99-0108 MOREPRESS RELEASE
EMBARGO:  NOT FOR PUBLICATION UNTIL
1300 GMT  22 JANUARY 1999
PRESS/TPRB/100
13 January 1999
 ARGENTINA REALIZES GAINS FROM ECONOMIC REFORMS
BUT COULD GAIN EVEN MORE FROM MULTILATERAL LIBERALIZATION
The economic reforms and restructuring programmes which have been pursued with notable
success since the early 1990s have helped Argentina to double its per capita income in less than ten
years and keep inflation below one per cent since 1997. Trade liberalization, de-regulation,
privatization and several regional integration initiatives also have increased market access
opportunities for Argentina's trading partners.
A new WTO Secretariat report on Argentina's trade policies and practices states that
Argentina has consolidated and continued to extend its autonomous reforms in trade and relatedpolicies while pursuing greater integration in the world economy through the completion and
implementation of the results of the Uruguay Round. It has also engaged in regional initiatives
through MERCOSUR
1 and other regional agreements. As a result, the WTO's report notes that
Argentina has become a more open and secure market for both regional and other trading partners.
Competition is expected to further intensify in 1999 following the elimination of tariff protection forsensitive products from other MERCOSUR member count ries such as plastics, clothing and iron. The
WTO report notes, however, that even if the government has resisted pressures from some sectors
against further domestic liberalization, the resort to anti-dumping and other trade-restricting measures,
as well as frequent variations in trade-related taxes, could raise concerns for some of Argentina's
trading partners.
The new Secretariat report, along with a statement by the Government of Argentina, will
provide the basis for two days of discussion at the WTO's Trade Policy Review Body on 20 and 22
January 1999.
                                                     
1 MERCOSUR - Mercado Comun del Sur members include: Argentina, Brazil, Paraguay and UruguayPRESS/TPRB/100
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MOREArgentina recovered quickly from the 1994 Mexican financial crisis, after which it
accelerated the restructuring of its financial markets. However,  it must now confront the impact ofthe Asian crisis and its effects on South America.  To help Argentina do so and also advance its
financial fiscal reform, the World Bank approved in November 1998 two special loan operations
totalling US$3 billion. The WTO report states that  for 1998 as a whole, GDP growth in Argentina is
expected to be in the order of 5%. For 1999, however, growth is expected to decline to 4.8%, a level
similar to that of 1996, partly in response to the trade repercussions of the financial crisis.
During the first six months of 1998, the external current account deficit of Argentina rose by
57%. This came mainly from a widening merchandise trade deficit, as imports grew three times faster
than exports, and from stagnating foreign direct in vestment inflows. Slow export growth reflected
declining world commodity prices and reduced beef exports due to high domestic prices. While
exports to Europe, Japan and North America increa sed, those to the rest of the world stagnated.
Imports from the European Union (EU), ME RCOSUR and the North American Free Trade
Agreement (NAFTA) rose, and the share of Asian imports grew significantly to 15%.
The report indicates that while trade has grown more rapidly within MERCOSUR, trade with
third countries has also expanded strongly. Overall, the report states that the network of free trade
treaties within Latin America indicates a willingness of these countries to pursue wider marketopening measures.
As a member of MERCOSUR, Argentina has been adapting its customs tariff to converge
progressively to MERCOSUR's Common External Tari ff (CET). This process, the report notes, will
bring a decrease in the average most-favoured-nation (MFN) rate, from 13.5% in 1998 to 11.1% in2006. The report states, however, that the CET convergence process has reversed an earlier trend
towards reducing tariff escalation, which is now more pronounced in virtually all sectors. Such
escalation distorts resource allocation by providing higher than average effective protection for certain
processing industries, especially automobiles.
The report also states that, in response to periodic fiscal pressure, Argentina has frequently
adjusted its tariffs and statistical tax. In 1998, for example, the average applied MFN tariff level was
raised by increasing duties on most items by 3 percentage points to offset the reduction of the
statistical tax rate – a tax affecting non-MERCOSUR origin imports.
While Argentina reduced its peak applied ad valorem  rates applying to imports of passenger
motor vehicles, the precise level of duty charge on certain types of automobiles, sugar, textiles,
clothing and footwear is difficult to compute because of additional or alternative tariff measures.
The report notes that Argentina has become an important user of anti-dumping measures,
mainly against imports from Brazil, China and the EU. Also, a few product-specific measures have
affected imports of sugar, automobiles, textiles, clothing and footwear. Argentina also uses certain
export measures, including export taxes covering a few unprocessed products and export licensing to
administer tariff quotas related to access to certain markets. The report points out that Argentina is
expected to bring any measures considered as prohibited export subsidies into line with relevant WTO
provisions by the year 2003.
The report indicates that Argentina dramatically reduced the degree of state involvement in its
economy through large-scale privatization and a de-regulation programme. Argentina has also
eliminated preference for domestic bidders in government procurement, improved the
implementation of its competition legislation and reinforced its protection of intellectual property
rights with new provisions confirmi ng protection of computer software.PRESS/TPRB/100
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MOREAccording to the report, goods, and mainly the agricultural sector, have led Argentina's
sectoral growth. In agriculture, government assistance has been falling and is now modest, mainlyconsisting of border measures, tax breaks, subsidized credit and debt rescheduling. While nominal
tariff protection in agriculture stood at 9.5% in 1998,  the report notes that after full implementation of
the CET, tariff protection for the sector will be reduced by another third. Protection for industrial
products will be maintained at a higher level.
Argentina's mining and energy sectors have experienced a rapid, reform-led expansion, thus
turning Argentina into an oil and gas exporter. In the manufacturing sector, nominal tariff protection
of 13.8% in 1998 stands slightly above the average level and is set to decline to 11.4% by 2001.
Involved as a respondent in a WTO dispute concerning safeguards affecting footwear, Argentina
modified its measure in November 1998.
In the automotive sector, complicated protection measures remain in force: these include high
peak tariffs for completely built up vehicles, quantitative restrictions, local content and export
performance requirements. Since late 1998, the effects of lower export demand in certain markets –
especially Brazil - have become more apparent and growth in output, exports and domestic sales has
progressively slowed.
Economic reforms resulted in pronounced changes in the services sector. The elimination of
state involvement in most activities has encouraged an expanding supply of services at largely
competitive prices. The restructuring and strengthening of the financial sector was greatly accelerated
following the Mexican crisis. Foreign-owned banks are allowed to operate on the same basis as
domestic banks. Argentina participated in the negotiations in financial, maritime transport and basictelecommunications services, but expressed no interest in signing the Information Technology
Agreement.
Since the previous review in 1992, Argentina has consolidated and continued to extend its
autonomous reforms in trade and related policies, while pursuing greater integration in the worldeconomy through the completion and implementation of the results of the Uruguay Round, and in the
sub-regional economy through MERCOSUR and other bilateral agreements. The report concludes
that as a result, Argentina has become a more open and secure market for trading partners. The report
points out, however,  that despite the results of the Uruguay Round, Argentina's agricultural exports
face barriers or unfair competition in certain markets. In this regard, Argentina's own reforms and itsregional integration represent a challenge to the WTO system to encourage multilateral liberalization
through a new round of trade negotiations.
