Argentina’s border emergency-kit in times of global crisis: In case of fire, break the glass

Demián Dalle, Federico Lavopa

11 January 2011

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After the outbreak of the global financial and economic crisis in mid-2008, unilateral and discriminatory trade measures multiplied in number. Developed countries put in place gigantic stimulus packages, some high- and middle-income countries set up catchall tariff and non-tariff measures, while those that had been applying import-duty rates below bound levels raised them up to bound ceilings.

Yet Argentina lacked the resources to keep pace with these massive stimulus packages1; and regional commitments tied its hands to unilaterally raise tariffs. Instead, it started to deploy a unique trade policy template, characterised by the resort to non-traditional border measures. The main components of this “border emergency-kit” have been non-automatic licenses, antidumping duties, and reference prices.

Though Argentina is a minor player in global trade, the implementation of this customs package raised concerns. The country was highlighted in many of the monitoring exercises carried out since the onset of the crisis as one of the most recurrent users of potentially trade-restrictive measures (see for example, Evenett 2010, European Commission 2010, and WTO 2010). Furthermore, its poor performance in these reports caused some uneasiness among G20 members, in light of its pledge at the Washington Summit (reiterated in the London and Pittsburg summits) not to respond to the crisis with protectionist measures.

In what follows, we will present a rough sketch of the physiognomy of Argentina’s post-crisis trade policy, and a preliminary assessment of its economic impact. In doing so, we will focus on the measures adopted by the country between November 2008 and May 2010, as reported in the Global Trade Alert (GTA) Database.

Breaking the glass: Argentina deploys its border emergency-kit

Argentina’s applied import-duty rates are well below the levels bound at the WTO2. However, as a member of Mercosur, Argentina cannot, except for a number of limited exceptions, modify its duty rates without the express consent of its three regional partners, Brazil, Paraguay and Uruguay. Different views among Mercosur partners on how to deal with the crisis and, more generally, divergent defensive interests resulting from dissimilar productive structures make Common External Tariff modifications a very cumbersome task. Yet, the Argentine government did not stand still as the crisis unleashed. In November 2008, it started to deploy a series of alternative instruments. Three of them stand out:

  • Reference prices (“valores criterio”): In June 2005, and with the declared purpose of strengthening customs control and preventing under-invoicing, the Federal Public Revenue Agency adopted a resolution establishing a regime of “valores criterio”. Under this regime, reference prices are fixed by the Agency for products and origins in which fraudulent practices have been found to be frequent. Any importer attempting to clear customs of a good covered by the regime is required to post a guarantee amounting to the difference between the “reference price” set by the Agency and the declared import value. From November 2008 until May 2010, the government adopted a total of 29 specific measures imposing or amending reference prices, which affected tariff positions in 38 headings. Measures involving reference prices currently account for 27% of all measures reported for Argentina within the studied period (See Table 1 below).
  • Antidumping duties: In September 2008, Argentina tightened the procedures for antidumping investigation so as to shorten the period of time that elapses between the initiation of the investigation and the imposition of definitive antidumping duties. From November 2008 until May 2010, Argentina initiated 27 dumping investigation for 28 different tariff positions and 8 origins; imposed provisional antidumping duties on three of these positions; and established definitive antidumping duties on 14. Moreover, according to GTA statistics, antidumping activity (initiations of antidumping investigations, impositions of provisional antidumping duties and imposition of definitive antidumping duties) in Argentina during that period was five times more frequent than the world average.
  • Non-automatic licenses: In 2005 Argentina began to require non-automatic licenses for the importation of certain goods, particularly footwear and toys. These licensing regimes require the submission of an application or supporting documentation (other than the one required for customs purposes) as a prior condition for importation. According to the government, the measures were merely required for informational purposes. With the onset of the global crisis in November 2008, the list of products subject to this requirement expanded significantly: 14 specific measures imposing or amending licensing requirements on tariff positions in 73 headings were passed.

Altogether, these three instruments constituted the core of Argentina’s border emergency-kit. They represented 82% of the total potential trade-restrictive measures reported for Argentina in the GTA Database between November 2008 and May 2010. Table 1 below shows how these three components of the kit were distributed.

