ArgentinaWT/TPR/G/277
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World Trade
Organization / RESTRICTED
WT/TPR/G/277
13February 2013
(130669)
Trade Policy Review Body / Original: Spanish
TRADE POLICY REVIEW
Report by
ARGENTINA
Pursuant to the Agreement Establishing the Trade Policy Review Mechanism (Annex 3 of the Marrakesh Agreement Establishing the World Trade Organization), the policy statement by Argentina is attached.

Note:This report is subject to restricted circulation and press embargo until the end of the firstsession of the meeting of the Trade Policy Review Body on Argentina.

ArgentinaWT/TPR/G/277
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CONTENTS

Page

I.INTRODUCTION5

II.ECONOMIC ENVIRONMENT AND COMPETITIVENESS5

(1)Introduction5

(2)Global Economic Environment6

(3)Macroeconomic Performance 200720126

(i)Economic growth with social inclusion6

(ii)Trends in foreign trade9

(iii)Trade promotion13

(iv)Financial situation14

(v)Fiscal soundness15

(vi)Employment and social policy15

(4)Sectoral Performance17

(i)Agricultural sector17

(ii)Manufacturing sector20

III.FOREIGN TRADE POLICY23

(1)Argentina and the G2023

(2)Argentina and the WTO25

(i)Regular committees25

(ii)Dispute settlement26

(iii)The Doha Development Round27

(iv)Surveillance and transparency28

(3)Argentina and Regional Integration29

(i)Argentina and MERCOSUR29

(ii)The LAIA and extraregional agreements32

IV.CONCLUSIONS33

ArgentinaWT/TPR/G/277
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I.INTRODUCTION

  1. Since its last Trade Policy Review, the Argentine Republic has expanded the model of economic growth with social inclusion introduced in 2003.
  2. Despite an adverse international background, defined by the outbreak of the international crisis in 2008, the policies implemented during the review period resulted in high rates of economic growth, a sustainable and genuine improvement in competitiveness, and a favourable trend in all the social indicators.
  3. The first part of this report contains a description of the macroeconomic performance of the growthwithsocialinclusion model. In this section the country's general economic situation is reviewed and the main production, financial and fiscal aspects, trends in foreign trade, trade promotion and employment policies and the performance of the social indicators are all described.
  4. The trends in the agricultural and manufacturing sectors are then outlined, with special emphasis on the creation of new institutions and the policies adopted to boost their growth.
  5. The third part of the report is devoted to foreign trade policy. In this section Argentina's multilateral and regional activities are described and, in particular, its participation in the G20 and its active role within the framework of the WTO's multilateral trading system and the Doha Development Round negotiations. At the same time, an account is given of Argentina's commitment and contribution to regional integration processes, both within MERCOSUR and in connection with the efforts to establish new integration areas such as the Union of South American Nations (UNASUR) and, in Latin America and the Caribbean, the Community of Latin American and Caribbean States (CELAC).
  6. Finally, the conclusions of the report are presented.

II.ECONOMIC ENVIRONMENT AND COMPETITIVENESS

(1)Introduction

  1. The policies pursued since 2003 have been responsible for unprecedented economic growth and job creation, while achieving significant improvements in all the social indicators and reversing the process of deindustrialization that the country had been experiencing since 1976.
  2. The general approach was characterized by a consistent macroeconomic policy sustained by the growth of foreign demand and the domestic market; a dynamic trade policy; strong development of industry and production; and an income policy that promoted social inclusion.
  3. This combination of measures, which required the State to play an active role in the economy - in complete contrast to the policy that prevailed in the 1990s - resulted in a cycle of growth and an improvement in the quality of life on a scale never previously experienced.
  4. It should be noted that these results were achieved within an adverse international context created by the economic crisis that erupted in the developed countries in 2008.
  5. The National State has assumed a strategic role in defining the common objectives and coordinating the activities of the public and private players, with a view to strengthening the productive framework, incorporating greater valueadded, generating quality employment and promoting dynamic integration into global trade flows.
  6. This strategy has intensified the growth process with the result that Argentina is making a relative contribution to global demand more than proportional to its size, thereby promoting increased trade flows and world growth.
  7. In short, the results achieved since 2003 and, in particular, during the review period, indicate that Argentina is on the right track.

