RESTRICTEDWORLD TRADE
ORGANIZATIONWT/TPR/S/47/Add.1
23 December 1998
(98-5160)
Trade Policy Review Body
TRADE POLICY REVIEW
ARGENTINA
Report by the Secretariat
Addendum
OVERVIEW
1. The main report (WT/TPR/S/47), which highlighted progress over the six-year period that
followed the first Trade Policy Review of Argentina, was completed in July 1998.  This addendum
provides an update on the major economic and policy developments to the end of November 1998.
2. During the period there were no major changes in Argentina's economic performance.
Nevertheless, certain effects induced by the Asian and Russian crises became progressively more
apparent and raised some concern about their impact on economic growth for 1999.  In addition,
legislation was passed in several areas, but no major and wide-ranging import restrictive measures
were adopted.  Further steps were taken to improve transparency and ensure compliance with
WTO undertakings.
I. DEVELOPMENTS IN THE ECONOMIC ENVIRONMENT1
3. Argentina's macroeconomic performance in the first semester of 1998 remained strong, albeit
at a slower pace than in 1997 as a whole.  Re al GDP growth for the second quarter of 1998 was
at 6.9% (as compared to the same period in 1997), slightly lower than in the first quarter; expansion
was led by investment spending.  For 1998 as a whole,  growth is expected to be in the order of 5%;
GDP growth for 1999 (a presidential elections year) is expected to decline to 4.8%, a level similar to
that of 19962, partly in response to the trade repercussions of the Asian crisis.
4. Sectoral growth has been led mainly by goods, chiefly agriculture.  Although industrial output
expanded during the first half of 1998, its growth slowed to 0.1% and 1.7% in July and August 1998,
respectively; according to private observers, falling sales in certain sectors and higher than needed
stocks seemed to suggest that industrial activity had reached a plateau or that it was to grow modestly
in the following months.3
                                                     
1 This section contains information found in: MEOSP (1998), Informe Económico: La Economía
Argentina en el Segundo Trimestre de 1998 , Issue No. 26, Ministry of Economy, Works and Public Services,
Buenos Aires, found at Internet address http ://www.mecon.ar/informe/informe26/indice.htm (as of
2 December 1998);  EIU (1998), Country Report 3rd quarter, 1 September; recent issues of the Latin American
Economy & Business, and Latin American Weekly Report .
2 Latin American Weekly Report, 8 September 1998; Latin American Economy & Business ,
October 1998.
3 Latin American Economy & Business, September 1998.WT/TPR/S/47/Add.1 Trade Policy Review
Page 2
5. Inflation has remained low.  In the first four months the CPI increased by about 3% as
compared to the previous year.  This rate has re mained stable during the second semester.  However,
in October and November 1998, the figures have shown a declining tendency:  0.9% and 0.8% as
compared to the same period of the previous year;  and -0.4% and -0.2% as compared to the
immediately preceding month.  A decline move has recently been recorded in wholesale prices,
influenced in part by trends in world commodity prices.  In fact, in October and November 1998,wholesale prices dropped by -5.1% and -5.8%, respectively, as compared to the same period of the
previous year.
6. The unemployment rate has remained stable, at 12.3% in October 1998.  In September 1998,
new labour legislation was passed.
4  It allows for two co-existing sets of labour rules; the old rules
govern labour employed prior to the passage of th e new legislation.  The new law reduces dismissal
costs for new employees, maintains the automatic renewal of collective agreements, and keeps the
bargaining process in the hands of national unions.  According to international observers, to avoid
reduced labour market flexibility, complementary legislation, a severance pay fund and the phasing
out of the Special Labour Statutes are required.
7. Privatization in the provinces of Mendoza, Santa Fe and Santa Cruz has progressed in areas
such as water supply and sewerage, electricity distribution and banking.5  Reportedly, the impact of
the Russian crisis on international equity markets caused a delay to certain privatization projects,
including the sale of the remaining stake of 14.99%  in the oil company YPF and the shares of the
National Mortgage Bank (BHN).
8. Argentina is preparing new fiscal legislation, the draft of which is in Congress;  the text aims
inter alia  to tighten tax evasion.6  If passed, the legislation may extend the 21% VAT to previously
exempt activities (radio and television broadcasting, billboard advertising, publications), introducea 10.5% VAT rate on cable television and private healthcare, increases the tax on profits, and impose
a 10.5% levy on interest and commissions on loans.  In addition, a law has been passed by the
Chamber of Deputies for the  establishment of a US$700 million fund to finance public education;
funds are to be raised by a 1-1 ½% tax on the sale of cars that cost more than US$4,000, motorbikes,
aeroplanes and yachts.