Table 1. Number of measures per type

 
Total
Non-Automatic Licenses
Antidumping
Reference Prices
Total Emergency-Kit
Other measures
Number of legislative acts
106
14
44
29
87
19
Percentage of legislative acts
100%
13%
42%
27%
82%
12%

Source: Own elaboration based on GTA Database and www.Infoleg.gov.ar

One aspect that distinguishes all three tools in the emergency-kit is their “targeted” nature and hence rather limited coverage. As a result, though representing 82% of trade-policy legislation, the triad of most frequent measures accounted for less than half of the headings affected by all the potentially trade-restrictive measures reported for Argentina in the GTA Database for the studied period (See Table 2 below). 

Table 2. Number of affected headings and participation per type

 
Non-Automatic Licenses
Reference Prices
Antidumping
Total Emergency-Kit
TOTAL MEASURES
Affected headings
73
38
49
160
324
Percentage of affected headings
23%
12%
15%
49%
100%

Source: Own elaboration based on National Direction of Customs.

The economic impact

What was the economic impact of the implementation of this set of border measures? While it is true that Argentinean imports dropped from $5,200 billion in May 2008 to $2,660 billion in May 2009, i.e. a 49% decrease over a twelve month period, it would not be fair to blame the emergency-kit as the main culprit for this dramatic fall.

Argentine purchases abroad are mainly composed of capital goods, and parts and accessories thereof. These items represented 41% of total purchases in 2009. And the figure rises up to 73% of total imports if we include imports of intermediate inputs. As a decrease in domestic economic activity will have a negative impact on the demand for these two items – which, as mentioned, account for almost three quarters of Argentinean purchases abroad, it will ultimately drag down the country’s total imports. The main factor behind the collapse of imports after September 2008 thus appears to be the slowdown of economic activity. Figure 1 confirms this view. It shows the high positive correlation between the evolution of imports and domestic economic activity.

Figure 1. Annual variation of total imports and domestic economic activity (2008-2010).

Source – Own elabouration based on information provided by the National Division of Customs and the National Statistics Division.

Final remarks

Argentina ranked high on the lists of protectionist-inclined countries that emerged after the global economic meltdown. This paper sought to explore the main features and make a preliminary assessment of the actual economic impact of the post-crisis package of measures that prompted Argentina to the “top-ten” of the world’s most recurrent users of potentially trade-restrictive measures.

  • First, our analysis confirmed that, in fact, Argentina stands out an intense user of restrictions.
  • Second, it showed that most of these restrictions took the form of one of three types of “targeted” border measures: Non-automatic licenses, references prices and antidumping duties. We referred to this triad of instruments as the border “emergency-kit”.
  • Finally, it suggested that, while aggregate imports collapsed after the onset of the crisis, this drop appears to have followed the plunge in domestic economic activity, rather than the deployment of this border emergency-kit. 

This paper presents a revised version of a paper published in the 7th Global Trade Alert Report (see Dalle and Lavopa 2010). The authors are very grateful to the Latin American Trade Network (LATN) and its Coordinator, Diana Tussie, whose encouragement, guidance and support made this paper possible. The usual caveats apply.

References

Dalle, Demiàn and Fedrico Lavopa (2010), “In Case of Fire, Break the Glass: Argentina’s Border Emergency Kit in Times of Global Crisis”, in Simon Evenett (ed.), Managed Exports and the Recovery of World Trade: The 7th GTA Report, Global Trade Alert, 16 September.
European Commission (2010), Sixth report on potentially trade restrictive measures, May.
Evenett, Simon J (ed.) (2010), Unequal Compliance: The 6th GTA report, Global Trade Alert, 23 June.
United Nations (2010), World Economic Situation and Prospects 2010. Global Outlook, p20.
WTO (2010), “Report from the director-general on trade-related developments”.


1 According to the UN’s World Economic Situation and Prospects 2010, the US spent $969 billion in stimulus packages. This represents around 1.7 times Argentinean total GDP (PPP). See United Nations (2010).
2 According to the WTO, in 2008 Argentina’s simple average bound tariff was 31.9% 

 

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Topics:  International trade

Tags:  protectionism, Global Trade Alert, Argentina

National Director of the Centre for International Economy, Argentine Foreign Ministry

Coordinator of the Master in International Relations and Negotiations at Flacso-Argentina / Universidad de San Andrés

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