(2)Global Economic Environment

  1. The eruption of the international economic crisis in 2008, with its epicentre in the developed countries, and the difficulty in finding solutions capable of putting the global economy back on the path of growth confronted Argentina and the developing countries with a great challenge in achieving their policy goals.
  2. The global crisis clearly revealed the inadequacies of models that disregard the role of theState. In fact, it was triggered when the financial processes of global speculation, in the absence of all State control, reached a limit as a means of creating growth.
  3. The process of fiscal adjustment applied to the developed country economies since 2010 has had obvious consequences for the real sector: in 2011, the global economy slowed down, growing by only 3.9% as compared with 5.3% in the previous year. Thus, during 2011 the global economy remained weak as a result of new episodes of financial stress, with Europe failing to recover and the United States economy continuing to show signs of fragility, thereby creating a latent threat of a further relapse in the world economy.
  4. Similarly, the prospects for 2012 are that several developed economies will experience recession: the most optimistic estimates indicate that GDP in the Eurozone will contract by 0.3% on an annual basis, while growing by 2.0% in Japan and barely 2.1% in the United States.
  5. For their part, the developing countries are still expected to grow, despite a certain slowdown during 2011 due to the economic environment described above.
  6. Despite the crisis, in 2011 Argentina was able to maintain the high rate of expansion of the previous year. With plus 8.9%, it was one of the Latin American countries with the highest rates of growth. Thus, between 2003 and 2011, GDP grew at an average rate of 7.7%, while per capita GDP accumulated a 66.2% increase.
  7. The country's macroeconomic performance during the review period is summarized below.

(3)Macroeconomic Performance 20072012

(i)Economic growth with social inclusion

  1. Since the last Trade Policy Report, Argentina's economy has continued along the path of growth. Between 2007 and 2011, real GDP expanded at an average annual rate of 6.4%. Moreover, it should be noted that after the slowdown caused by the international economic and financial crisis during 2009, high growth rates were again recorded in 2010 and 2011 (9.2% and 8.9%, respectively).
  2. This performance can be attributed to the consistency of the Government's economic policy decisions, taken in a critical global context, which propped up domestic demand while managing to maintain the good performance of the external sector.
  3. This favourable trend has extended into the current year. In the first half of 2012, real GDP rose 2.4% relative to the same period in 2011, and, according to budget estimates, will end the year with an increase of 5.1%.[1]

  1. During the period 20062011, per capita GDP - measured in US dollars - doubled, rising from US$5,424 in 2006 to US$10,896 in 2011.
  2. It should be noted that every sector of activity, except for mining and quarrying, grew duringthe period 20072011; this trend was particularly significant in financial intermediation (55.9%), transport and communications (44.4%), retail and wholesale trade (39.5%), and manufacturing (26.7%).

  1. Sustained growth also generated strong investment. During the first years of recovery, from2003 to 2005, the improvement in the domestic market offered businesses a robust demand met mainly by utilizing idle existing capacity and running machinery for longer periods of time.
  2. However, as companies expanded the use of their installed capacity, it became necessary to progress to new investment. Thus, from 2005, production was mostly maintained by creating new productive capacity. As a result of this process, in 2011 fixed investment exceeded the peak achieved under convertibility (1998) by 85%, reaching 23% of GDP (at current prices).
  3. These levels of investment are a clear sign of the growth potential of the economy in the medium term and a significant indicator of business expectations and hence the country's prospects for growth.

