WORLD TRADE
ORGANIZATIONG/SG/N/6/ARG/4
G/SG/N/7/ARG/2
18 January 2001
(01-0256)
Committee on Safeguards Original:  Spanish
NOTIFICATION UNDER ARTICLE 12.1(A) OF THE AGREEMENT ON
SAFEGUARDS ON INITIATION OF AN INVESTIGATION AND
THE REASONS FOR IT
NOTIFICATION UNDER ARTICLE 12.4 OF THE AGREEMENT ON
SAFEGUARDS BEFORE TAKING A PROVISIONAL SAFEGUARD
MEASURE REFERRED TO IN ARTICLE 6
ARGENTINA
The following communication, dated 15 January 2001, has been received from the Permanent
Mission of Argentina.
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ANNEX I
I. NOTIFICATION UNDER ARTICLE 12.1(A)
1. Date of initiation of the investigation
The planned date of initiation of the investigation is January 2001.
2. Product subject to investigation
The investigation involves peaches preserved in water containing added sweetening matter,
including syrup, preserved in any other form or in water.
This product is under MERCOSUR tariff headings 2008.70.10 and 2008.70.90.
3. Reasons for initiating the investigation
(i) The investigation was initiated pursuant to a request by the CÁMARA DE LA
FRUTA INDUSTRIALIZADA DE MENDOZA  (Chamber of Industrial Fruit
Production of Mendoza) (CAFIM).  From the evidence gathered so far, the
implementing authority considers that the applicant accounts for approximately
100 per cent of domestic production in this sector.
(ii) The evidence which served as a basis for the initiation of the investigation and the
evidence for the existence of critical circumstances in which a delay might cause
injury that is difficult to repair, is as follows:
The implementing authority considers that the appl ication contains sufficient evidence of the
threat of serious injury to the domestic industry  caused by imports, thus fulfilling the conditions
detailed by the regulations for the implementation of possible provisional safeguard measures.
Likewise, it concluded from the examination of all import-related aspects that recent trends meet the
conditions required by the Agreement on Safeguards to initiate an investigation concerning the
imposition of a safeguard measure.  The current situation therefore constitutes critical circumstances
pursuant to Article 6 of the Agreement on Safeguards.
In view of the evidence submitted by the sector involved, the implementing authority finds
that this evidence constitutes the critical circumstances laid down by Article 6 of the GATT 1994
Agreement on Safeguards, approved by Law No. 24.425.
Accordingly, the implementing authority has deci ded to initiate an investigation with respect
to the application of measures.
II. NOTIFICATION UNDER ARTICLE 12.4
1. Product subject to the proposed provisional safeguard measure
Peaches in preserved water containing added sweetening matter, including syrup, and
preserved in any other form or in water1 which enter the country under MERCOSUR tariff headings
                                                     
1 Referred to hereafter by the generic term "canned peaches".G/SG/N/6/ARG/4
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2008.70.10 (peaches preserved in water containing added sweetening matter, including syrup) and
2008.70.90 (peaches preserved by any other method).
2. Proposed safeguard measure
US$0.50 per kg. net.
3. Proposed date of introduction of the provisional safeguard measure
January 2001.
4. Proposed duration of the provisional safegu ard measure, should a decision have been
adopted regarding the duration of the measure
Two hundred (200) days.
5. Explain the basis for:
(i) Formulating a preliminary determination of an increase in imports that has caused or
threatens to cause serious injury.
The National Foreign Trade Commission (CNCE) carried out a study in response to the
application submitted by the Chamber of Industrial Fruit Production of Mendoza (CAFIM) to
determine the existence or threat of serious injury, within the meaning of the Agreement onSafeguards, in connection with the product defined in Part 1 of this notification, the results of which
are recorded in CNCE Directive No. 711 of 2 January 2001.
The analysis shows that the application contains  sufficient evidence of the threat of serious
injury to the domestic industry caused by imports, thereby meeting the conditions laid down by theregulations in force to implement possible safeguard measures.
The above-mentioned conclusion is based on the following aspects:
• Import trends
Recent trends in imports meet the conditions required by the Agreement on Safeguards for
initiating an investigation with a view to the imposition of a safeguard measure, with reference to the
following aspects:
(a) Imported product subject of the application
The imported product subject to the application is under MERCOSUR tariff
headings 2008.70.10 (peaches preserved in water containing added sweetening matter, including
syrup) and 2008.70.90 (peaches preserved in any other form).