9. During the first six months of 1998 the external current account deficit rose by 57% (as
compared to the same period in 1997); this was mainly due to the increasingly negative merchandise
trade balance (US$1.2 billion, equal to US$1.1 billion more than the same period in 1997) and weak
investment income. For the same period, foreign direct investment inflows (about US$2.5 billion)
remained strong but showed no major increase as compared to previous year.
7
10. The widening of the merchandise trade deficit continued as imports grew three times faster
than exports in the first half of 1998;  the deficit was expected to be two times that of 1997.  Slow
export growth reflected declining world commodity prices (soya, wheat, maize, oil and gas) and
reduced beef exports (due to higher domestic prices); in certain cases (e.g., maize) increased export
volumes compensated partly for the price decline.  Exports to the Quad markets increased while those
                                                     
4 Latin American Weekly Report, 8 September 1998; EIU (1998), Country Report 3rd quarter,
1 September, p. 19.
5 EIU (1998), Country Report 3rd quarter, 1 September, p. 23.
6Latin American Weekly Report, 15 September 1998; Latin American Economy & Business ,
October 1998.
7 A private sector study indicated that Argentina benefitted from the Asian crisis in as much as
investors had avoided other markets in the region that had been more affected by the crisis (Latin American
Economy & Business, August 1998).Argentina WT/TPR/S/47/Add.1
Page 3
to the rest of the world stagnated.  Import growth was driven largely by capital goods and to a lesser
extent by consumer goods, passenger vehicles and intermediary goods; imports from EU,
MERCOSUR, and NAFTA countries rose, and the share of Asia in total imports grew significantly
to 15%.
11. Despite the strength of the economy (stronger banking system and level of international
reserves) for dealing with international crises, observers expressed concern over the impact of aturmoil on interest rates (a rise may slow growth) as well as the sustainability of financing the trade
deficit in the long term against a background of reduced demand for soya in Asian markets and lower
investment in oil activities.
8  To mitigate the impact of the unsettled international financial markets
and to advance financial and fiscal reforms in Argentina, in November 1998 the World Bank
approved two special loan operations totalling US$3 billion.9
II. TRADE POLICY DEVELOPMENTS
12. Since August 1998, consultations have been held in MERCOSUR to examine forthcoming
changes in import duty rates (both the Common External Tariff (CET) and/or applied rates)
on 71 eight-digit HS items (including, chemicals, ph armaceuticals, cordage of jute, tubes of cast iron,
iron or steel cables, extruding machines, parts of automatic processing machines, transmissionapparatus, parts for measuring insulation of electric motors, used industrial ovens/cooking and
packing machinery/lifts for the bakery industry);  proposals involve the reduction of duties, except for
nine items (chemicals, pharmaceuticals, herbicides, resins, copper foil, cellular phones) which may be
increased.  Argentina initiated more than ten requests for reductions, and two for increases (by 54%
for a certain chemical, by 400% for copper foil).
10
13. Argentina's WTO waiver on tariff binding obligations was extended to 30 April 1999, to
allow it to finalize consultations and negotiations under GATT Article XXVIII in the context of theimplementation of changes relating to the introduction of the Harmonized System 1996 (HS96) into
Argentina's loose-leaf schedule.
11
14. Argentina provided further explanations and shared its experience with other Members on the
operation of its preshipment inspection regime in the context of the meeting of the WTO Working
Group on Preshipment Inspection, held in October 1998.12  By August 1998, 95,000 certificates had
been issued (affecting 25% of total imports, mainly consumer goods and automobiles) and
about 100 claims had been registered; most of these claims related to confusion on certain issues.  As
a result of the operation of the PSI regime, the value of each kilogram of imports rose from 25%
to 30%.  The customs value of items subject to PSI requirements was much higher than that of the
same goods outside the PSI scope (because their shipment value was below the threshold ofUS$3,000).  To cope with this and other issues, in October 1998 the preshipment inspection regime
was modified by inter alia  lowering the threshold to US$800 and by raising inspection costs covered
                                                     
8 Weak oil prices forced  several oil companies to lower their investment budgets by 20% to 30%.  By
the end of July 1998 the number of drilling rigs had fallen from 60 to 45 (Statements of the Energy Minister anddata of the Instituto Argentino de Petróleo y Gas  contained in Latin American Economy & Business,
October 1998).  Latin American Economy & Business, September 1998;  EIU (1998), Country
Report 3rd quarter, 1 September.
