Trade policy and interests

A provocative piece on how trade policy must be negotiated is found in Huffington Post's piece here. Alleging that trade negotiations and agreements now are favoring investors, global investors and access to markets. It concludes that labour and environmental rights and interests are sidelined and need to be part of the trade policy paradigm.

"In actual fact -- not a thought experiment at all -- we now negotiate our trade agreements in the interests of investors and global companies. They prioritized their interests: higher profit margins, "flexibility" to do what they want, maximum possible trade, and a shield against local, regional or national policies that might reduce their economic prospects. 

They actually do use the WTO and various trade tribunals to enforce investor interests, independent of any national courts or political accountability. The global economy can grow and produce great wealth. And to be sure, this is no mean feat. 

Economic growth could arguably align with public interest, at least in a trickle down sort of way. Please hold your fire on this one, for a moment."

One may not entirely agree with the analysis out there, but some food for thought? Are trade agreements only exposition of business interests and not "national" or "public interests"? It brings us back tot he question of what interests the state represents as well as the multiplicity of stakeholder interests.

Trade Policy - How should it be?

Cato had this scathing post on how trade policy should be. While it referred to the U.S. in the present case,  it could well apply to any other trading country.Opining on the purpose of trade policy it says:

"No. Policy should be neutral with respect to the goals of particular companies and industries, and designed to attract investment and human capital, and to maximize opportunities for Americans to partake of the global economy. Trade policy should be about ensuring certainty and eliminating policy-induced frictions in supply chains. As I wrote in this article (21st Century Economy Deserves Better Than 16th Century Trade Policies), which expounds upon the thoughts in this post: 

This 21st century economic reality demands better than trade policies rooted in 16th century mercantilist dogma. It demands policies that are welcoming of imports and foreign investment, and that minimise regulations or administrative frictions that are based on misconceptions about some vague or ill-defined “national interest”."

I am not an expert on trade policy nor am I a practitioner of it. The prescriptions in the post did make sense in terms of not benefitting "special interests" rather than the large number of consumers. It brings us back to the question I have often raised in this blog in other posts - what constitutes "national interest"? While the concept does differ in differing situations, at times, interests of the consumer conflict with the interests of the local producer. What stand does a trade policy analyst take then? Is the prescription in the post referred to too idealistic for implementation?

Non-Tariff barriers - Protectionism's new name?

The issue of the use of non-tariff measures to advance "protectionist" objectives has been a subject of debate in international economic law and policy debates. While the last few decades has seen a fall in tariffs as a means of protection to local industry, non-tariff measures (NTMs) has become the new tool to ensure both achievement of public policy objectives as well as protection. The legal framework in the WTO that addresses the NTMs are the TBT and SPS Agreement. How much domestic policy space these Agreements provide for countries to pursue their national priorities within an international system and to what extent they prevent adoption of blatantly protectionist measures would require careful analysis.

A piece by Marc Bacchetta, Cosimo Beverelli in Vox titled "Non-tariff measures and the WTO" gives an overview of the use of TBT and SPS measures in the context of international trade.Are they per se protectionist or do they serve domestic public policy purposes? The WTO itself allows the use of NTMs to achieve public policy objectives. the TBT and SPS Agreements reflection of this. however, where does one draw the line between a legitimate use of NTMs for public policy objectives and it's use for protecting local industry in a discriminatory manner? It becomes more interesting when "protecting domestic industry" from "increased competition" itself becomes the stated public policy goal of an NTM. How does the WTO deal with this and what impact does this have on international trade, the multilateral regime and trade policy?

The piece highlights the steady growth of NTMs as depicted in the graphics below which is inversely related to tariff reduction of countries.

(SPS measures)

(TBT measures)

The piece argues that NTMs need to be regulated since they have a tendency to be protectionist and have a devastating impact on trade and costs. Non- transparency of measures is also an issue.

