II of the GATT 1994 "in all cases" in which
Argentina applied the minimum specific duties;
- upheld the findings of the Panel concerning the inconsistency of the statistical tax
(paragraphs 6.79 and 6.80 of the Panel Report);  and
- concluded that the Panel did not violate Article 11 of the DSU in:  (i) admitting
certain evidence submitted by the United States two days prior to the second
substantive meeting of the Panel with the parties, and granting Argentina two weeksto respond;  and (ii) not seeking information from, and consulting with, the IMF so as
to obtain its opinion on specific aspects of the matter concerning the statistical tax
imposed by Argentina.
63. In July 1998, the authorities made a proposal to implement the Appellate Body's conclusions:
customs procedures were to be introduced to ensure that the ad valorem  equivalent of minimum
specific duties would not exceed the bound rate of 35%, and ceilings by range of import value were to
be set from January 1999 to ensure that the statistical tax would not exceed US$500 per shipment.
60
Argentina - measures affecting textiles and clothing
64. In October 1997 a panel was established to examine a complaint by the EU concerning the
application and non-notification of specific duties on imports of textiles and clothing in excess ofbound tariff levels.
61  The United States reserved its third party rights.
Argentina – safeguard measures in imports of footwear
65. Following unsuccessful consultations with the EU, Indonesia, and the United States, in
July 1998 a panel was established to examine safeguard measures on imports of footwear in force
since February 1997 (Chapters III and IV).62
Other
66. In November 1992, the EU requested Argentina to enter into GATT Article XXIII
consultations regarding the application of countervailing duties on imports of certain dairy products.63
In December 1992, under the same procedures the EU requested consultations on countervailingduties on imports of canned peaches in syrup originating in Greece.
64  In April 1994, the Czech
Republic requested Argentina to hold consultations (Article XXII:1) regarding the imposition of
provisional anti-dumping duties on imports of three-phase electric motors originating in the former.65
All complaints referred to lack of substantive evid ence on the fact that the imports of the products in
question had caused or threatened to cause material injury to the domestic industry, as required by
GATT Article VI of the General Agreement;  as a result, investigations were initiated in Argentina
and/or measures were adopted (Chapter III).
                                                     
60 WTO document WT/DS56/14, 7 July 1998.
61 WTO documents WT/DS77/4, 7 January 1998, and WT/DS77/4/Corr.1, 20 January 1998.
62 WTO documents WT/DS121/1, 8 April 1998, WT/DS121/2, 8 April 1998, WT/DS123/1,
27 April 1998, and WT/DS123/2, 13 May 1998.
63 GATT document DS35/1, 7 December 1992.
64 GATT document DS36/1, 6 January 1993.
65 GATT document DS50/1, 11 April 1994.Argentina WT/TPR/S/47
Page 35
(b) Complaints by Argentina
EU - oilseeds concessions
67. In September 1992, Argentina requested the urgent establishment of a panel under
Article XXIII:2 to examine its principal supplier righ ts to the EU market with respect to soy beans and
soy cake.  At the Council meeting of November 1992 th e EU recognized the rights of Argentina as a
principal supplier in the light of paragraph 4 of the 1980 Procedures for Negotiations under
Article XXVIII. 66
Norway - subsidy in connection with a tender submitted for a hydro-electric project in Costa Rica
68. In September 1992 Argentina informed the GATT Council of its intention to request
Article XXII:1 consultations with Norway in connection with a hydro-electric project in Costa Rica
that involved work in energy materials as well as the supply of related equipment.67  The offer had
included a donation (mixed-credit financing), which implied an implicit subsidy, considered by
Argentina inconsistent with Article XVI.  Although consultations with Norway were being held,Argentina reserved its right to resort to Article XXIII:2 if that should prove necessary.
EU - restrictions on imports of lemons
69. In July 1993, Argentina complained, in the GATT Council, against the system of reference
prices and countervailing charges applied by the EU under its Common Market Organization for fruit
and vegetables;  these measures, which were viewed by Argentina as inconsistent with GATTArticles XI, XIII and X, affected Argentine lemon exports.