(b) Absolute quantities imported
For the purposes of evaluation, the Commission considered imports of canned peaches
originating from MERCOSUR non-member countries .  Imports originating from MERCOSUR were
not analysed since no such transactions were recorded.G/SG/N/6/ARG/4
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The volume of imports of canned peaches from outside the MERCOSUR area fell by 45 per
cent in 1998, went up by 104 per cent in 1999, and a 16 per cent rise was estimated for 2000.
Imports measured in f.o.b. dollars showed a decreasing trend in 1996, 1997 and 1998, then
rose by 69 per cent in 1999 and by 11 per cent in the first eleven months of 2000.
(c) Imports in relation to domestic production
The annual estimate for imports for 2000 was 13 per cent of domestic production.  If the
January-October period is compared with the same period in 1999, the figure is lower than for the
year as a whole (8 per cent), which confirms the existence of seasonal differences for imports andproduction.
(d) Conditions affecting imports
Considering the conditions in which imports take  place and in view of the characteristics of
the product, price is the key factor.
Accordingly, the annual average f.o.b. price of imports was around US$0.755/kg. in 1998,
ranging between US$0.625 and 0.575/kg. for 1999 and January-November 2000 respectively;  in
particular, total prices for the European Union varied from US$0.610/kg. in 1996 to US$0.505/kg. in1999 and US$0.442/kg. in the first 11 months of 2000.
(e) Serious injury or threat of serious injury to the domestic industry
1. Like  or directly competitive products
At this stage and on the basis of existing information, it was concluded that domestically
produced canned peaches are like or directly competitive products with respect to imported products
which are the subject of the application.
The Código Alimentario Argentino (Argentine Foodstuffs Code)
2 defines canned peaches as
fruits of the species Prunus pérsica L. , white or yellow in colour, both of which may be freestone or
clingstone, cut into symmetrical halves, in slices or pieces, or whole with the stone, ripe, wholesome,
clean and skinless, canned with a solution of nutritional sweeteners, hermetically sealed and subjected
to industrial sterilization.  They may be white or yellow, and different varieties may not be mixed in
the same can.  Pieces of each type must be whole;  they must have their own aroma and flavour, and
the only flavours and aromas that may be added to the liquid are those expressly permitted anddeclared on the label.  The liquid covering the canned peaches is generally water or a solution of
nutritional sweeteners.
It should also be pointed out that public information referring to canned peaches presented at
international conferences of the sector – World Canned Deciduous Fruit Conference –, specialist foodsector publications – Food News –, sectoral reports prepared by the embassies of the United States of
America in the leading producer countries of canned peaches and, in addition the use of an
international price for canned peaches in the Canned Fruit Accord or Agreement (CFA), do not
differentiate between qualities or types of canned peaches.  This also makes it possible to regard
canned peaches as a food commodity which meets certain international specifications.  Nevertheless,the investigation will undertake a more in-depth analysis.
                                                     
2 Hereafter referred to as CAA.G/SG/N/6/ARG/4
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2. Domestic industry
The Commission analysed the information submitted by the Chamber of Industrial Fruit
Production of Mendoza (CAFIM), which accounts for 100 per cent of domestic production of cannedpeaches and represents all the producing companies (referred to below as "the companies surveyed"),
which constitute a major proportion of the domestic industry.
3. Situation of the domestic industryIn order to analyse the situation of the domestic industry, the following aspects were
considered:
The processing industry shows a high level of integration, with domestic production for 2000
estimated at 65,600 tonnes, maintaining 1999 levels.
Overall domestic sales for 1999 peaked at 32,375 tonnes, while a 12 per cent decline in
physical terms was estimated for 2000.  In monetary terms, sales in 2000 show an estimated fall of the
order of 25 per cent.
The volume of Argentine exports of canned peaches fell sharply in January-September 2000,
for all destinations, with a lesser drop in f.o.b. dollar terms.
The production capacity of the companies surveyed shows 21 per cent growth in 1998, 13 per
cent in 1999 and 2 per cent in 2000.  The degree of utilization for the same group of companies stands
at 78 per cent, with a reduction of two percentage points between 1999 and 2000.
The total number of employees in the area of production of the companies surveyed is a factor
which introduces a substantial element of relativ ity, since some of the companies reported both
permanent and temporary staff, so that a consistent aggregate number can therefore not be produced.
With regard to productivity, the "physical product per employee" was analysed, which gave rise to the
problem of temporary and permanent workers and the impossibility of determining trends, given that
there were major variations in the indicator during this period.
A representative cost structure for all the companies analysed showed a decreasing trend in
average unit cost values, falling by 11 per cent, 0.5 per cent and 1 per cent in 1998, 1999 and 2000,
respectively.  This was accompanied by a fall in average sale prices of 8 per cent, 0.3 per cent and
20 per cent for the same years, producing figures of 1.20, 1.25 and finally 1.01 in 2000 for the
price/cost ratio, as an indicator of the specific profitability of the sector.