"One of the main challenges facing the regulation of non-tariff measures is where to draw the line between protectionist and non-protectionist non-tariff measures. In the GATT, the approach used is to allow domestic regulatory measures provided that they do not discriminate against the imported product. One of the issues that has arisen in connection with national treatment concerns the relevance and weight to be given to the rationale or purpose of the measure. The report argues that economic theory can help identify situations in which governments may be more likely to use non-tariff measures to address competitiveness concerns rather than the stated public policy rationale. Indeed, an analysis of the efficiency and incidence of the measure in question, and of the wider sectoral and political context would help identify the purpose of non-tariff measures."

Finding the right line to tread in the "protectionist"-"public policy" debate is an extremely difficult task. Further, the perceived loss of domestic sovereignty and increased tendency to replace tariff measures with NTMs to further national development strategies will make this debate even more complex and strenuous. The use of NTMs can adversely impact both developing as well as developed countries.While in the case of developing countries, NTM increase the cost of compliance to "new standards", for the developed world access to markets is impacted by NTMs. The recent AB reports in the COOL case and Dolphin safe tuna case indicate the growing importance of these measures in international trade policy. Treading the middle path will become all the more difficult.

Transparency, China and the WTO - What next?

A lot is written about the rise of China in the multilateral trading system. It is heralded as an example of how a developing country utilised the international trade rules to further its national agenda. Critics argue that China has not done much in terms of reforming its own systems as per WTO rules. So while it benefits from the advantages the multilateral system offers, it does not abide, to the extent necessary, by it WTO and WTO plus (due to the Accession protocol) obligations. I have blogged extensively about China's role in the WTO here, here, here, here and here.

How much of the above criticism about China's reluctance to abide by WTO obligations is true? The recent Trade Policy review of China brought to the fore these issues with both the US and EU reacting strongly. I have blogged about the US response here. The EU reacted similarly here:

"In his statement at the WTO, the Ambassador pointed out the following areas of concern:

- The EU's main concern is related to a lack of transparency, which makes China's trade and investment policies – in the words of the WTO's report - "opaque and complex". More needs to be done to make key WTO principles like transparency and non-discrimination the norm in China's legislative system. The EU also calls on China to honour its WTO notification commitments in particular in the area of subsidies.

- State interference in the economy leading to distortion of competition: The EU shares the remark in the Secretariat's report that "despite all the reforms, state-owned enterprises still tend to benefit from lower cost of and better access to capital than non-public-sector enterprises". We therefore urge China to increase its efforts to ensure a level playing field amongst market operators, regardless of their ownership structure or origin.

- Excessive regulatory and technical obstacles to trade in goods, services, investment and public procurement and other non-tariff barriers: according to the WTO, only 46% of the more than 20 000 national standards in force in China are adopted from international or advanced foreign standards. In some areas, the participation of foreign and foreign-invested companies to standard-setting work is still restricted.

- Intellectual Property Rights (IPRs) protection and enforcement: despite China's efforts, serious problems remain and need to be tackled, notably in terms of violations of copyrights, trademarks, patents, and trade secrets.

- Raw materials: since all countries are interdependent and rely on the free supply of raw materials, the EU calls on China to remove all its export restrictions."

Are these reactions mere accusations in the context of a rising trading power or do they have some substance? China's State capitalism too doesn't help matters and obsfuscates the line between permissible State support and actionable subsidies in the context of the WTO.

Leila Choukroune has summarised the issues about China's adherence to the WTO in this special article titled "The Compromised Rule of Law by Internationalisation" in China Perspectives. Has WTO membership help "internationalise" the rule of law in China? Has it helped reform the Chinese legal system? Are the WTO plus obligations in the Chinese Accession Protocol being complied with? The author has noted that significant progress has been made by China in amending its domestic legal regime in consonance with international obligations. Primary among them is in the arena of transparency. Nevertheless, the author concludes that substantial effort still needs to be made in terms of fully complying with the WTO mandate:

"The syncretic nature of China’s legal system no longer evokes surprise. Although drawn from foreign rules and practices, China has sinicised these norms to better integrate them. China’s accession to and participation in the WTO is a fascinating illustration of this ability to adapt and perpetuate a given system without fundamentally challenging its basis. While Chinese legal reform has clearly benefited from the WTO engine, the changes in leadership witnessed since the mid-2000s have not led to the “rule of law via internationalisation” some Chinese rulers were themselves calling for. As discussed above, this incomplete transformation originates in the limits of Chinese law itself, from law-making to law implementation, and creates tensions between WTO Members as evidenced by an increasing number of disputes directly pinpointing the lack of transparency of the Chinese legal regime.

