72527 v1 World Trade Indicators 2009/10 Argentina Trade Brief Trade Policy imports, is 5.3 percent, reflecting the large trade flows with its MERCOSUR partner, Brazil. Argentina is also Although Argentina’s trade regime became more open an active user of trade remedy laws, and was the in the early 1990s and the country adopted the fourth largest initiator of anti-dumping cases over the common external tariff (CET) of MERCOSUR (the 1995–2008 period. The economic reforms of the Southern Common Market customs union with Brazil, 1990s resulted in the elimination of state involvement Uruguay, and Paraguay), trade policy reform has been in most activities, though concerns remain about the vulnerable to macroeconomic shocks. Tariffs rose level of government control on important sectors like during 1998–2001 as the country attempted to deal energy, utility, and transport. However, regulations with external shocks and recession, but dropped again related to market entry do not differentiate between after the currency board was abandoned and the peso foreign and local capital as long as the company has devalued. However, since the 2001–02 default crisis, presence in the country. Based on the extent of its there has been an increasing reliance on export taxes on commitment to trade liberalization in services, agricultural products as a source of fiscal revenue. Argentina ranked 43rd out of 148 countries on the Export taxes as a share of government revenue rose GATS Commitment Index. from 0.1 percent in 2001 to 10 percent in 2002. In the context of the food crisis and in an attempt to During the 2007–09 period there has been a keep domestic prices low and prevent shortages at significant backsliding from a liberal trade agenda. As home, the government suspended exports of wheat judged by the latest MFN Trade Tariff Restrictiveness and flour.2 Also, in March 2008, the government Index (TTRI)1, on which it is ranked 90th out of 125 raised export taxes on grains and seeds through a countries and scores 11.4 percent, Argentina’s tariff presidential decree (for soybeans, one of Argentine’s barriers remain more restrictive than those of an top crop exports, export taxes rose to more than 40 average Latin America and Caribbean (LAC) or upper- percent from a fixed rate of 35 percent). The president middle-income country (7.8 percent and 6.9 percent, argued that the additional tax revenue is necessary to respectively). Argentina’s trade regime in agriculture, support infrastructure building. However, the measure where it is highly competitive as a producer and an was reversed when the senate rejected a bill supporting exporter on world markets, is more open than its the new farm taxes in July 2008, after large protests by comparators, while its non-agricultural market access Argentine farmers.3 The government has also taken is much more restrictive (11.5 percent when compared some liberalizing measures such as reducing export to the LAC average of 7 percent and upper-middle tariffs by 5 percentage points for wheat and corn, and income country average of 6.5 percent). Its TTRI eliminating taxes on 35 dairy products. However, in including preferences is much lower at 5.1 percent. the context of the global recession, the financing The 2008 simple average MFN tariff is a high 12.2 requirements of Argentina’s fiscal stimulus plans add percent, but the weighted applied tariff, which takes pressure to keep export taxes high. At the beginning into account preferences and the actual source of of 2009, Argentina introduced non-automatic import licensing requirements on steel, metallurgical, tires, and textile products, among others, which created a large bureaucratic burden on importers, and succeeded in Unless otherwise indicated, all data are as of August 2009 curtailing imports. It also introduced reference prices and are drawn from the World Trade Indicators 2009/10 (“criterion values�) on 1,000 imported products such Database. The database, Country Trade Briefs and as auto parts, textiles and shoes, and imposed price Trade-at-a-Glance Tables, are available at references for the exports of copper. These measures http://www.worldbank.org/wti. have become a source of some friction between the If using information from this brief, please provide the MERCOSUR partners. In this context, Argentina has following source citation: World Bank. 2010. “Argentina also heightened its use of anti-dumping initiations, Trade Brief.� World Trade Indicators 2009/10: Country Trade which went from 7 in 2007, to 20 in 2008 and has Briefs. Washington, DC: World Bank. Available at reached 16 in the first half of 2009.4 http://www.worldbank.org/wti. World Trade Indicators 2009/10 Argentina Trade Brief External Environment Trade Outcomes When judged by the latest Market Access TTRI5 After accelerating sharply in the years following the (including preferential rates), on which it is ranked 61st 2001–02 crisis and up until the third quarter of 2008, out of 125, Argentina faces less favorable access to Argentina’s real (in constant 2000 U.S. dollars) growth international markets (3 percent) when compared to in total trade of goods and services decreased from its LAC and upper-middle-income country 14.2 percent in 2007 to an estimated 7.3 percent in comparators (2.0 percent and 2.3 percent, 