Notes to Editors
The WTO's Secretariat report, together with a policy statement prepared by Argentina, will be
discussed by the WTO Trade Policy Review Body (TPRB) on 20 and 22 January 1999. The WTO'sTPRB conducts a collective evaluation of the full range of trade policies and practices of each WTO
member at regular intervals and monitors significant trends and developments which may have an
impact on the global trading system. The Secretariat report covers the development of all aspects of
each of Argentina's trade policies, including domestic laws and regulations, the institutional
framework, trade policies by measure and by sector. Since the WTO came into force, the new "areas"of services and trade-related aspects of intellectual property rights are also covered.
To this press release are attached the summary observations from the Secretariat report and
the government report (without the tables and charts). The full Secretariat and government reports are
available for journalists from WTO Secretariat on request (call 41 22 739 5019). They are alsoavailable for the press in the newsroom of the WTO internet site (www.wto.org). The Secretariat
report, together with the government policy statement, a report of the TPRB's discussion and thePRESS/TPRB/100
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MOREChairman's summing up, will be published in hardback in due course and will be available from the
WTO Secretariat, Centre William Rappard, 154 rue de Lausanne, 1211 Geneva 21.
Since December 1989, the following reports have been completed: Argentina (1992),
Australia (1989, 1994 & 1998), Austria (1992), Bang ladesh (1992), Benin (1997), Bolivia (1993),
Botswana (1998), Brazil (1992 & 1996), Burkina Faso (1998), Cameroon (1995), Canada (1990,
1992, 1994, 1996 & 1998), Chile (1991 & 1997), Colombia (1990 & 1996), Costa Rica (1995), Côted'Ivoire (1995), Cyprus (1997), the Czech Republi c (1996), the Dominican Republic (1996), Egypt
(1992), El Salvador (1996), the European Communities (1991, 1993, 1995 & 1997), Fiji (1997),
Finland (1992), Ghana (1992), Hong Kong ( 1990, 1994 & 1998), Hungary (1991 & 1998), Iceland
(1994), India (1993 & 1998), Indonesia (1991, 1994 & 1998), Israel (1994), Jamaica (1998), Japan
(1990, 1992, 1995 & 1998), Kenya (1993), Korea, Rep. of (1992 & 1996), Lesotho (1998), Macau
(1994), Malaysia (1993 & 1997), Mali (1998), Mauritius (1995), Mexico (1993 & 1997), Morocco
(1989 & 1996), New Zealand (1990 & 1996), Namibi a (1998), Nigeria (1991 & 1998), Norway (1991
& 1996), Pakistan (1995), Paraguay (1997), Peru (1994), the Philippines (1993), Poland (1993),
Romania (1992), Senegal (1994), Singapore (1992 & 1996), Slovak Republic (1995), the Solomon
Islands (1998), South Africa (1993 & 1998), Sri La nka (1995), Swaziland (1998), Sweden (1990 &
1994), Switzerland (1991 & 1996), Thailand (1991 & 1995), Trinidad and Tobago (1998), Tunisia
(1994), Turkey (1994 & 1998), the United States (1989, 1992, 1994 & 1996), Uganda (1995),Uruguay (1992 & 1998), Venezuela (1996), Zambia (1996) and Zimbabwe (1994).PRESS/TPRB/100
Page 6
MORETRADE POLICY REVIEW BODY
ARGENTINA
Report by the Secretariat – Summary Observations
The Economic Environment
Since the early 1990s, Argentina has pursued its economic reform and restructuring process
with notable success.  The macroeconomic disciplines introduced under the Convertibility Plan
of 1991, together with built-in initiatives in the areas of trade liberalization, de-regulation,
privatization as well as regional integration de velopments, have allowed for a doubling of real per
capita income since 1990 and led to price stability (less than one per cent inflation in the last two
years).  These basic changes permitted a fast recovery from the impact of the 1994 Mexican financialcrisis, although not without some major adjustments in the banking sector.  Unemployment remains
relatively high, but the labour market shows some signs of improvement.  There has been a marked
improvement in public finances, resulting from major tax reforms and the elimination of a number of
fiscal supports to various sectors of the economy.  Nevertheless, in response to periodic fiscal
pressures, there have been frequent adjustments to tariffs and the statistical tax;  while the thrust of thereforms remains unchanged, these policy adjustment lend an appearance of some uncertainty to the
trade and investment regimes.  So far, there are few signs that the Asian crisis has had any serious
impact on the Argentine economy, and the reform programme, including banking reforms after the
financial crisis of 1995, means that the economy is more resilient than before;  however, any global
slowdown would inevitably ha ve some spillover effects.
The success in reducing inflation owes much to the currency board system, which has
prevented the monetization of fiscal deficits, but has thrown the burden of macro-economic
management on to fiscal policy.  Initially, the fixed exchange regime had a negative effect on
international competitiveness, but this has been reco vered mainly because of the reduction in inflation
and productivity gains under the reform package.  Although current account and merchandise trade
deficits persisted, these were maintained at manageable levels, and international reserves reached
record levels by mid-1998 (eight months of imports).  Although external debt rose, the share of
foreign debt of the non-financial public sector has dropped; recourse to the issue of public bonds and
titles has increased.
Under the changed economic climate, the far-reaching privatization programme and various
improvements in the regulatory framework for in vestment have turned Argentina into a major
destination for foreign direct investment.  This has further stimulated the transformation of the
Argentine economy, contributing to the productivity gains.
The composition of trade has also changed under the reforms: outward-looking sectoral
development has induced import concentration in investment-related items, while there has been a
reduction in the dominance of agricultural and agro-industrial exports.  Since the establishment of
MERCOSUR, Brazil has become the largest single market for Argentine exports.  The EU, Brazil and
the United States remain Argentina's main suppliers, but imports from East and South Asia have
declined.
Trade Policy Framework
Since the previous review, Argentina has consolidated and continued to extend its
autonomous reforms in trade and related policies, while pursuing greater integration in the worldeconomy through the completion and implementation of the results of the Uruguay Round, and in the
sub-regional economy through MERCOSUR and other bilateral agreements.  As a result, ArgentinaPRESS/TPRB/100
Page 7
MOREhas become a more open and secure market for trading partners.  While trade has grown more rapidly
within MERCOSUR, trade with third countries has also expanded strongly.  Competition is expectedto further intensify in the Argentine market as tariff protection on imports of sensitive
items originating in other MERCOSU R countries is to be largely eliminated by the end of 1998.  In
the near future, this may entail further adjustments,  particularly in sectors such as sugar and motor
vehicles where the establishment of common regimes was still pending at the time of completion of
this report.  MERCOSUR negotiations for freeing trade in services, for which the framework wasagreed in December 1997, may be expected to have a positive impact on the Argentine economy.  The
expansion of the network of free trade treaties within Latin America should extend the regional
market, but the exclusion of "sensitive" items would reduce the benefits from improved resource
allocation across the sub-region.