(ii)Trends in foreign trade

  1. The policies adopted by the National Government to improve competitiveness, together with an active trade promotion policy, resulted in more intensive exporting, the diversification of the export basket and the opening up of new markets.
  2. Between 2007 and 2011 Argentina's foreign trade continued further along the path of growth on which it first set out in 2003: exports grew at an average annual rate of 14.1% and imports at an annual rate of 20.7% (in current dollars). It is important to note that both percentages were influenced by the sharp decline in global trade in 2009.
  3. In 2010 and 2011 exports grew at an annual rate of 22.8% and imports at 38.3%, evidence of the powerful integration of the Argentine economy in global trade.
  4. The strength of the country's export performance becomes clear when the trend in global trade is compared with that of Argentina: whereas during the period 20072011 global imports increased by 19%, Argentina's imports increased by 65.4%, three times the global growth rate. Where exports are concerned, Argentina recorded an increase of 50% over the same period, much higher than the corresponding figure for global exports (18%).
  5. It should be noted that the sustained growth in exports during the review period made it possible to generate a trade surplus, which was beneficial for the balance of payments and the sustainability of economic policy.
  6. In this connection, throughout the period beginning in 2003 the trade balance was positive, even in the current global context. Thus, in the first nine months of 2012 the trade surplus wasUS$10,942million[2], which means a yearonyear rise of 34%.
  7. In analysing the trends in trade it is important to consider, in particular, the performance of exports of manufactures of industrial origin (MIO), which rose from 29% of total foreign sales between 1991 and 2002 to 35% between 2003 and 2011, despite the rising trend in agricultural products.
  8. This effect is a consequence of the 17% average annual increase in MIO exports since 2003, arate considerably higher than that for Argentine exports as a whole (14% per year on average).
  9. In addition, manufacturing exports increased their share of GDP, reaching 6.5% during the period 20032011, whereas in the 1990s they accounted for only 2.2%.
  10. The trend described led to foreign sales of MIO rising by a total of 67% during the review period. Thus, Argentina managed to avoid primarization, by raising the value added content of its exports.

  1. In this connection, it is appropriate to stress not only the increase in exports but also their greater technological content: the contribution of mid to hightech products to total exports reached 24% during the period 20072011, which is higher than that recorded in earlier periods (20.7% for19961998).
  2. Another distinctive aspect of this phase was the increasing contribution of producers of capital goods and engineering products, as well as of chemical companies and manufacturers of vehicle parts, among others.
  3. For their part, MSME exports accounted for 15% of total national exports. It should be noted that this sector is being given priority under the national development strategy.
  4. In the particular case of exports of Primary Products[3] (PP) and Manufactures of Agricultural Origin (MAO), an increasing trend was maintained up to 2008, with sustained growth at rates of11.25% in 2006, 33.89% in 2007 and 28.94% in 2008. After a decline in 2009 due to the international economic crisis, these exports resumed their expansion, recording growth rates of 23.26% in 2010 and29.36% in 2011.
  5. Wheat, maize and soy complex are making a very significant contribution as export products.
  6. As regards PP and MAO imports, they increased steadily between 2002 and 2008 (growth between endpoints of 434%), only to decline markedly in 2009 due to the international economic crisis. They resumed their expansion in 2010 and 2011, albeit without achieving the level recorded in2008.
  7. Prominent among imports are oilseeds and oleaginous fruit which, on average, accounted for 20% of the sector total between 2006 and 2011. These products are mainly imported for pressing, which indicates the importance of vegetable oil and "pellet" production within MAO.

Foreign trade: Argentina 20072011

(US$ million)

Exports f.o.b. / 2007 / 2008 / 2009 / 2010 / 2011 / Ch. Exports20112007
Primary products / 12,486 / 16,202 / 9,257 / 15,148 / 20,213 / 61.9%
Manufactures of Agricultural Origin (MOA) / 19,213 / 23,906 / 21,225 / 22,668 / 28,192 / 46.7%
Manufactures of Industrial Origin (MOI) / 17,333 / 22,063 / 18,734 / 23,846 / 28,916 / 66.8%
Fuel and energy / 6,949 / 7,848 / 6,457 / 6,525 / 6,629 / 4.6%
Total / 55,980 / 70,019 / 55,672 / 68,187 / 83,950 / 50.0%
Imports c.i.f. / 2007 / 2008 / 2009 / 2010 / 2011 / Ch. Imports20112007
Primary products / 1,804 / 3,137 / 1,245 / 1,663 / 2,270 / 25.9%
Manufactures of Agricultural Origin (MOA) / 1,065 / 1,303 / 1,065 / 1,478 / 1,805 / 69.5%
Manufactures of Industrial Origin (MOI) / 38,990 / 48,681 / 33,846 / 48,888 / 60,415 / 55.0%
Fuel and energy / 2,849 / 4,341 / 2,631 / 4,763 / 9,446 / 231.6%
Total / 44,707 / 57,462 / 38,786 / 56,793 / 73,937 / 65.4%

Source: National Directorate of National Accounts - INDEC.