68  Following a series of consultations
(Article XXIII:1), initiated in June 1994 under paragraph 4 of the April 1989 Decision on
Improvements to the GATT Dispute Settlement Rules and Procedures, this case was resolved in 1996,
in the context of GATT 1994 Article XXIV:6 negotiations on the accession of Austria, Finland and
Sweden to the EU;  Argentina was, inter alia , offered more flexible import price conditions for
lemons, apples and pears.69
Hungary - export subsidies in respect of agricultural products
70. In March 1996, Argentina and other WTO Members, complained that Hungary had not
observed its commitments under Article 3.3 and Part V of the Agreement on Agriculture, by
providing export subsidies in respect of agricultural products not specified in Section II of Part IV of
its Schedule, as well as subsidies in excess of the budgetary outlay and quantity commitment levels
specified in the same Schedule.  In February 1997, following unsuccessful consultations, a panel wasestablished on the request of Argentina, Australia, New Zealand and the United States.  By July 1997,
the parties to the dispute had reached a mutually ag reed solution, which required Hungary to request a
                                                     
66 GATT documents DS 34/1, 18 September 1992 and C/M/260, 26 November 1992;  and
GATT (1992).  Argentina's claims were based on the monitoring of EU compliance with panelrecommendations, which in 1990 urged it to redress the nu llification and impairment of benefits accruing from
tariff bindings;  this situation had been created by the introduction of a regime of payments and subsidies toprocessors and producers of oilseeds and related animal -feed proteins.  Argentina had participated as a
complainant in this panel (GATT document C/M/256, 29 May 1992).
67 GATT documents C/M/259, 22 October 1992 and C/M/260, 26 November 1992.
68 GATT documents C/M/265, 16 August 1993, DS 45/2, 28 June 1994, C/M/273, 12 July 1994, and
C/M/275, 24 October 1994.
69 WTO document G/L/65/Rev.1/Add.2, 21 October 1997.WT/TPR/S/47 Trade Policies Review
Page 36
waiver of certain WTO obligations;  pending adoption of the waiver the complaint was not
withdrawn.
Other71. In December 1997, Argentina (Canada and Japan joined in January 1998) requested the
United States to enter into consultations with respect to the administration of its tariff-rate quota for
imports of groundnuts.
70
(c) Third party interests
United States - measures affecting the importation, internal sale and use of tobacco72. In January 1994, following unsuccessful consultations, a panel was established in accordance
with paragraph F(a) of the April 1989 Decision concerning Improvements to the GATT Dispute
Settlement Rules and Procedures (BISD 36S/61) pursuant to the complaints of Brazil, Canada, Chile,
Colombia, El Salvador, Guatemala, Thailand and Zimbabwe, to examine measures maintained on the
importation, internal sale and use of tobacco in the United States;  Argentina, the EU andNew Zealand joined later as interested third parties.
71  Argentina claimed that the measures would
seriously affect its tobacco exports to the United St ates, a market which in the previous two years had
accounted for almost 40% of its total tobacco exports.  Argentina's sales to the United States
represented 17,820 tonnes (or US$45.8 million) and 15,568 tonnes (or US$41.4 million) in 1992
and 1993, respectively;  such levels represented a significant increase compared to pastperformance.
72
73. The Panel concluded that:
- the Domestic Marketing Assessment (Section 1106(a) of the 1993 Budget Act) was
an internal quantitative regulation inconsistent with Article III:5;
- the Budget Deficit Assessment (Section 1106(b)(1) of the 1993 Budget Act) was an
internal tax or charge inconsistent with Article III:2;
- the No Net Cost Assessment (Section 1106(2)(b) of the 1993 Budget Act) was not
inconsistent with Article III:2;  and
- the evidence did not demonstrate that Sect ion 1106(c) of the 1993 Budget Act, Fees
for Inspecting Imported Tobacco, mandated action inconsistent with Article VIII:1(a).
74. The Panel recommended that the inconsistent measures should be brought into conformity
with the United States' obligations under the General Agreement.