Among the more important extra-regional initiatives is the Free-trade Area for the Americas
for which negotiations were launched at the Second Summit of the Americas in Chile in 1998 and aredue to be concluded by 2005.  A framework has also been agreed between MERCOSUR and the
European Union for negotiations on an Association Agreement with an FTA as a long-term goal.
Such regional initiatives indicate a willingness of Argentina and MERCOSUR to pursue wider market
opening;  they also pose a challenge to the WTO system to provide equivalent opportunities for
negotiating trade liberalization at the multilateral level through the scheduled agricultural and servicesnegotiations, the built-in agenda and, perhaps, a new, comprehensive round of multilateral
negotiations.
Since the previous Review, Argentina has undertaken an extensive reform of its legislative
framework, driven by the adoption of a new Constitution and the incorporation of trade commitmentsat the regional and multilateral levels.  In order to implement WTO commitments, new legislation has
been adopted in a number of areas, including on price bands (1996), preshipment inspection (1997),
patents (1995/96), data exclusivity, industrial design and utility models protection (1996), and sanitary
and phytosanitary standards (1997).  MERCOSUR re gulations have been adopted in areas such as
investment, anti-dumping, safeguards, sanitary and phytosanitary standards, competition protectionand trademarks.  In the same context, further legislative reforms are being considered for customs
clearance, standards, government procurement, an ti-dumping, export taxes, patents and copyrights,
competition policy, trademarks and copyrights, fisheries, hydrocarbons and services.  In addition,
Argentina has autonomously adopted new legislati on in the area of consumer defence (1993, 1997).
Argentina has met regular GATT/WTO notification requirements relating to the legislation
and responded to periodic questionnaires in various areas.  However, the transparency of the
Argentine trade regime could be further enhanced  through timely communication of the adoption of
all trade measures affecting the operation of GATT 1994.   For example, a series of measures have not
yet been communicated to the WTO, including variable import levies on sugar, changes in statistical
tax rates, increases in ad valorem duties on footwear (1997) and on most tariff items (1998), price
bands (1996), import quotas on certain paper products (period 1993-94), "mirror" export subsidies(period 1992-93) and free-trade zones and similar fiscal regimes.  Information on the regime of
minimum specific duties (textiles, clothing, footwear) was only made available in the context of the
Dispute Settlement Mechanism.
Trade Policy Developments
Since the previous review, Argentina has been adapting its customs tariff to converge
progressively to MERCOSUR's Common External Tari ff (CET); this process will bring a modest
decrease in the average MFN rate from 13.5% in 1998 to 11.1% in 2006.  Recourse to other forms of
border protection has been limited to a few instruments and sectors.PRESS/TPRB/100
Page 8
MOREUnder the CET, Argentina's previous, basic four-tier applied tariff structure is being enlarged
to a more disperse eleven-tier system, with common rates of 0, 2, 4, 6, 8, 10, 12, 14, 16, 18 and 20%;in 1998, the average applied MFN tariff level was increased by 3 percentage points to offset the
reduction of the statistical tax rate (see below);  the increase will apply only until 2000.  Peak applied
ad valorem rates, exceptions to the basic structur e, were reduced to 33%, applying to imports of
passenger motor vehicles.  However, the precise level of duty charged on certain types of
automobiles, sugar, textiles, clothing and footwear is difficult to compute because of additional oralternative para-tariff measures.  The CET convergence process has reversed the earlier trend towards
reducing tariff escalation, which is now more pronounced in virtually all sectors.
In the Uruguay Round, binding commitments were expanded considerably to cover the entire
tariff; the ceiling was reduced from 140% to 35%, implying an average gap of over 20% between
bound and applied rates.  Argentina's bindings are subject to a waiver under GATT 1994.  Provisions
for tariff exemptions or concessions on imported inputs have been revised with a view to promotesectoral and/or regional development as well as to meet input supply shortages within MERCOSUR.
There is as yet no agreement on any timetable for a common regime of concessional entry under
MERCOSUR.
Despite trade liberalization, as a result of the growth of trade and efforts to improve tax
collection on imports, the share of trade taxes in total tax revenues has risen in recent years, reversing
the trend noted at the time of the previous review.  The rate of the statistical tax, affecting non-
MERCOSUR origin imports, has varied frequently de pending on the fiscal situation; in 1998 it was
reduced to 0.5% ad valorem and a proposal was made to set maximum amounts.  A preshipment
inspection regime was adopted in 1997, but certain inputs for the automotive, electronics andtelecommunications industries are exempt from such requirements. In 1996 price bands were
introduced to monitor invoicing practices of certai n items.  Since the early 1990s anticipated payment
of VAT and the profits tax has been required for imports.  Maximum rates for container handling fees
seem to differentiate between imports and exports.
Since the last Trade Policy Review, no new import prohibitions have been introduced on
commercial grounds.  For contingency protection, Ar gentina has become an important user of anti-
dumping measures, mainly against imports from Brazil, China and the EU; however, there has been a
slight declining trend in the application of provisional measures in recent years.  Countervailing
measures and safeguards have been applied in a few cases.  A few product-specific measures haveaffected imports of sugar, automobiles, textiles, clothing and footwear.
Export prohibitions on commercial grounds have been eliminated.  Export taxes, now
covering a few unprocessed products, apply to ensure supplies to domestic processors and to counter
tariff escalation in export markets; those on cattle-derived raw materials are to be phased-out by the
end of 1999.  Export licensing has been used to administer tariff quotas related to access to certain
markets, such as sugar and beef and in the United States, various meats and cheese in the EuropeanUnion and textiles and clothing items.
Direct assistance has been provided to exports under turnkey plant contracts and from
Patagonian ports; the latter is to be phased out by the year 2005. The drawback regime now covers
virtually all export items, including most agricultural products;  maximum drawback rates were cut byhalf due to fiscal constraints. Concessional rates for export finance are limited to small- and medium-
sized producers of capital goods under certain regional criteria. In addition, since 1994, legislation
authorizing the establishment of free-trade zones has allowed operators exemption from the payment
of duties and all internal taxes as well as from taxes affecting basic utilities (such as
telecommunications, gas, electricity, water and sewage).  Argentina is expected to bring any measuresconsidered as prohibited export subsidies into line with relevant WTO provisions by the year 2003.PRESS/TPRB/100
Page 9
MOREThe large-scale privatization, franchising and de-regulation programme has dramatically
reduced the degree of State involvement in the economy.  Preference for domestic bidders ingovernment procurement was eliminated and remaining provisions for telecommunications equipment
do not apply in practice. In the light of the increasi ngly higher degree of market concentration in the
economy, competition legislation has been implemented more efficiently in recent years.  Consumer
defense and conciliation action have become important issues, particularly in relation to pricing by
certain public utilities.