A diligent student of international trade law, which plays with international norms and seemingly abides by them, China has not been able to overcome the serious contradictions that have not only hindered a genuine political evolution, but have also taken legal reform backward, by favouring stability over change. It is to be hoped a different political elite may soon be able to approach legal and political reform in a less fragmented and hence more coherent way that could bring about the long-awaited transformations."

This is an interesting debate about how WTO rules influence domestic law making mandating changes in the national legal regimes. While this does not limit policy space in terms of adopting a "particular" developmental paradigm within the WTO rules, the primacy of transparency, need for a strong judicial review system of administrative acts as well as inviolability of the national treatment and non-discrimination principles severly influences domestic policy making. While no one can argue with the need for increased transparency in rule making and notifications to the WTO, the problem arises in interpretation and action. China, in its responses, has constantly argued that it is on the path of reform and is complying with all WTO obligations. It also argues that State led capitalism is not per se against WTO principles and is a justifiable exercise of national sovereignty within WTO rules. The Chinese examples portrays how a country has made its engagement in the multilateral system a centre piece of its developmental strategy. To what extent the former has influenced the latter is a matter of continuing debate!

Trade Policy, China and the US

China's Trade Policy Review at the WTO was held in June 2012. It has been reported in the Chinese press here. Trade Policy Reviews are extremely informative processes which highlight the trade policies as presented by the member country as well as the WTO Secretariat. It provides a bird's eye view of the trade policies pursued by the country as well as the steps being undertaken to bring law and regulations in conformity with the WTO rules.

China, in it submission to the WTO at the Trade Policy Review, had many interesting points:
         "(1)  Continuing to Deepen the Reform Steadfastly

1.                  Reform is China's basic state policy.  The Chinese Government handles properly the relationships among reform, development and stabilization, steadily and steadfastly advances the reform and eradicates obstacles embedded in various systems and mechanisms constraining development and constantly improves the socialist market economy, so as to provide a great driving force for acceleration of the transformation of the economic growth pattern and for promotion of the comprehensive, balanced and sustainable economic and social development.

(i) Establishment of the socialist system of laws with Chinese characteristics

2.                  Rule of law is a fundamental principle for China to effectively govern the country.  China needs to bring into being a comprehensive system of laws with Chinese characteristics so as to ensure that there are laws to abide by for the carrying on of state affairs and social life.  This is a precondition and foundation for China to implement the fundamental principle of rule of law and an institutional guarantee for China's development and progress."

"Establishment of the socialist system of laws with Chinese characteristics" and still in conformity with the WTO? Is this another example of creative use of "domestic policy space" within the WTO by an emerging economy? There is little doubt that China has benefitted immensely with its participation in the WTO system since 2001. Has it don eso on its own terms much more than other developing countries? If yes, what can other developing countries learn from this experience?

The issue of support by China of its State owned enterprises is often a subject of intense discussion and debate. Several countries allege that China unfairly supports its State Owned Enterprises contrary to WTO rules. While China's "socialist" model adopts adopts a strong involvement of the public sector in its developmental paradigm, whether the modes of support and incentives to the State Owned Enterprises is permissible under relevant WTO rules is a source of constant disagreement. While listing out its "reform" efforts in this sector, China strongly defends its State Owned enterprises in its Report:

"Supporting the development of SMEs, especially small low-profit enterprises, is an important part of the work of the Chinese Government to promote the common development of economic entities of diverse forms of ownership.  In addition to the structural tax reductions in favour of small low-profit enterprises, the Chinese Government expanded the funds for promoting the development of SMEs.  It will also continue making efforts in broadening financing channels of SMEs, gradually expanding the size of issuance of collection notes, collection bonds and short-term financing bills by SMEs, and actively and steadily introducing private equity investments and other financing vehicles."