9 World Bank News Release No. 99/2000/LAC, 10 November 1998.
10 MEOSP Resolutions 532/98 and 533/98, 24 August 1998; MEOSP Resolution 666/98,
5 October 1998; MEOSP Resolution 737/98, 4 November 1998.
11 WTO document WT/L/281, 20 October 1998.
12WTO documents G/PSI/WP/W/17 , 28 April 1998; G/PSI/WP/W/18 , 17 September 1998;
G/PSI/WP/M/7 , 12 November 1998.WT/TPR/S/47/Add.1 Trade Policy Review
Page 4
by the authorities (Federal Administration of Public Revenue) from 0.8% to 0.95% ad valorem , for a
minimum of US$120 per shipment.13
15. New implementing regulations on anti-dumping and countervailing mesures were introduced
in November 1998.14  In accordance with commitments under the relevant WTO Agreements,
provisions deal inter alia  with investigation procedures, prov isional and definitive measures, duty
payments, reviews and appeals.  Assistance is to be available to small- and medium-size firms forcollecting information required to initiate an investigation.
16. Anti-dumping duties in form of minimum export prices were imposed against imports of:
vertical-turret milling machines, spokes with nipples for bicycles and motorcycles originating in
China (P.R:) and Chinese Taipei; fireworks, padlocks, on locks for furniture and buildings from
China (P.R:); spiral drills from the European Uni on ((EU) Italy);  straight bi-metal sawing blades
from the EU (Sweden, United Kingdom); and, cross-linked polythene from the United States.
Similarly, countervailing duties were imposed against imports of olive oil (packaged and in bulk) and
wheat gluten originating in the EU.
15  Since September 1998, anti-dumping investigations have been
initiated against unglazed ceramics from the EU (Italy); flat rolled products of iron or steel from
Brazil, the Russian Federation and Ukraine16;  an investigation (initiated on 30 December 1997) on
crab-flavoured seafood sticks from Korea (Rep. of) was terminated.17
17. In September/October 1998, the EU requested consultations under GATT Article XXIII 
GATT with Argentina with regard to the imposition by Argentina of definitive countervailing duties
on imports of wheat gluten from the EU.18
18. As from September 1998, items subject to provisional or definitive safeguards do not benefit
from concessional treatment under the Temporary Admission Regime for export processing;
applications for concessional treatment for these items are no longer considered.19
19. In October 1998 Argentina notified the WTO of its investment, production and export
incentives under the regimes for Patagonian ports (with the subsidy to be eliminated as
from 31 December 1999 at a rate of one percentage point a year), mining (with the VAT-related
subsidy to be terminated by 31 December 1999), forestry activities and free zones.20
20. Protection of intellectual property rights was reinforced in October 1998 with new provisions
confirming protection of computer software.  With the enforcement of these provisions, the private
                                                     
13 Paragraph 43 of Chapter III of WT/TPR/S/47; MEOSP Resolution 1106/98, 9 September 1998;
MEOSP Disposition 4/98, 1 October 1998.
14 Decree 1326/98, 10 November 1998.
15Table AIII.2 of WT/TPR/S/47; MEOSP Resolution 811/98, 16 July 1998; MEOSP
Resolution 772/98, 25 June 1998; MEOSP Resolution 858/98, 14 July 1998; MEOSP Resolution 1111/98,9 September 1998; MEOSP Resolution 1112/98, 9 September 1998; MEOSP Resolution 1391/98,30 October 1998.  WTO documents: G/SCM/44, 13 October 1998; G/ADP/N/43, 15 September 1998;G/ADP/N/44, 21 October 1998