Restructuring and diversification as well as regional, scientific and technological development
projects have been encouraged through a complex network of fiscal, credit, direct financial and
technical assistance available at national and/or regional level.  The form of assistance has varied
depending on the sector and the size of the beneficiary firm.  There have been improvements in the
coordination in the use of a number of federal and regional incentives since 1994.
Wide-ranging legislative efforts have been made recently to reinforce the protection of
intellectual property rights on patents and utility models, thus paving the way for the implementation
of the provisions of the TRIPs Agreement by the end of the transition period; nevertheless, progress
remains to be made in enforcement of measures against software and video tape piracy.
Sectoral Policy Developments
Government assistance for the agriculture, livestock, forestry and fisheries sectors has been
falling and is now modest, mainly consisting of border measures, tax breaks, subsidized credit and
debt rescheduling.  Nominal tariff protection stands at 9.5% in 1998, below the overall average level.General liberalization has reduced the bias against the sector.  However, this process will be partly
reversed by full implementation of the CET under which tariff protection for the sector by will be
reduced by another third while industrial protection is maintained at higher levels, a situation similar
to that under the earlier import-substitution policy.  This policy shift will only be partly offset by
fiscal incentives in form of deferrals of tax payments and explicit tax breaks introduced to encouragestructural adjustment and new investment.  Subsidized credit has been made available for regional
development purposes .
Some sectors benefit from higher than average assistance.  Thus, in addition to the ad valorem
tariff of 23% on imports of sugar, variable import levies have been applied since 1992.  Tobacco hasbenefited from a price support mechanism, which has been discussed in the WTO Committee on
Agriculture in November 1997.  Special debt write-off facilities are also available for the tobacco
sector in certain provinces.  In its WTO commitments, Argentina has made no use of tariffication,
tariff quotas, special safeguards nor was any notification made of domestic or export subsidies that
would become subject to reduction commitments (e xcept that the tobacco price support, initially
thought to be de minimis,  is now subject to such commitments).
In the Uruguay Round Argentina obtained impr oved access to the US and EU markets for
several agricultural items; however, certain factors have impeded making full use of such
improvements depending on the item and the market.  In the meat sector, a particular effort has been
made to ensure compliance with export-related sanitary requirements, re-opening some export
markets for beef.
In the light of rapid expansion in fisheries, efforts have been focused in rationalizing
operations of foreign vessels and restraining overfishing of certain species.  Fiscal incentives in
forestry were replaced by direct subsidies for re-afforestation and trimming.
The mining and energy sectors have experienced a rapid, reform-led expansion thus turning
Argentina into an oil and gas exporter; by the end of the century, ongoing mining projects may alsoPRESS/TPRB/100
Page 10
MOREproduce exportable surpluses.  Mining was assisted by the introduction of an attractive framework of
investment incentives including tax breaks; efforts have also been made to co-ordinate provincialincentives and procedures at federal level.  State involvement in oilfield exploration, petrochemicals,
electricity generation and distribution, and gas distribution has decreased.
Under the reform programme, the manufacturing sector has experienced increased
concentration towards large conglomerates, but the reforms have led to important increases in labour
productivity.  Nominal tariff protection of 13.8% in 1998 (including the three percentage point
increase to offset the reduction of the statistical tax) stands slightly above the average level and this
will decline to 11.4% by 2001.  Since 1993, minimum specific duties have protected domestic
producers of textiles, clothing and footwear;  in  1997 duties affecting footwear were revoked but
safeguards in the same form were adopted, while ad valorem duties on this item were increased
concurrently.  Previously, the manufacturing sector benefited from specific assistance schemes such
as the industrial specialization regime and tax breaks for the purchase of capital goods, but these havenow been suspended for new contracts in the light of fiscal constraints.
Liberalization in the automotive sector on an MFN basis has been limited, but some recent
flexibility in the application of policies has helped increase production and trade while cutting car
retail prices.  Complicated protection measures, coupled by a managed trade agreement with Brazil,remain in force; these include high peak tariffs fo r completely-built up vehicles (and in certain cases a
surcharge), quantitative restrictions, local content and export performance requirements.  The
combination of a high rate on vehicles and concessional entry on parts and components implies levels
of effective protection for domestic value added well above that for any other sector of the economy.
Under the transitional arrangements of the TRIMS Agreement, local content and export performancerequirements should be eliminated in principle by the year 2000 when a MERCOSUR Common
Automotive Regime is to be introduced.
Economic reforms resulted in pronounced change s in the services sector; the elimination of
State involvement in most activities has encouraged an expanding supply of services at largely
competitive prices.  Commerce is the leading services activity, but travel and transportation are the
main components of trade in services.  The restructuring and strengthening of the financial sector was
greatly accelerated following the Mexican crisis; foreign-owned banks are allowed to operate on the
same basis as domestic banks. The suspension in the establishment of new insurance firms was to be
eliminated by October 1998 and taxes affecting fees are to be progressively cut.  Competition in thetelecommunications sector is being increased through the gradual introduction of more operators, and
tariffs for basic telecommunications services are falling.  Reforms have produced more efficient and
cheaper passenger and cargo transportation as well as merchandise handling; however, cabotage rights
and bilateral cargo sharing agreements persist in  maritime transport.  The satellite broadcast
transmission is subject to an MFN exemption under the WTO, while taxation and other administrative
measures have been introduced to support the local film industry.
Argentina's commitments under the General Agreement on Trade in Services (GATS) cover a
large number of sectors.  The provision of fixed satellite communication geo-stationary services,
which are subject to conditions of reciprocity, were exempt from MFN treatment as envisaged under
GATS Article II; no such exemption was made with respect to preferential treatment granted in the
context of agreements on audio-visual, cinematographic and transport services.  Argentinaparticipated in the negotiations in financial, mar itime transport and basic telecommunications services
but no interest was expressed in signing the Information Technology Agreement.
Trade Policies and Foreign Trading Partners
At the time of the previous review in 1992, the major reforms of the Argentina economy had
just begun.  In the last six years, these reforms have been extended across practically all areas of thePRESS/TPRB/100
Page 11
MOREeconomy, radically changing the economic life of the country.  Pressures from some sectors to reverse
the liberalization process have largely been resisted, although the resort to anti-dumping and othertrade-restricting measures as well as frequent vari ations in trade taxes gives cause for vigilance, both
for their effects on market access and for the threat  they pose to the reform process.  From the
perspective of trading partners, the market opening of the last decade has been strengthened by
increased security of access resulting from extended  trading commitments at the multilateral level. So
far, regional commitments have largely compleme nted the domestic reforms and the multilateral
commitments, and, while trade within the region has grown more rapidly, trade with third countries
has also benefited from the greater opening and eco nomic stability within the region. However, tariff
escalation under MERCOSUR's CET co ntinues to distort resource allocation, providing higher than
average effective protection for certain processing industries, especially automobiles.  Despite the
results of the Uruguay Round, Argentine agricultural exports face barriers or unfair competition in
certain markets.  In this sense, Argentina's own reforms and its regional integration represent a
challenge to the WTO system to encourage multilateral liberalization through a new round whichallows a balancing of interests across the entire range of issues.PRESS/TPRB/100
Page 12
MORETRADE POLICY REVIEW BODY
ARGENTINA
Report by the Government
A. INTRODUCTION
In the period since the last review of Argentina's trade policy (1992), the country has
consolidated price stability, implemented an acceler ated reform process and continued to cultivate its
external relations, particularly in the field of trade policy.