2008, and is expected to shrink by 7.9 percent in 2009. respectively). The simple average applied tariff Increasing demand for agricultural products from (including preferences) that Argentina faces from the emerging economies in Asia, along with higher rest of the world is a high 9.6 percent, when compared commodity prices, led to the increase in Argentine to the mid-2000s average of 5.5 percent. Its 2008 rest exports. However, due to the economic slowdown and of the world weighted average applied tariff is, decreasing commodity prices, Argentine exports however, much lower at 4.2 percent, with its shrank, with total export growth slowing down from 9 agricultural exports facing 7.7 percent and its percent in 2007 to an estimated 1.7 in 2008, and manufactured exports 1.2 percent tariffs. Argentina projected to fall by 6.8 in 2009. Imports of goods and has continued to maintain a managed float of the peso services decreased from 20.1 percent in 2007 to an since 2002. Over the course of 2008, the real effective estimated 13.3 in 2008 and are expected to shrink by 9 exchange rate of the Argentinean peso appreciated by in 2009. 1.9 percent, making exporters relatively less competitive abroad. However, total trade growth in nominal U.S. dollars remained the same in 2007 and 2008 at approximately MERCOSUR members signed an FTA with Israel in 25 percent, due to high commodity prices. Nominal December 2007 and a preferential trade agreement export growth was 26.5 percent, while nominal import (PTA) with the South African Customs Union (SACU) growth was 29.5 percent. However, nominal goods in December 2008. A PTA with India came into effect exports registered a decline that can be traced to the in June 2009. In March 2009, Paraguay increased fourth quarter of 2008, which registered a sharp fall of tariffs against its MERCOSUR partners to 10–15 22 percent compared to the same quarter in 2007. percent on a range of goods related to household National statistics register a 26 percent drop in goods cleaning products and paints, possibly straining exports during the first quarter of 2009 compared to relations among MERCOSUR members. the same period last year, and a 35 percent drop in imports, leading to a trade surplus.6 The country experienced a severe drought, which resulted in Behind the Border Constraints decreased agriculture production and exports. Argentina’s trade share in GDP is around 45 percent, Global rankings point to a somewhat weak lower than an average LAC and upper-middle-income institutional environment. Argentina’s rank is 118th in comparators’ levels. The country’s main export the Ease of Doing Business index in 2009, which products in 2008 included animal feed, vegetable oil, looks at the business environment in 183 countries. oil seeds, and maize. Brazil is Argentina’s main export However, Argentina ranked 45th (out of 151) on the destination market (22 percent), followed by China, 2007 Logistics Performance Index, outperforming its the biggest purchaser of raw soybeans (11 percent), comparators on nearly all aspects of the index. Here, the United States (8 percent), Chile (6 percent), and its weakest indicator was efficiency of customs and Spain (4 percent). Brazil is also the largest source of other border procedures, while its strongest logistics Argentina’s imports (33 percent), followed by the category was timeliness of shipments. United States (15 percent) and China (12 percent In order to address trade finance constraints, the each). Remittances accounted for 0.2 percent of GDP central bank introduced a new facility that allows it to in 2008. FDI inflows accounted for 2.4 percent of offer repurchase-agreement contracts in dollars to GDP in 2008. encourage banks to use their idle foreign-currency deposits for export financing. In order to encourage trade between Argentina and Brazil, the two countries decided in May 2009 to start trading in their own local currencies. Argentina Trade Brief World Trade Indicators 2009/10 Notes 20601110&sid=adDit3aN.lxk>. Food and Agriculture Association of the United Nations 1. TTRI calculates the equivalent uniform tariff that (FAO). 2009. “Policy Measures Taken by would keep domestic welfare constant. It is weighted by Governments to Reduce the Impact of Soaring import shares and import demand elasticity. Prices (As of 15 December 2008).� United Nations, 2. FAO, 2009 New York. 3. Faries, July 17, 2008. GlobalTradeAlert. “Argentina: Amends Non-Automatic 4. WTO, 2009. Licensing Requirements (effective from 5 May 5. MA-TTRI calculates the equivalent uniform tariff of 2009).� Accessed 29 June 2009. . constant. It is weighted by import values and import Government of Argentina. 2009. “Argentine Foreign demand elasticities of trading partners. Trade Statistics.� Vol. 13 N.1. 8 May 2009. Instituto 6. Government of Argentina, 2009. Nacional de Estadística y Censos. July 25, 2009 References World Bank (PRMTR). n.d. “Updates on Trade Measures Bilaterals.org. April 2009. “MERCOSUR.� Bilaterals.org. and Sector-Specific Support.� Various issues. World June 29, 2009. . World Trade Organization (WTO). March 26, 2009. Faries, Bill. July 17, 2008. “Argentine Farm Taxes “Report to the TPRB from the Director-General on Rejected in Senate Tie Breaker.� Bloomberg.com. the Financial and Economic Crisis and Trade-