The Report also lists three gains for China by actively engaging with the WTO : Promoting the growth of the world economy, improving the welfare of people in all countries (by providing inexpensive and quality products)  as well as providing broad market for trading partners. The Report concludes by reiterating China's "commitment" to reform:

"More importantly, with the more than 1.3 billion population, China has a huge market and its development potential will be constantly unleashed.  The fundamental impetus for economic growth will not diminish in a fairly long period of time.  In the historical course of constantly improving the livelihood and well-being of more than 1.3 billion Chinese people and realizing the development goal of building a moderately prosperous society set by the Chinese Government, there will be a steady flow of effective demands to support China's strong and sustainable economic growth.

 Accelerating the transformation of the economic development pattern needs to rely on furthering the reform.  The Chinese Government will be more resolute and courageous in advancing the reform in all fields in an all-round way.  China not only needs to vigorously press ahead with reform of economic system, but also needs to prudently advance political reform and accelerate reform of the cultural and social management systems in order to eradicate deep-seated institutional barriers hindering the development of productivity and improve constantly the socialist market economy."

It is interesting to note that the Chinese submission has no reference to subsidies that often comes up in the critique of China's trade policy. The WTO Secretariat's review of China's Trade Policy has reflected on this:

" Subsidies and other government assistance are important features of China's trade policy and industrial policy making.  China submitted a new WTO notification of its subsidies in 2011, listing programmes providing government assistance at  the central government level between 2005 and 2008.  However, in many cases there are no figures on the magnitude of support provided, and no information is available on subsidies and other government assistance provided at the provincial level, which are believed to be considerable."

The US in response to the Trade Policy has, expectedly, come out with a stronger questioning of some of the Chinese policies. Apart from questioning the level of "protection" of IPRs in China, the US Statement which has been reported here on the Trade Policy made at the WTO is here:

" Subsidies and other government assistance are important features of China's trade policy and industrial policy making.  China submitted a new WTO notification of its subsidies in 2011, listing programmes providing government assistance at  the central government level between 2005 and 2008.  However, in many cases there are no figures on the magnitude of support provided, and no information is available on subsidies and other government assistance provided at the provincial level, which are believed to be considerable.

...

The Secretariat’s Report also explains that the use of subsidies is “an important feature of” China’s trade policy regime.  The Report notes that China submitted a subsidies notification under the Agreement on Subsidies and Countervailing Measures in October 2011, but adds that “in many cases there are no figures on the magnitude of support provided, and no information is available on subsidies . . . provided at the provincial level, which are believed to be considerable.”  It is also disturbing that, in several instances, China failed to provide information requested by the Secretariat for its Report.  In a similar, disturbing vein, the United States notes that it filed a counter notification under Article 25.10 of the SCM Agreement in September 2011, detailing 200 central and sub-central government subsidies – including subsidies that appeared to be prohibited – that had never been notified by China.   In these circumstances, Article 25.10 called on China to notify those subsidies promptly.  However, in its subsequent subsidies notification, China included only 10 of the 200 subsidies identified in the U.S. counter notification and has not taken any further action.  In addition, China has failed to notify large fisheries subsidies, even though China is the world’s greatest fishing power and the Secretariat’s Report cites a study indicating that the Chinese Government’s support of this industry has exceeded $4 billion per year.  The United States expects China, commensurate with its fishing status, to notify all of its fisheries subsidies promptly and to make a significant contribution in the WTO’s ongoing work toward ambitious and effective disciplines on fisheries subsidies.

The United States would like to underscore that these concerns about China’s subsidies practices are far from trivial.  During China’s tenure as a WTO Member, investigatory work by the United States has led to the filing of three WTO disputes involving allegations that China has employed scores of prohibited subsidies, both at the central government level and the sub-central government level.  In each dispute, China subsequently withdrew the challenged subsidies or removed export contingencies or local content requirements."