Markets in Argentina operate with full freedom, prices are set exclusively by the interaction
between supply and demand, and national treatment is fully applied.  The exchange market and capital
transfers have been decontrolled, there are no restri ctions on foreign investment and national treatment
is in full effect.  The autonomy of the Central Ba nk and growing fiscal di scipline are combined with
deregulated goods and services markets and the absence of non-tariff barriers in the field of trade policy.
In short, the process of reform of th e State and privatization is continuing.
The present report contains a brief discussion on these different aspects.
B. STABILIZATION AND STRUCTURAL REFORM POLICIES IN THE ARGENTINE ECONOMY IN THE 1990 S
2.1 THE START OF THE CURRENT ECONOMIC PROGRAMME
Decades of nationalist economic policies, accompanied by growing fiscal deficits and extreme
protectionism, were the chief causes of the fall in per capita income levels and the rise in poverty.  Bad
economic policies also led to a wholesale flight of capital and rising debt and inflation, which
culminated in hyperinflation at the end of the 1980s.
Immediately after President Carlos S. Menem took office, a sweeping process of structural
reform and price stabilization began when Congre ss passed two fundamental laws in 1989:  (i) the
Government Reform Act which made it possible to  carry out a broad privatization programme that
eventually extended to gas and electric utilities and distributors, telecommunicati on, railway, airline, and
oil companies, etc.;  and (ii) the Economic Emergency Act which launched a deregulation programme
that covered a broad gamut of activities, including foreign investment, capital markets, national markets
for goods and services and government regulatory agencies.  Regulations governing interest rates,
foreign exchange controls, prices and wages were also removed.
The Convertibility Act, passed by Congress in Ap ril 1991, was crucial in consolidating the price
stabilization strategy.  Under that Act, the monetary  base is to be backed by foreign currency reserves
and gold, and the exchange rate has been set at one peso to the United States dollar.  The Act mirrors the
commitment of the Executive Branch and Congress to maintaining strict fiscal  discipline.  Under the
convertibility plan, economic adjustments are made  through price and wage mechanisms, which has
made it necessary to take steps to ensure that the economy behaves competitively.
Other laws and instruments that were important  in consolidating macroeconomic stability and
progress in structural reforms included:
- The autonomy of the Central Bank through a new charter;
- a new tax policy, which is much simpler and more efficient;
- consolidation and restructuring of the internal and external public debt;
- lifting of barriers to foreign trade and membership in MERCOSUR;PRESS/TPRB/100
Page 13
MORE- reform of the social security system, ba sed on private pension fund administrators.
Argentina experienced an excellent combinati on of economic indicators in the four years
from 1991 to 1994, until the disruption caused by the intern ational financial problems that began at the
end of 1994.  Inflation in the consumer price i ndex plunged from 1,343 per cent in 1990 to just 3.9 per
cent in 1994 and growth in GDP averaged 8.5 per cent, dr iven by a rapid rise in investment and foreign
trade (Charts 1 and 2).
2.2 OVERCOMING THE 1995 FINANCIAL CRISIS
The speed-up in economic growth after the reform s described above was threatened by the crisis
of confidence at the end of 1994 following the devalu ation of the Mexican peso.  The visible impact of
this phenomenon in Argentina was the sharp drop in bank deposits, which led to a decline in funds
available for lending and an increase in interest rates.
The authorities decided to tackle these probl ems by deepening the stabilization strategy and
structural reforms.  Except for social programmes , public spending was brought down to levels that
could be financed with own resources and loans fro m international lending agencies.  The fiscal and
financial measures introduced to cope with the crisis  included:  (i) an increase of three points in the
value added tax;  (ii) establishment of a trust fund to finance mergers and absorptions of banks;  and
(iii) establishment of another trust fund fo r the privatization of provincial banks.
By the end of 1995, country risk and the spreads in domestic interest rates had declined
considerably (Chart 3).  However, the Govern ment continued to work on a second generation of
precautionary measures to consolidate the solvency  of the financial system, including opening up the
financial services sector to foreign investment a nd establishing a contingent line of credit (Contingent
Repo Facility) in the Central Bank of Argentina w ith foreign financial entities for up to US$6.1 billion
in cash.  Last December, the line of credit was increased by a further US$1.3 billion.
These and other measures have had a positive impact on consolidating the financial system,
including:  (i) the purchase of several private Argen tine banks by very solid foreign banks, with the
foreign banks together controlling 59.4 per cent of a ll private bank deposits; (ii) a reduction in the
number of banks from 168 before the crisis to 96 at present; and (iii) privatization of 19 of the
29 provincial State banks.
2.3 CONSOLIDATION OF THE PROGRAMME
After going through an adjustment proce ss in 1995, the economy began to grow again, at
4.8 per cent in 1996 and 8.6 per cent in 1997.  It was led increasingly by the rise in investment which,
after growing by 8.8 per cent in 1996, shot up to 26.5 per cent in 1997.
As a result of this vigorous growth in produc tion, the unemployment rate fell from a peak of
18.4 per cent in 1995 to 13.7 per cent in October 1997 (most recent data published by the National
Institute of Statistics and Censuses).  Poverty indexes declined once again in 1997.  While 38.3 per cent
of households in Greater Buenos Aires lived be low the poverty line in October 1989, by October 1997
the figure had dropped to 19 per cent.
The crisis on world markets caused by the problem s that appeared in  South-East Asia toward
the end of 1997 awoke fears that the process of econom ic growth would be interrupted again.  However,
eight months after the crisis the initial fears are bein g dispelled.  Even though the stock markets and, to a
lesser extent, the bond markets were not immune from the crisis, the behaviour of total deposits in thefinancial system and gross international reserves ha s demonstrated the solidity of the reform programme
and the confidence vested in it.  For example,  last May, deposits exceeded 74 billion pesosPRESS/TPRB/100
Page 14
MORE(United States dollars) and were 12.3 per cent higher  than before the South-East Asian crisis and
61.1 per cent higher than their levels prior to the Mexican crisis.
The strong inflows of private capital, which exceeded US$6 billion in 1997, have made it
possible to finance the current account deficit and build  up reserves.  The reopening of the international
lending market after Mexico’s exchange crisis had been surmounted made it possible to extend the
terms of new public debt issues, which averaged three years in 1994, to 10 years in 1997.  As for the
cost of financing, in mid-1997, the average lending spread was reduced to less than 200 basis points
above non-risk securities and although events in South-East Asia led to more expensive credit, in recent
months levels have gradually been falling back to their previous minimums (Chart 3).