  1. It is important to note that the coefficient of openness of the economy (understood as the ratio of foreign trade to GDP) has continued to increase in accordance with the trend observed over recent decades, thanks to the greater relative growth of Argentina's trade. In this case too there was a decline in 2009 and a subsequent recovery.

  1. The diversification of Argentina's trade is reflected in the relative shares of its main trading partners.
  2. MERCOSUR maintained its position as the principal export destination (24.7%), while the AsiaPacific countries increased their share to 15.4%. As a result of these changes, in 2011 thetworegions accounted for 40.1% of Argentine exports as compared with 38.3% in 2007. Exports to North America and the European Union accounted for 26% during the period 20072011.
  3. Where imports are concerned, thanks to growth and steady economic recovery Argentina made a relative contribution to global demand more than proportional to its size, thereby promoting increased trade flows and global growth.
  4. Intraregional trade played a significant role, as evidenced by the combined contribution of MERCOSUR and LAIA (34%) to total imports. At the same time, AsiaPacific imports were those whose share showed the biggest increase, reaching 25% in 2011. Finally, one third of total imports originated in the countries of North America, the European Union and Africa.
  5. Trade in services increased in volume by about 45%.
  6. The services that grew the most were those related with information and information technology. Business, professional and technical services and construction services continued to show surpluses.
  7. Exports and imports of services for the year 2011 are broken down in the chart below.

(iii)Trade promotion

  1. Another aspect of the National Government's strategy to expand growth and employment and further improve external integration in the present environment of international economic crisis has been its implementation of an ambitious and active trade promotion policy.
  2. The creation of the Foreign Trade Secretariat under the Ministry of the Economy and Public Finance and the coordination of its activities with the initiatives of other ministries is a central feature of this policy.
  3. Within this context, Argentina is seeking to increase and diversify Argentine exports with respect to not only destinations but also regions, products and enterprises. Where destinations are concerned, the aim is to strengthen exports to traditional trading partners while helping to open up promising new growth markets. In terms of products, efforts are being made to diversify export supply, with emphasis on products with greater valueadded at origin and local technology content in order to generate quality employment in Argentina.
  4. The MSMEs are a prime target for these measures, in view of the special contribution they make to job creation and their greater need for assistance with the process of trade internationalization. At the same time, Argentina's trade promotion policy is also prioritizing the federalization of foreign trade, with the aim of improving the geographical balance of the domestic production system by promoting sales from regional production complexes.
  5. These measures are being supplemented by continuous negotiations to improve access to markets for Argentine products, as well as by multilateral questioning, through the World Trade Organization, of the new forms of protectionism evidenced by the increasing proliferation of nontariff barriers.
  6. Trade promotion policy is being implemented by means of multisectoral and sectoral trade missions carried out abroad, the identification of marketing opportunities by Argentina's more than140 representative offices around the world, visits to Argentina by foreign importers (socalled "reverse missions"), and participation in international fairs and exhibitions. Argentina's worldwide chain of representative offices are working to put these measures into effect, supply domestic businesses with market information and provide them with assistance throughout the export process.
  7. At the same time, the work on trade promotion is being supplemented by the measures taken by the Argentine Export Foundation, a publicprivate trade promotion agency whose main task is to help businesses market their products and services competitively at international level. To this end, the Argentine Export Foundation facilitates contacts between Argentine producers and foreign buyers at the world's biggest business events and provides domestic companies with trade information, technical assistance and training.

