EU takes Argentina to the WTO - Legal battle or political settlement ahead?

News of the EU filing a complaint in the WTO against Argentina's import licensing procedures started trickling in. The WTO website announced that EU had filed a formal complaint. The details of the complaint are awaited and will be available on the WTO website soon. The EU is essentially complaining against the import licensing requirements which it alleges violates the WTO Agreement. News reports in Buenos Aires Herald, Chicago Tribune carried the broad contours of the dispute.This has not come as a surprise. I had blogged about this issue here and here. 

The Agreement on Import Licensing Procedures would  need to be interpreted for clarity on the matter. There have been 34 cases at the WTO on this subject. The gist of the complaint against Argentina which was earlier raised by many countries in the Import Licensing Committee meeting in April 2012 was as follows:

"Australia, Turkey, the EU, Norway, Thailand, the US, New Zealand, Costa Rica, Colombia, Peru, Chinese Taipei, Japan, Rep. Korea, Switzerland and Canada said their producers and traders reported that their exports to Argentina have declined or been delayed by Argentina’s licensing processes and requirements, which some described as “protectionist”.

Among the complaints were:

• Almost 600 products are now covered either explicitly or in practice, each requiring individual approval in order to be imported

• Non-automatic licences are issued as part of a “trade-balancing” policy, on condition that the importer also exports or invests in local production

• Processing an application can take considerably longer than the 30-60 days maximums for non-automatic licensing set in the agreement’s Art.3.5(f)

• The licensing is more burdensome than necessary and raises problems under other agreements such as those on technical barriers to trade, sanitary and phytosanitary measures (food safety and animal and plant health), and customs valuation, as well as the General Agreement on Tariffs and Trade (the umbrella agreement for trade in goods)

• Argentina as a member of the G-20 group of leading economies is not living up to the group’s declarations against increasing protectionism."

It would be interesting to see whether the EU has raised some additional points in the request for consultations. Interestingly, one of Argentina's main English newspaper Buenos Aires Herald carried a report of the meeting of Argentina's Foreign Minister with WTO Director General Pascal Lamy to complain about "protectionist" measures by developed countries in the guise of "protecting the planet". Was he referring to the EU ETS scheme of the EU which was extended to the aviation sector recently? Argentina was one of the 26 signatories in Moscow to the joint declaration against the EU ETS scheme coverage of the aviation sector. I have blogged about the EU ETS controversy here, here, here and here. 

As per the Observatory of Economic Complexity, around 15 % of Argentina's exports and imports  in 2010 were to and from the EU respectively.There are substantial trade interests between the two parties. Will this dispute go the whole way to the Panel and AB or will a "political compromise" be worked out? Did the recent events in Argentina of the nationalisation of YPF which affected Spain aggravate this complaint? Are we in for a prolonged legal battle or a negotiated, political settlement. After all, international trade is not all about legal rules and judicial interpretation. The political economy of trade is equally influential.