Argentina has made major progress in the field of  taxes.  At the end of 1996, it adopted a series
of tax measures which, coupled with the increase in the level of activity and progress in curbing evasion,
led to a growth in tax revenues of 13 per cent.  In 1997, they reached an historical high of 48.588 billion
pesos or 52 billion if contributions to the pensi on fund administrators are included, which represent
income that the government relinquished when it re formed the pension system in 1994.  As a result of
these higher tax revenues and spending restraints, the Federal Government was able to bring its deficit
down from 6 billion pesos in 1996 to under 4.3 billion in 1997.  Today, it is complying with the
extended facility arrangement reached with the Intern ational Monetary Fund in February of this year to
cut back the Government's consolidated deficit to  under $3.5 billion in 1998, or the equivalent of about
1 per cent of GDP.
The Government is continuing to work on new programmes for structural reforms and
consolidation of stabilization, including:  (i) modern ization of tax policies;  (ii) additional measures to
achieve greater flexibility in the labour market;  (iii)  privatization of residual government assets such as
the National Petroleum Corporation, some communica tions services and the National Mortgage Bank;
and (iv) strict control over public spending.  The Government views these policies as absolutely
essential for maintaining and enhancing external openness of the economy.
In short, the significant stabilization measur es and structural reforms carried out during
President Menem's Government have done away with  inflation and, if the economy grows by 5.8 per
cent this year as projected in the national budget, GDP will have grown since 1990 at an average of
6 per cent a year during a period when the country  surmounted two serious financial crises that
originated abroad.
C. ARGENTINA 'S TRADE POLICY
Since the first Trade Policy Review (1992), Ar gentina has deepened the structural reform
programme begun at the end of the 1980s, particularly in the area of trade liberalization and openness.
The programme to reduce tariffs and eliminate barriers to trade launched in 1988 was given a strong
push forward by the current administration, both unilaterally and through different regional and
multilateral negotiations, fully consistent with the obligations deriving from Membership in the GATT
and the World Trade Organization.
One of the keys to the process of growth descri bed above was the sharp increase in foreign trade
volumes.  Between 1990 and 1997, exports of goods doubled in value (from US$12.3 billion to
US$25.5 billion), for an average annual growth of 10.9 per cent (far higher than the 6.7 per cent rate ofgrowth in world trade).  For their part, imports grew from US$4.1 billion in 1990 to US$30.4 billion in
1997, ranking Argentina among the economies that have experienced the largest rise in imports in recent
years (see WTO Press Communiqué No. 98 - Appendi x - Table 2).  Thus, leaving behind decades of
inward-looking development, our country has seen a considerable increase in the relative significance of
international trade flows and its share in them.PRESS/TPRB/100
Page 15
MORESince 1991, MERCOSUR has developed an essential role in international negotiations.  Based
on that recognition, MERCOSUR has gradually and pr ogressively become a reference point for the
South American countries.  Surmounting the inevitabl e difficulties implicit in the integration process,
MERCOSUR, through a well-understood concept of regi onalism, is one of the main tools that our
countries can use to address the challenges of a gl obalized economy.  By way of example, trade flows
between the member countries have grown fivefold t hus far in this decade and economic agents now see
the regional market as a permanent and strategic reality.  These developments constitute one of the keyfactors in attracting investments.  MERCOSUR's im ports from outside the zone have grown rapidly as
well.
Opening up our economy to foreign direct inve stment (FDI) has been another pillar of the
reform.  Flows quadrupled between 1990 and 1997, turning Argentina into one of the main receivers of
FDI among the developing countries.  By the e nd of 1996, accrued foreign di rect investment flows
(1990 to 1996) amounted to more than US$22.4 billion, making Argentina the third largest recipient ofFDI among the developing nations, after Malaysia and Mexico.  Although the privatization process
explained a large part of those flows in the early y ears of the decade, the completion of the bulk of the
process (around 1993/1994) did not lead to a drop in fo reign investment.  On the contrary, the flows
acquired new impetus and it is generally agreed that in the coming years their relative importance in the
national economy will grow even more.
3.1 TRADE POLICY OBJECTIVES
Argentina's trade policy includes an autonomous  process of liberalization, participation in
regional integration under MERCOSUR and active and full participation in the multilateral trading
system.
The core trade policy objective is integrati on of the national economy into international
economic relations.  To that end, the opening up a nd liberalization of import and export trade and the
treatment of foreign investment have been and con tinue to be the pivotal elements in the period under
review.
Liberalization of the economy is a component of the structural reforms that are being deepened
and consolidated under the Convertibility Plan.  This li beralization consists essentially of the elimination
of all barriers or obstacles to exports and imports of goods and services, coupled with the free entry and
exit of capital.  The restructuring of the production of goods and services that was promoted under the
Argentina's structural reform was intended to prov ide the country with the capacity to compete on the
global and regional levels.
Autonomous liberalization began at the end of the 1980s, with a unilateral reduction in import
duties and the gradual elimination of different mechan isms that directly or indirectly obstructed import
and export operations.  In 1991, through applica tion of Decree 2284/91 on economic deregulation in
particular, a number of instruments for State inte rvention in foreign trade which constituted non-tariff
barriers to imports and exports were eliminated.
Consistent with this process of autonomous liberalization, major steps were taken toward
subregional integration under MERCOSUR.  The integration process that began in 1991 was
strengthened with the signature of the Ouro Pret o Protocol in December 1994 and the introduction of the
customs union.  MERCOSUR signed trade agreements  with Chile and Bolivia and began negotiations
with the Andean Community.
MERCOSUR also signed a framework agreement with  the European Union.  It is participating
actively in building the FTAA and is attempting to  forge closer ties with other geographic areas,
particularly South-East Asia.PRESS/TPRB/100
Page 16
MOREReaffirmation of the full consistency of Arge ntina's trade policy w ith the rules of the
multilateral trading system is essential for assuring th at the country's economy will be able to integrate
into the world market without contradictions or backtracking.
MERCOSUR's objective of maintaining economies  that are open to external competition
coincides with the WTO's own objectives of en suring growth through mutually advantageous
understandings intended to eliminate discriminatory tr eatment in international trade and to substantially
reduce tariffs and other barriers to trade in goods and services.
3.2 ARGENTINA IN MERCOSUR
Regional integration is a suitable tool for promoting specialization in a given economic space by
expanding the market and the ensuing benefits.
The expanded economic space under MERCOSUR has a population of 200 million, a GDP of
US$1.250 billion, and an area of 12 million square kilome tres.  The four member countries cover 70 per
cent of South America and contai n 64 per cent of its population.
MERCOSUR is based on the strategy of consolidating the democracies in the region,
productive transformation, and competitive positioning in the world economy.  Unlike other integration
schemes that existed in the past, MERCOSUR was not conceived as a closed-ended process but as a tool
for boosting the capacity of its member States to partic ipate actively in international markets.  Thus, first
and foremost, MERCOSUR is a platform for connecting to the rest of the world (final objective), and
not for creating an isolated internal market (instr ument).  The idea is to maximize the benefits of
intraregional integration in a context of open regionalism.