75. The Panel Report was presented to and adopted by the GATT Council in October 1994.
                                                     
70 WTO documents WT/DS111/1, 8 January 1998, WT/DS111/2, 22 January 1998, and WT/DS/111/3,
22 January 1998.
71 GATT document DS/44R, 12 August 1994;  and GATT (1996), p. 44.
72 GATT document DS 44/8, 11 February 1994.Argentina WT/TPR/S/47
Page 37
Turkey - action on imports of textiles and clothing
76. In February 1996, Argentina stated at the Dispute Settlement Body that it shared the views of
other complainants and was to reserve its rights w ith respect to consultations regarding the conformity
of the unilateral measures on imports of textiles and clothing adopted in the context of the
implementation of the customs union agreement between Turkey and the EU;  such measures were
said to affect imports from Argentina.73  By January 1998 such consultations were still pending.
(ii) Disputes outside WTO
77. The Committee of Representatives of the LAIA provides a framework for trade consultation
mechanisms.  This body makes proposals for the resolution of differences between members when
norms or principles of the Montevideo Treaty are not observed.  Bilateral commissions deal with
problems, mostly in the area of non-tariff measures, arising from the implementation of bilateral
LAIA agreements.
78. MERCOSUR's dispute settlement procedures, initially established under the Brasilia Protocol
for the Settlement of Disputes of 1991 (in force as from April 1993), were amended and expanded by
the 1994 Ouro Preto Protocol.  The mechanism provides for three successive stages for resolving
disputes:  (i) direct negotiation, (ii) intermedia tion by the MERCOSUR Trade Commission and, in the
absence of consensus, recourse to the Common Market Group, and (iii) recourse to an arbitration
tribunal (panel of experts), whose decisions cannot be appealed.  In 1994 it was decided to establishMERCOSUR's Arbitration Tribunal in Asunción (Par aguay), but up to mid-1996, all cases had been
resolved with direct negotiation (the first stage);  furthermore, in 1997 there was discussion (at the
Comisión Parlamentaria Conjunta del  MERCOSUR ) on the setting up a Tribunal of Justice to settle
trade disputes.
74 The first formal dispute settlement case, involving a complaint by a Uruguayan paper
firm on the application of import duties by Argentina, was resolved between the parties in April 1997.
79. The MERCOSUR agreements with Chile and Bolivia provide for a dispute settlement
mechanism based on a panel of experts.
(8) INVESTMENT POLICY FRAMEWORK
80. According to the OECD, Argentina's overall policy framework has been a critical factor in
maximizing the gains from foreign direct investment (FDI) and trade policy was of particular
relevance.  Trade liberalization had a positive effect on the volume of FDI inflows, because it made
the domestic market more dynamic, allowed enterprises to import better or lower cost inputs (whichmade export-oriented production viable) and regional or multilateral agreements implied that these
exports would face fewer barriers abroad.
75
81. Changes in Argentina's foreign investment regi me have been a key element in opening the
economy and in the successful deregulation, privatization and modernization of the large sectors
traditionally controlled by the State.  Argentina has made significant efforts to liberalize, strengthenand expand its investment framework, and has worked for similar improvements at the sub-regional
and multilateral levels.
                                                     
73 WTO document WT/DSB/M/11, 16 March 1996.
74 Mexico & NAFTA Report, 8 July 1997.
75 OECD submission and intervention at the March 1998 meeting of the WTO Working Group on the
Relationship between Trade and Investment (WTO documents WT/WGTI/W/26, 23 March 1998, andWT/WGTI/M/4, 5 June 1998).WT/TPR/S/47 Trade Policies Review
Page 38
82. Argentina's provisions governing foreign investment encompass, in a single text, the
liberalization measures under the 1989 Economic Emer gency and State Reform Acts as well as the
prior Foreign Investment Law (Law 21382, as amended in 1980, 1989 and 1993);  separatelegislation, designed specifically to attract foreign investment, governs the mining sector and similar
provisions are under preparation for the hydrocarbons sector (Chapter IV).