The official submission of China in the Trade Policy review, the WTO Secretariat's version as well  as the US response raise important points. Can a country pursue its "own development" paradigm (in this case a socialist path) and still be in conformity to the WTO? Does WTO restrict ideological diversity? While the rules of the game within the various WTO Agreements need to be followed in terms of National Treatment and following the Most Favoured Nation principle, is there a prohibition from following one's own economic model of development?


Does the WTO rules mandate that a country must be "capitalist"? Can a "socialist" country be a pioneer in reduction of trade barriers and enhanced transparency? Can a "capitalist" country have many instances of subsidies that are prohibited by the WTO? Should we not go beyond terminologies and ideologies to see actual policies that either are in consonance or contravene the WTO? Does the WTO provide a country domestic policy space to pursue its own "ideological" path as long as the provisions of the various Agreements are adhered to or is it implicit that a country will have to follow a "particular" model of development if it is a WTO member? Is developmental autonomy a myth in the multilateral trading system? 


Having said this, there is no doubt that "transparency" in policies must be the cornerstone of any system of government. The WTO has a number of provisions that require notifications and measures to be made available to other countries. While some countries follow it in letter and spirit, others are seen lacking. Transparency enhances accountability as well as throws open one's policies to increased scrutiny. It also increases the need to logically justify your policies against a challenge since it is open to scrutiny. There is also greater awareness of the measures within the country and policies are not seen to be made behind closed doors to reflect vested, domestic or international, interests.There is no doubt that the best practises of countries that follow this well must be replicated in the WTO system

Developing countries and the WTO

Chiedu Osakwe's article titled "Developing Countries and GATT/WTO Rules" in the Minnesota Journal of International Law throws light on the complex nature of engagement of developing countries in the multilateral, rule based trading system. He argues that developing countries in recent years have gradually implemented liberalizing and trade policy reform as against protectionist tendencies earlier. It has been argued that developing countries have shifted tracks from inward looking protectionist policies to a more open, rule based system of trade policy due to the multilateral trading system.

The role of the WTO in encouraging this change on policy behaviour has been highlighted. 

"The effect of the rules-based Multilateral Trading System in particular has been underestimated. The architecture of the WTO has operated to secure rule-compliant, trade-reformist behavior and exercised systemic constraints on individual Members to check and counter protectionism. This architecture rests on the pillars of enforceable rules, under the DSU, periodic Trade Policy Reports and monitoring reports, within the framework of the TPRM, and the accumulating effects of the terms of accession of RAMs, pursuant to Article XII accession negotiations. This architecture, renovated by periodic trade rounds, has acted in combination with domestic growth priorities, in developing countries, to generate and sustain the momentum for trade liberalization."

Particularly interesting are the observations on the Dispute Settlement mechanism of the WTO. 

"The DSU is the foundation of the rules-based Multilateral Trading System. It ensures that trading rules are enforced, that WTO Members operate on the basis of the rule of law and that the trading system is secure and predictable. Recourse to and frequency of invocation of the DSU suggests deeper institutional engagement in the rules-based system. Greater recourse to dispute settlement is associated with trade opening behavior and commitment to domestic reforms. The data suggests that in the fifteen-year period between 1995 and 2010, developing countries, taken together, have increased recourse to dispute settlement as “complainants.” As a group, they are now fairly active users of the system. Increased recourse to dispute settlement would suggest greater sensitivity to the content of trade measures and the effects they carry for consistency or inconsistency with the rules of the trading system.

 ...

 Regardless, what is more important is the fact that developing countries have been respondents in cases regarding the WTO-consistency of measures taken.This increases awareness and sharpens sensitivity that trade measures that developing countries take (as with other Members) should aspire to be WTO-consistent."

The increasing use of the DSU by developing countries is an encouraging sign. As Pascal Lamy had opined, every initiation of a dispute at the WTO should not be seen as a "trade war". In fact, it acts as a safety valve to air grievances and sort out differences. However, developing countries need to augment their capacities to engage with the DSU. The decisions of the Panel and Ab indicate the detailed analysis of fact and law. Most of the cases rely on complex issues of data, economic analysis and judicial interpretation. The need for a "law and economics" approach is vital to sustain one's claims. The teams involved must be multidisciplinary with  government officials, trade policy experts, data analysts, trade economists and international trade lawyers. Developing countries can expect a large number of disputes as they integrate into a rule based system both from fellow developing countries as well as the developed world. While developing countries coalitions do exist it must be remembered that when "national" domestic interests are involved, the coalitions will not be able to sustain itself. The increasing heterogeneity of developing countries interest was also brought to light in the article:

"The composition and role of developing countries in the Multilateral Trading System is complex and evolving. The group is heterogeneous. It is neither a monolith nor is it unitary. Its interests are mixed, uncertain, and in some cases, divergent.