The main indicators used to track the evoluti on of trade show that the objective of opening
economies up to external competition, thus ensuring th at resources are allocated in response to price
signals that closely resemble those that ap ply on the world market, is being attained.
MERCOSUR was created by the Treaty of As unción on 26 March 1991 as a response to the
growing globalization of the international economy, and forms part of the trend toward liberalized trade
throughout the entire American hemisphere.  It has two purposes:  (1) to establish a common marketwith free circulation of goods, services, and producti on factors among its member countries;  and (2) to
facilitate competitive integration into the world economy.
The meeting of the Common Market Council (the  body that determines MERCOSUR policy) in
December 1994 at Ouro Preto, Brazil, declared that  the transition period had ended and established
completion of the customs union and construction of a common market as the objectives for the new
stage of MERCOSUR, organizing the institutional framework that continues to exist today.
The customs union was launched on 1 January 1995, when the common external tariff (CET)
and the common MERCOSUR trade policy came into e ffect, reflecting the political will of the States
Parties to liberalize trade flows by offering an expanded economic space, with transparent rules for
investors from within the zone and from the rest of the world.
Under Article 5 of the Treaty of Asunción, the function of the CET is to encourage foreign
competitiveness of the States Parties, through lower and less dispersed tariffs.
The CET is structured into 11 tariff levels and includes progressive steps of two percentage
points each, ranging from 0 to 20 per cent, with excepti ons that will eventually be brought up or down to
converge with the CET, within  different time frames depending on the goods and the country.PRESS/TPRB/100
Page 17
MOREGeneral exceptions were allowed for 300 products (399 for Paraguay) and will be eliminated in
the year 2001 (except for Paraguay, which will eliminate them in 2006).
In the case of capital goods, Argentina and Brazil will gradually converge with a 14 per cent
CET in 2001 (Argentina from 10 per cent and Brazil fro m 20/24 per cent, both in 1995).  Paraguay and
Uruguay have five more years to complete their convergence.
In the case of computer and telecommunications equipment, the level is 16 per cent, to be
achieved through an integration scheme by 2006.
Automotive products are subject to specia l regimes under Common Market Council (CMC)
Decision 29/94 and will c onform to the common regime on 1 January  2000.  A special regime also
applies to the sugar sector under CMC Decision 19/94, which will be liberalized on 1 January 2001.
The customs union will be completed in 2001 (2006 for the exceptions mentioned) after a six-
year period during which the exceptions will be made to converge at the agreed levels.
The free trade zone, which was virtually completed on 31 December 1994, and the process of
building the customs union, which began on 1 January 1995, are intended to guarantee competition
between the products and services of the States Parties.   In this connection the objective of the CET is to
promote improved allocation of resources throug h international price signals stemming from the
liberalization process.
The common trade policy, whose design and implementation was begun on 11 January 1995, is
crucial for achieving the objectives of the customs union.  The instruments of this common policy cover
a broad range of issues relating to trade in goods, su ch as import duties, rules of origin, trade rules and
disciplines, non-tariff barriers, trade protection mechanisms, etc.
To harmonize trade policies, it was decided to establish the Trade Commission and to define its
main responsibilities.  The Commission is respons ible for supervising the operation of the common
trade policy instruments and hearing trade complaints.  In particular, it is responsible for issues relating
to the CET, nomenclature and administrative rules for tr ade, the final adjustment system, rules of origin,
free zones, elimination and harmonization of non-tar iff barriers, the customs code, guidelines for
harmonizing export incentives, guidelines on unfair trading practices and competition safeguards and
protection.
The short-term objectives defined in the MERCOSUR 2000 Action Plan approved on
7 December 1995 cover the tasks involved in developing and consolidating the integration process.  On
the internal level, MERCOSUR is called upon to cons olidate the customs union - including all sectors
and products - by eliminating every obstacle to th e free circulation of goods and defining a common
policy for the services sector and government proc urement prior to negotiations on the hemispheric and
international levels.  In December 1997, the CMC a pproved a services protocol and is currently
negotiating the initial commitments under the agreem ent.  It also established an ad hoc group on
government procurement, with the mandate of designing a common regime for MERCOSUR.  Actions
to eliminate non-tariff barriers and harmonize national rules were stepped up in 1997 and 1998.
3.3 ARGENTINA AND MERCOSUR'S EXTERNAL RELATIONS POLICY
As a result of its initial momentum, MERCOSUR has won political and economic recognition
in regional and international circles.  With a view  to participating in the international economy under
competitive conditions, MERCOSUR has undertaken negotiations to liberalize trade under the
frameworks of LAIA, the future FTAA, the WTO and th e EU.  It has also begun discussions with thePRESS/TPRB/100
Page 18
MOREAssociation of South-East Asian Nations (ASEAN), Austra lia, New Zealand, China, Japan, Russia, and
countries in southern Africa.
3.3.1 MERCOSUR IN THE WTO
In the relations between MERCOSUR and the WTO, the members of MERCOSUR have had
and continue to have substantial interest in the gradual and progressive liberalization of trade and in
strengthening the institutions of  the multilateral trading system.
In reaffirmation of the linkage between regionalism and the multilateral trading system,
ratification of the commitments assumed by the members of MERCOSUR in the Uruguay Round,
which was completed in April 1994, is an indicator of  their will to comply with the objectives on the
regional and multilateral fronts.  The States Parties bound all the headings for imports of goods with a
moderate tariff ceiling that defines maximum protection levels.  The CET provides for a maximumimport duty of 20 per cent, which is consistent with MERCOSUR's position in multilateral forums that
regional integration is a positive contribution to liberalization and expansion of trade in goods and
services.
3.3.2 MERCOSUR AND LAIA
Negotiations were initiated in 1994 and 1995 with  all the LAIA countries with which the
different members of MERCOSUR had bilateral agreem ents that granted trade preferences for a series
of goods.
As a result of those negotiations, free trade agreements were concluded with Chile and Bolivia
in June 1996 and December 1996, respectively.  Both agreements envisage establishment of a free trade
zone within 10 years, through a tariff liberalizati on programme for products originating in the parties
and through the applicable trade disciplines.
MERCOSUR is holding talks with the other members of LAIA, with a view to multilateralizing
the trade preferences contained in the bilatera l agreements between the different members of
MERCOSUR and the LAIA countries.  In that context, a framework agreement was signed with the
Andean Community in April 1998.  It calls for completion of the first stage of negotiations by
30 September 1998, and negotiation of a free trade agreement to be concluded on 31 December 1999.
3.3.3 MERCOSUR AND THE FTAA
Argentina has always played an active ro le in the FTAA through increasingly close
coordination in MERCOSUR, given the will and need to act as a bloc in the hemispheric negotiations.