76
83. Foreign firms may invest in Argentina without prior government approval (including for full
foreign ownership of a domestic company) on an e qual footing with domestic firms in virtually all
activities.  No restrictions apply on the access of foreign investors to sources of local financing,including publicly financed research or subsidized research, full eligibility for economic development
incentive programmes, or to the foreign exchange market;  investment in government securities and in
local quoted companies;  capital repatriation and transfer of realized earnings
77;  and the use of
unrepatriated funds.  No law or regulation forces foreign investors to associate with local partners.
There are no discriminatory withholding taxes on income and no taxes affect the remission of profitsand dividends emanating from foreign capital.  No performance requirements are aimed specifically at
foreign investors.
84. Under the 1993 legislation, mining investment, including in nuclear minerals such as uranium
and thorium, has guaranteed stability as regards tax treatment for a 30-year period
78;  stable exchange
and customs treatment;  exemption from taxation on assets and for profits stemming from capitalcontributions involving mines and mining rights;  deductions for prospecting and exploration
expenses and environmental conservation expenses;  accelerated depreciation for income tax purposes
for investments made in infrastructure and equipment for new mining projects or extending the
productive capacity of existing operations;  and exemptions from import duties (as well as the
statistical tax that applied until early 1998) on equipment and parts (Chapter III).
79  To be eligible for
this treatment, individuals and corporations must be domiciled in Argentina and register with the
National Mining Department.  A schedule of tasks and surveys to be conducted must be submitted tothis Department, which verifies compliance (either directly or indirectly) on an annual basis.  In
addition, a sworn declaration on the environmental impact of the firm's activities has to be submitted
annually.
85. Fiscal incentives consisting of tax payment deferral are in force in agriculture, while
trade-related investment measures are in force for the automotive sector (Chapters III and IV).
86. Investment disputes can be adjudicated through local courts or administrative procedures, as
well as through international arbitration.  Under the Constitution, expropriation is only possible in
case of public necessity and provided that appropriate compensation is paid in accordance with the
                                                     
76 Decree-Law 1853, 8 September 1993;  U.S. Department of Commerce (1996) United States
Department of Commerce/National Trade Data Bank and Economic Bulletin Board,  Country Diversification
and Defense Market Assessment Guides Country Profile:  Argentina, IMF (1996);  Price Waterhouse (1995).
77 The right to repatriate profits and invested capital may be suspended by the Government in the event
of serious balance-of-payments problems; in this case, the authorities may issue external public debtinstruments, denominated in foreign currencies, to cover the amounts that registered foreign investors wish torepatriate as profits (European Commission, 1997).
78 Provinces that adhere to this statutory regime and receive royalties or decide to receive royalties,
cannot charge an amount exceeding 3% over th e "minehead value" of the extracted mineral.
79 Law 24196/93, Law 24296, 7 December 1993, and Decree 2686, 28 December 1993.  Activities
relating to liquid gas and hydrocarbons, the industrial process of cement manufacturing from calcination orsimilar processes, the industrial process for the manufacturing of ceramics, and sand, pebbles and gravelassigned to the construction industry are excluded.Argentina WT/TPR/S/47
Page 39
provisions of the law.  Since the implementation of the 1989 economic reform programme began,
there has been no expropriation.  Confiscation of property is not allowed.80
87. Argentina is a party to the World Bank's International Centre for the Settlement of Investment
Disputes (ICSID) and the Multilateral Investment Guarantee Agency (MIGA).  MIGA guarantees
have recently covered construction, manufacturing and energy projects.81  In 1995 MIGA guaranteed
currency transfer and expropriation risks for:  a to ll road project involving an equity investment by
Italy's largest construction company in Argentina's Autopistas del Sol SA  (risk valued at
US$5 million);  and a joint venture expansion of an Argentine cotton textile facility by means of anequity investment by a U.S. firm (risk valued at US$16.2 million).  In 1996 currency and war risks
(valued at US$2.2) were covered for investment ai med at developing a small-scale hydro-electric
power plant.
88. In April 1997 Argentina underscored its commitment favouring foreign direct investment and
demonstrated its ability to meet OECD standards in this field by becoming the first non-OECD Latin
American country to adhere to several OECD in vestment instruments with the same rights and
obligations as OECD member countries.