...

In the Doha Round, various developing country negotiating coalitions have emerged that provide snapshots of the diversity of the trade and economic interests of developing countries in the Doha Round. For instance, in the agriculture negotiations, several groups are operative. These include the Commodities Group; the Cotton-4; the G20 of Members committed to ambitious liberalization in agriculture; the G3-33 with defensive orientations in agriculture; the G-90; the LDCs; the RAMs; small and vulnerable economies (SVEs-Agriculture); and the Tropical and Alternative Products Group. Although the Cairns Group of agricultural  exporters includes developed Members such as Australia, Canada, and New Zealand, its other Members are developing countries. For instance, Mauritius, a Member of the African Group is designated a developing country, but participates in the Doha Round Agriculture negotiations with developed Members in the G-10, with high levels of domestic support and low ambition levels in the agriculture negotiations. This is in contrast to South Africa, another developing country member of the African Group, participating with other developing countries in the G-20 group, with low levels of domestic support and high levels of ambition in the agriculture negotiations."

Increasingly countries will pursue their domestic national trade interests within legitimate limits and seek remedies. The example of Brazil taking on Argentina's import restrictions  is only one example of a developing country questioning each other's policies. This in itself need not be seen as a negative development. The body of jurisprudence built around the WTO Agreements by the Panel and AB decisions is an indication of an increasing involvement and willingness of countries to engage with a rule based system without foreclosing the "negotiated" route.

Proposed EU trade policy - Does it hurt the WTO?

Iana Dreyer's recent paper on EU trade policy titled "Trade Policy in the EU's neighbourhood : Way Forward for a Deep and comprehensive Free Trade Agreements" calls for an aggressive push towards Free Trade Agreements by the EU with its neighbours. This study assesses the trade policy of the European Union (EU) in its neighbourhood and formulates proposals for the negotiation of “Deep and Comprehensive Free Trade Agreements” (DCFTAs) that the EU is currently engaged in, or offering to, Ukraine, Moldova, Georgia, Armenia, Jordan, Egypt, Tunisia and Morocco, as part of the European Neighbourhood Policy (ENP). The paper is an extensive study of existing EU policy as well as the course EU should take with its new partners.

Proposing a cautious approach to new DCFTAs the paper concludes:

"In the DCFTAs that the EU proposes, it should instead suffice to ask their trade partners to comply with EU standards to be able to sell in the EU markets and ask these partners to allow the EU to export its products according to its own standards. The EU can directly help exporters from these economies comply with EU standards.Changing the entire domestic law of DCFTA partners to fit the EU’s rule book is not necessary and is politically and economically unhelpful. Some partners are not only very poor but also very small, and hence not of major commercial interest to EU business. It is thus perplexing to see the EU spending bureaucratic energy and putting its political capital at risk in its neighbourhood by imposing a costly rule book with its DCFTA efforts with Georgia, Armenia or Moldova. 

...

The EU should focus its efforts on economies that need trade liberalising reforms and a better environment for investors. In the context of its DCFTAs, Egypt is the greatest priority, though the EU cannot expect an economy like Egypt’s to readily and easily adopt EU-style legislation. The EU should rather attempt to offer an attractive FTA, similar to those it has been signing with other emerging markets in recent years, with significant market openings in goods and services on both sides. A DCFTA between the EU and Tunisia, Morocco and Jordan is a good means to lock in their recent domestic economic reforms, as long as they are not overburdened by regulatory approximation with the EU.

...