With regard to the evaluation of the net worth and financial situation of the companies
surveyed, the fact that all of them are multi-product enterprises means that no very significant
conclusions could be reached regarding the indicators of profitability, operations, liquidity and
indebtedness.  There was a drop in profitability a nd an increase in indebtedness in some companies,
while in the remainder there was greater stability and even improvements in values.  The Commission
considered it inadvisable to undertake any analysis here, until the specific accounts of the sector have
been analysed.
4. Opinion on the serious injury or threat of serious injury to the industry caused by
imports
Since imports of canned peaches increased in a manner capable of producing serious injury or
the threat of serious injury to the domestic industry, while net domestic production of exports hasG/SG/N/6/ARG/4
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nevertheless maintained its share in current consumption, this has been accompanied by a fall in sale
prices, which have reached the level of the representative unit cost of the sector.
The foregoing, taken in conjunction with the estimated volume of stocks at the end of the
2000 period, especially in the countries of the European Union, plus an apparent discrimination in
prices towards Argentina on the part of the chief EU producer – Greece, creates a situation which may
be regarded as constituting a threat of injury caused by imports.
(ii) Determining the existence of critical circumstances where delay would cause damage
which it would be difficult to repair.
Canned peaches are a food commodity and therefore competition takes place almost
exclusively through prices, with few possibilities for differentiating the product in terms of quality.  In
this context, worldwide production for the period 1999-2000 was estimated at a record 1,242,216
tonnes, an increase of 14 per cent compared with the previous period and almost 8,000 tonnes above
the record registered in the period 1992-93.  Worldwide exports reached the record level of over600,000 tonnes, a 15 per cent increase compared with the previous year, also exceeding the record
level of 1995-96.  It is anticipated that global stocks will be 51 per cent above the figure for the
previous period.  These figures are due especially to the impact on the market of the exceptional
harvest in Greece.
These circumstances have contributed to a decline in prices in the domestic market.  The
average f.o.b. price dropped 17 per cent in 1999, and even more sharply in 2000.  Between
January-November 1999 and January-November 2000, it fell again by 10 per cent.  In this situation
imports grew by 104 per cent between 1998 and 1999.  Between January-November 1999 and
January-November 2000 imports recorded a growth of 23  per cent by volume.  In view of the fall in
prices, the increase was less in terms of f.o.b. dollars.
At the same time, apparent consumption of canned peaches increased during 2000, with the
share of imports staying at 11 per cent.  This share of apparent consumption corresponded to a drop in
prices for the domestic product, which are at the limit of covering costs.  This trend shows that,
because of the repeated drop in prices of imports, the domestic product will be unable to maintain its
share in the short term.
Canned peaches are a highly seasonal product.  In Argentina the period of greatest demand is
the last quarter of the year and the first quarter of the following year.  In the northern hemisphere,
where 80 per cent of canned peaches are processed, the industrialization process takes place between
July and September, while in the southern hemisphere that process occurs between December andMarch.
Imports of canned peaches from the northern hemisphere accelerate during the last quarter of
each year, having a significant impact on prices paid to the domestic producer at the time the harvest
of peaches for processing begins and contracts are concluded between producers and distributors.  Inthis context, overproduction and the record harvest in the northern hemisphere in 2000 and the prices
at which these peaches have been entering th e domestic market are exerting strong downward
pressure on domestic purchase prices, jeopardizing even the actual picking of the peach harvest.
Figures for imports across the country indicate a sharp 10 per cent drop in the months of 2000 that
were analysed, producing a 20 per cent fall in domestic product prices, which stood at slightly abovecost price.
In addition to its highly seasonal nature, the production of peaches for canning is narrowly
localized in Argentina.  Production and processing are exclusively concentrated in the province ofG/SG/N/6/ARG/4
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Mendoza.  The industry, with its two stages of production and processing, employs over
15,000 persons, representing 13.4 per cent of the rural population of the province.  Women make up
some 90 per cent of the workforce.
In view of the above factors, the Commission considers that the current situation constitutes
"critical circumstances" within the meaning of Article 6 of the Agreement on Safeguards.  If imports,
irrespective of their origin, continue under current conditions, especially with respect to price, it
would cause serious injury which it would be diff icult to repair owing to changes in purchasing
decisions by importers, supermarkets and wholesalers, and the consequent difficulty for local
companies to conclude contracts with even minimal pr ofitability.  It is therefore estimated that this
could cause the destruction of an important sector of domestic industry.
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