82  In anticipation of its adherence, it acquired observer status
in the OECD Committee on International Investment and Multinational Enterprises (CIME), which is
responsible for monitoring implementation of the instruments, and, as a result, its investment policies
are to be periodically examined by the CIME;  it has also participated as an observer in the
negotiations for the preparation of the Multilateral Agreement on Investment (MAI).  Argentina has
also agreed to take measures against the bribery of foreign public officials in connection with
international business transactions and to endeavour no t to allow the deductibility of bribes to foreign
public officials;  in this context, it has become  a participant in the OECD Working Group on Bribery
in International Business Transactions.
89. In 1994 and 1995, Argentina signed the MERCOSUR Intra-zone and Extra-zone Protocols for
the Promotion and Protection of Investment.83  While both protocols are aimed at creating favourable
investment conditions in MERCOSUR countries, th e extra-zone protocol is intended to avoid
conflicting investment regulations among indivi dual MERCOSUR members with respect to foreign
direct investment;  its provisions will not cover the automotive sector until 2000.  These protocols
guarantee fair, equitable and national treatment to foreign investors.  Under the intra-zone protocol
(affecting MERCOSUR-origin investment), tempor ary exceptions to national treatment are allowed
for certain activities, and Argentina has reserved its rights on this matter.  The intra-zone protocol also
explicitly prohibits the use of local-content and export-performance requirements;  as stated above,
the automotive sector is not subject to such conditions.
90. Since the previous Trade Policy Review, Argen tina has increased considerably its bilateral
investment promotion and protection treaties;  37 treaties are currently in force, mainly with
                                                     
80 Europa Publications Limited (1995);  U.S. Department of Commerce (1996).
81 MIGA News, issues of Spring and Summer 1995, and Spring and Fall 1996.
82 WTO document WT/WGTI/W/4, 7 August 1997.  The instruments include:  the OECD Declaration
and the related OECD instruments on International Investment and Multinational Enterprises;  the 1994Recommendations on Bribery in International Business Transactions;  and the 1996 OECD Recommendation onTax Deductibility of Bribes to Foreign Public Official s.  The OECD Declaration on International Investment
and Multinational Enterprises requires signatories to provide national treatment;  good behaviour guidelines for
multinational enterprises;  transparency, consultations and review procedures on investment incentives and
disincentives;  and the use of its cooperative approach for avoiding or minimizing the imposition of conflictingrequirements on multinational enterprises.
83 OECD (1997);  MERCOSUR Decisions 11/93 and 11/94;  and WTO document WT/W/GTI/W/22,
26 January 1998.WT/TPR/S/47 Trade Policies Review
Page 40
European, American and some Asian countries, and another ten are subject to ratification.  In
addition, an inter-institutional agreement with Chinese Taipei was signed and applied in 1993.
Furthermore, 33 bilateral agreements against double taxation (19 of which deal with transport-relatedtaxation) and/or tax evasion are in force.  Argentina also maintains a comprehensive insurance-type
agreement with the United States Overseas Private Investment Corporation (OPIC) which covers U.S.
investors against political risks such as exchange controls, war and riots, as well as other risks,
provided that the investment project has the approval of the authorities;  it also allows for
international arbitration of investment disputes.
91. There are no controls on the movement of capital into or out of Argentina.
92. The Secretariat of Industry, Trade and Mining of MEOSP is the regulatory and enforcement
authority for foreign investment legislation.  In August 1993, Fundación Invert-Ar Argentina , a
private sector institution, was co-founded by the pub lic and the private sectors to promote investment
in Argentina.  It provides advice to domestic and foreign investors, disseminates information oninvestment opportunities and organizes campaigns, seminars and conferences on this matter.
93. Since October 1997, in the context of the Working Group on the Relationship between Trade
and Investment, Argentina has identified certain problems arising from the lack of coherence and
limited scope of the investment-related provisions in WTO Agreements;  its success in and reasons for
attracting FDI in recent years are discussed in background papers prepared by the WTO Secretariatfor use in the Working Group.
84
                                                     
84 WTO documents WT/WGTI/M/2, 10 November 1997, and WT/WGTI/W/26, 23 March 1998.