A final point is on political conditionality. While it is understandable that the EU conditions the signing of a DCFTA on the partner country signing up to democratic principles, the EU should deal with the DCFTA as a comprehensive economic and commercial package and not subject individual items of the DCFTA to a conditionality that is not related to trade and investment."

I am not an expert on trade policy nor on EU trade dynamics. I found this paper highly informative. What implications does this approach have for the WTO? The trend of regionalism as against multilateralism is a hotly debated topic and there is abundance of scholarly literature on PTAs and its impact on multilateral trade rules. Does the approach presented have a negative bearing for the WTO or are they just building blocks? Are WTO rules not being able to address the issues the DCFTA seek to address? 


A reference in this paper to a study titled "Beyond the WTO? An anatomy of EU and US preferential trade agreements" by Henrik Horn, Petros C.Mavroidis and Andre Sapir made interesting reading. They conclude by analysing the obligations under the EUs and US PTAs vis a vis WTO obligations and tend to suggest that the WTO plus obligations contained in the PTAs may be breeding concern about the unfairness in trade relations since the same obligations could not be included in the WTO multilateral negotiations due to strong opposition by the developing countries.It would be interesting to see Iana Dreyer's paper debated around the issues of its impact on the multilateral trading system and on WTO's relevance and efficacy.

EU cries foul against Argentina, yet again

Reports of the EU considering a trade dispute against Argentina are trickling in. Reuters reported  that a WTO  complaint is a few weeks away. 

"The European Union is planning to lodge a complaint at the World Trade Organization over Argentina's import restrictions and is seeking other trading partners to back its suit, a source familiar with the situation said on Tuesday.

"This is a process that is advancing but it will take some time before it becomes official. We will naturally look at others that could accompany us," the source said.

It is likely to be "a matter of weeks" before the EU launches the case, the source said." 

As reported here, EU Trade Commissioner Karel De Gucht proclaimed in this speech:

"We have a comprehensive trade enforcement strategy that employs all tools, from diplomacy to dispute settlement proceedings at the WTO, to promote market openness around the world." 

I had earlier blogged here  about a joint statement by a number of countries against Argentina's import licensing policies. Are these measures against the Agreement on Import Licensing Procedures ? A number of cases  have been filed earlier with respect to this Agreement in the WTO DSM. The Committee on Import Licensing  too has addressed this issue of Argentinian non-automatic import licensing procedures.

The Joint statement seemed to imply that the procedures violate the Agreement.

"A non-automatic licensing requirement is WTO incompatible unless it is necessary to implement measures which are imposed in conformity with the relevant WTO rules and does not have trade-restrictive or trade-distortive effects on imports beyond those caused by the underlying restriction. The non-automatic licensing requirement must comply with all relevant provisions of the Agreement on Import Licensing Procedures, including a maximum processing period of 60 days.

• Companies from many of the Members that support this statement report that Argentina’s non-automatic import licensing scheme has a trade-restrictive effect on imports and that there are long delays in the issuance of import licenses. Many companies have reported wait periods of up to six months and longer. In some instances, companies are denied import licenses altogether, without justification or explanation.

• The lack of transparency in Argentina’s implementation and administration of its import licensing regime creates profound uncertainty both for exporters and potential exporters to Argentina, as well as for investors in Argentina.

• In January 2012, Argentina announced regulations that went into effect on February 1, requiring pre-registration, review and approval of each and every import transaction. These regulations are creating long delays and resulting in huge costs for many of the exporters from Members supporting this statement.

• It appears that this new system is operating as a de facto import restricting scheme, on all products."

The first step for the EU would be to seek consultations under the WTO DSM. I will be watching this space to see Argentina's official response. Would the dispute be a threadbare interpretation of the Agreement on Import Licensing procedures? Would the dispute go the whole way to the Appellate Body? Would Argentina argue that its procedures are within its domestic policy space consistent with its WTO obligations? The last Trade Policy Review  of Argentina  was in 2007. Would the next review throw up violations of WTO obligations? If found in violation of its WTO commitments, would Argentina continue to maintain the restrictions and face retaliation? After all, if a country is "protectionist" it should be ready to face similar treatment to its goods in other countries.