16 MEOSP Resolution 630/98, 22 September 1998; MEOSP Resolution 661/98, 1 October 1 998.
17 MEOSP Resolution 550/98, 27 August 1998.
18 WTO document WT/DS145/1/Rev.1-G/SCM/D29/1/Rev.1 , 12 October 1998.
19 Paragraph 31 of Chapter III of WT/TPR/S/47; MEOSP Resolution 1113/98, 9 September 1998.
20 WTO document G/SCM/N/38/ARG, 17 November 1998.Argentina WT/TPR/S/47/Add.1
Page 5
sector forecasts an initial drop of 15% in illegal sales of software, thus bringing Argentina's piracy
rate down to 60%.21
21. In the area of trade policy coordination, a Private Sector Advisory Council on Foreign
Trade ( Consejo Asesor Empresarial del Comercio Exterior ) was established in August 1998 with a
view of strengthening the participation of the business community in the development and
implementation of foreign trade policies; it is to provide advice to MEOSP's Secretariat of Industry,
Trade and Mining.22  A Registry of Barriers to Argentine Exports ( Registro de Barreras a Las
Exportaciones Argentinas ) was created in October 1998, with a view to identifying and classifying
access barriers in foreign markets; this database, which is to be open to the public and private sectors,
is to be used in the context of regional or multilateral negotiations.23
III. SECTORAL POLICY DEVELOPMENTS
22. In agriculture SPS-related measures were adopted.  Argentina is to lift a ban on imports of
fresh pork meat from the United States.  This ban, in force since 1992, was aimed at protecting
domestic hog production from disease, but the United States provided scientific data showing that the
risk of disease transmission through fresh meat was minimal.24  In October 1998, to protect human
health, the production and trade of veterinary products and animal feed preparations containingcertain chemical substances was prohibited.
25
23. In accordance with recommendations resulting from the relevant WTO panel and Appellate
Body reports, a regulation was issued in July 1998 to ensure that the ad valorem  equivalent of the
minimum specific duties ( derechos de importación específicos  mínimos ) applied on textiles imports
from Members of the WTO do not exceed the bound level of 35%;  Customs was instructed to adopt
enforcement procedures in this respect.26  In September 1998 the duration of minimum specific duties
affecting imports of textiles and clothing was set until 31 March 2000; the ad valorem  equivalent of
such duties must not exceed, depending on the product, 35% or 30% until 31 July 1999, and 30% or
26% until their expiry.
24. In July 1998 a WTO dispute panel was established to examine safeguards affecting
footwear.27  In November 1998, the safeguards affecting footwear imports in force until
February 2000 were modified.28  Tariff quotas for minimum specific duties ( derechos de importación
específicos mínimos ) were introduced and out-of-quota imports are charged 100% higher rates;
in-quota volume is to be increased by 10% on 1 December 1999.  Import licensing procedures are to
be used for quota allocation.  The timetable for duty reductions was also changed.
25. Since late 1998 the effects of lower export demand in certain markets (i.e. Brazil) has become
more apparent in the automotive sector.29  Growth in output, exports and domestic sales has
                                                     
21Paragraphs 178 and 181 of Chapter III of WT/TPR/S/47; Journal of Commerce, 24 November 1998
found in Internet address http://www.joc.com/issues/current/t1rade.
22 Paragraph 15 of Chapter II of WT/TPR/S/47; MEOSP Resolution 570/98, 31 August 1998.
23 National Commission on Foreign Trade Resolution 1/98, 6 October 1998.
24 The Bureau of National Affairs (1998), International Trade Reporter, Vol. 15 No. 42, 28 October,
Washington D.C.
25 MEOSP/SAGPA Resolution 76/98, 8 October 1998.
26Paragraph 63 of Chapter II of WT/TPR/S/47; MEOSP Resolution 806/98, 3 July 1998;
MEOSP Resolution 1184/98, 29 September 1998.
27 Paragraph 65 of Chapter II of WT/TPR/S/47.
28 Chapters II, III and IV of WT/TPR/S/47; MEOSP Resolution 1506/98, 16 November 1998.
29 Latin American Weekly Report, 27 October 1998; Latin American Economy & Business ,
October 1998.WT/TPR/S/47/Add.1 Trade Policy Review
Page 6
progressively slowed.  In October 1998 Argentine motor-vehicle manufacturers announced the scaling
down of their operations by 2.2 million man-hours, which cost workers in the sector a quarter of their
wages for the last four months of 1998.  This may have repercussions on the auto parts industry,
which exports two-thirds of its output to Brazil.
26. To date the level of the tariff  surcharge ( sobre arancel ) that is pledged voluntarily by private
importers at the quota auction for Category A vehicles has ranged from 8% to 70%.30  A s  o f
November 1998, there was no agreement on the MERCOSUR Common Automotive Regime that is
expected to govern the automotive sector as of 1 January 2000.
27. In the services sector, commitments undertaken in the context of the WTO Agreement Basic
Telecommunications (Fourth Protocol to the GATS) were ratified by the Congress in July 1998,
meeting the second deadline for ratification.31
__________
                                                     
30 Chapters III and IV of WT/TPR/S/47; MEOSP Resolution 591/98, 9 September 1998.
31 Paragraphs 133 and 157 of Chapter IV of WT/TPR/S/47; Law 25000, promulgated on 22 July 1998.