(iv)Financial situation

  1. In the field of finance and foreign exchange, the year 2011 was marked by the repercussions of increasing global financial instability, especially during the second half of the year. The Central Bank of the Argentine Republic (BCRA) played an active part in the market which enabled it to manage parities and smooth out movements in the nominal exchange rate in the face of the possible impact of shocks to the international financial system.
  2. In 2011, the BCRA's international reserves averaged US$50,410million (US$38,500million more than in 2003), providing ample room for manoeuvre in dealing with exchangerate pressures, as happened in connection with the outbreak of the international crisis.
  3. In parallel with its intervention in the foreignexchange market, during the last months of2011 the BCRA took a series of measures to strengthen its operational capabilities. Moreover, inApril2012 the new Charter of the Central Bank, approved by Law No.26.739, entered into force.
  4. The reforms were mainly aimed at adapting the Central Bank's regulatory framework to the new macroeconomic model in effect since the abandonment of convertibility. The Central Bank's new freedom of manoeuvre gave the monetary authority greater flexibility in dealing with the shortterm needs of an economy exposed to international economic volatility.
  5. The banking system continues to report excellent solvency and soundness indicators, as well as high rates of return. At the same time, the "irregularity" (nonperformance) ratio for private sector financing remains at low levels in historical terms (1.7%). Moreover, provisions as a percentage of the irregular portfolio stand at about 145%, which shows that the system has a high level of coverage.
  6. Privatesector fixedterm deposits are increasing at record yearonyear rates of about 50%, exceeding last year's levels. This high rate of expansion shows that the economic and financial policies adopted have succeeded in establishing confidence in the local financial system.

(v)Fiscal soundness

  1. The fiscal soundness of the economic model is demonstrated by the primary surpluses obtained since 2003, something never before experienced in Argentina's history. This achievement can be attributed to several factors.
  2. Firstly, to the public debt reduction policy. The economic growth experienced in the last nineyears has made it possible to pursue a determined policy of national publicsector debt reduction, leading to strong State finances and a sovereign macroeconomic policy. Whereas in 2002 gross national public-sector debt amounted to 166.4% of GDP, by the fourth quarter of 2011 this figure had been reduced to 41.8%. Moreover, 53.8% of this total is in the hands of publicsector agencies and13.9% is held by multilateral and bilateral credit organizations. Thus, only 32.3% of public debt, amounting to a mere13.5% of GDP, is in private hands.
  3. Secondly, to more efficient tax administration and a lesser tendency to evade and avoid taxes. This is being supplemented by a process of increasing the impact of progressive taxes such as export duties and income/profits tax (impuesto a las ganancias), signifying progress towards a fairer tax structure.
  4. Thirdly, to an expansion of public expenditure, which maintained a balance between the need to restore coverage of the country's social and physical infrastructure and the goal of achieving a budgetary outcome that would provide the capacity to carry out various public policies if the circumstances so required.
  5. The debt reduction and the absence of budgetary imbalances has made it possible to use fiscal policy tools to restore the economic infrastructure, take care of the needs of the less privileged social groups and promote greater regional equity. These measures include, in particular, the creation of the Federal Solidarity Fund to finance works aimed at improving the health, education, hospital, housing or road infrastructure in urban or rural areas in the provinces and municipalities.
  6. Thus, throughout the review period tax receipts reflected recovery in the level of activity.During the period 20072011 the cumulative increase was 170%. In the first nine months of2012, receipts grew by 25% as compared with the same period during the previous year, reachingArg$496,783million.
  7. On the expenditure side, between 2007 and 2011 primary expenditure expanded by 218%. InJanuaryAugust2012 an increase of 32% was recorded as compared with the same period in the previous year. Thus, throughout the period 20072011 buoyant tax receipts made it possible to record primary surpluses, which in the first eight months of 2012 amounted to Arg$6,200million.

(vi)Employment and social policy

  1. The accelerated rate of growth was also reflected in the main labour market indicators, which followed a favourable trend despite the resurgence of the global crisis. Activity and employment rates continued to rise and unemployment fell to 6.7% in the fourth quarter of 2011. Moreover, formal employment continued to gain ground: the nonregistration rate fell 0.9 percentage points between2010 and 2011.