MERCOSUR has facilitated the discussion of idea s and proposals through formal presentations on
concrete aspects, such as what to negotiate, wh en, and under what conditions.  Within MERCOSUR and
with respect to the countries of the hemisphere, Ar gentina has maintained a constructive attitude, with a
view to promoting beneficial results for all pa rties under the FTAA.  Negotiations were formally
launched at the Hemispheric Summit in Santiago, Chile (April 1998) and the negotiating groups began
their work in September 1998.
3.3.4 MERCOSUR AND THE EUROPEAN UNION
Relations with the European Union began after the Treaty of Asunción came into effect and an
institutional cooperation agreement was signed on 20 May 1992.
Relations between the two customs unions became closer in the period 1992-1994 and a
working agenda was designed to make progress in liberalizing reciprocal trade.  A frameworkPRESS/TPRB/100
Page 19
MOREagreement on interregional cooperation was signed in December 1995, whose objective is to pave the
way for the creation of an interregional free trade association.  Activities up to the first half of 1998
focussed on preparing a situation table on trade relations in both regional blocs, covering the areas of
goods, services and trade disciplines.
On the multilateral front, Argentina participated actively in the Uruguay Round negotiations,
with the objective of achieving concrete results in terms of effective access to markets and designing anew framework of multilateral rules that would be broader and more highly developed than the one that
applied under GATT.
From the Argentine standpoint, the ultimate purpose of the Uruguay Round was to build a
stronger multilateral trading system with single rules, which would be global, equitable, non-
discriminatory and capable of assuring full particip ation by all the system's Members, with balanced
respect for the variety of trading interests that form part of an indivisible negotiating agenda.
Argentina is firmly convinced that the new structure of the multilateral trading system, as
reflected in the Agreement Establishing the World Trade Organization, will help to bring about general
economic well being.
Adoption of the results of the Uruguay Round, which are included in Argentina's constitution
and rank higher than its domestic laws since they are international treaties , reflects a binding
commitment by our country that guarantees a high level of legal certainty for all the Members of the
system.
Argentina applies its commitments under the Urug uay Round consistently and fully in all the
areas that were negotiated.  Trade policy has automatically moved in this same direction, on the
understanding that a stronger multilateral system will a llow for better participation in the international
economy.
At the same time, stepped up international participation and support for the commitments
stemming from it constitute adequate guarantees for the process of internal transformation.  This, in turn,
has its own momentum which is needed to impr ove the response of the domestic economy to the
demands of international scenarios that are incr easingly open to competition as a result of trade
liberalization and globalization of the economy.
In this context of multilateral liberalization born of the Uruguay Round, Argentina has made a
significant contribution to impr oving market access by binding, in ad valorem  terms, its entire tariff
universe for goods and a significant schedule of conc essions in services, one of the most open schedules
presented at the Uruguay Round negotiations on services.  This contribution will be substantially
enhanced in future, with the entry into effect of  the commitments regarding basic telecommunications,
which cover a broad spectrum of activities in a grow ing market that offers full freedom for foreign
investment.
3.4.2 PROSPECTS
The Second Ministerial Conference held in May 1998 in Geneva marks a significant milestone
in maintaining the impetus and c ontinuity of the multilateral trade liberalization process begun during
the Uruguay Round and ratified at the First Minist erial Conference in Singapore at the end of 1996.
The process, which will continue until the next ex traordinary meeting to be held by the General
Council in September 1998, should lay the groundwork and fine-tune the procedures to enable the Third
Ministerial Conference to quickly launch a broad a nd comprehensive programme of negotiations.  ThisPRESS/TPRB/100
Page 20
MOREprocess should lead steadily to the creati on of new and broader opportunities for production,
employment and trade for all the Members of WTO.
All issues must be addressed, without excepti on.  The inclusion of new negotiating subjects
should be based on two pr imordial conditions:  consensus  and balance .
Consensus  ensures that agreements can actually be complied with, while balance  permits
understandings to be arrived at on the basis of shar ed objectives.  This is counterpoised with sector
negotiations which, by definition, have an intrinsic bias which ends by benefiting a limited number of
Members.  Therefore, isolated and/or hasty treat ment of certain issues, which must necessarily be
included in global negotiations on an equal footing with the rest of the agenda, is not desirable.
Our country believes that the work of revision pr ovided for under existing agreements and in the
decisions adopted in Singapore s hould continue in a constructive vein, but respecting the agendas
already established and without creating advantageous  or artificial priorities for any Member or group of
Members, or with respect to particular issues.  No  one should be excluded or obtain premature sectoral
benefits.  No mandated negotiations should be held hos tage to other decisions, since that would increase
the cost of the rights and obligations already negotiated and agreed upon in the past.
In the field of agriculture , Argentina will continue to promote further liberalization of trade in
multilateral forums, in coordination with trading partners with whom it shares common positions.
Future negotiations on agriculture should begin at the time planned in the agreement and should
not be unnecessarily conflictive, so that the Third Mi nisterial Conference can be held by the end of 1999
without setbacks.
Negotiations should cover the entire agricultural s ector and be constructive;  in other words, no
legitimate issue related to the reform process launched during the Uruguay Round should be excluded.
In other areas for discussion in the multilateral sphere, our country maintains a position open to debateand to formal discussion of items already on the agenda and new items.
With respect to regionalism, much remains to be done to complement and confer consistency on
the interaction between regionalism and the multilate ral trading system.  The linkage between regional
and multilateral rules is a fundamental step in prov iding greater solidity for WTO.  Furthermore, the
World Trade Organization is reinsurance for integrating the different processes under way.
As to sustainable development, trade and the en vironment should mutually reinforce each other.
It is important to begin with instances that bring dual benefits, i.e. the adoption of measures which make
for freer trade while improving the environment.  Th e removal of subsidies which distort international
prices - as in the case of agriculture - is a c oncrete example of turning Principle 16 of the Rio
Declaration into a reality, since "mistaken" prices ma ke it impossible to take decisions that are good for
the environment.  Nonetheless, envi ronmental protection should not be used as an excuse for old or new
types of production subsidies.
Argentina believes that the dispute settlement sy stem is one of the pillars of WTO and that it
generally satisfies the expectations of the Member s.  It only requires opera tional fine-tuning, including
the adjustment of certain provisions through further in terpretation of some of the rules.  The adjustments
would not be complete without improving the repres entativeness and balance of the Secretariat's legal
services through staff that is properly trained in the different legal systems or schools that coexist in the
world.  The process of universalizing WTO, whic h followed on the conclusion of the Uruguay Round
and which is being continually enriched with the accession of new Members, should also be reflected ingreater representation of the different  currents of universal legal thought.PRESS/TPRB/100
Page 21
ENDIt is also important to bolster technical cooperati on in this area, since safeguarding specific trade
interests increasingly requires specialized, up-to-date, and detailed legal knowledge which, in turn,
creates a growing need for qualified human resources.
The establishment of a dispute settlement m echanism based on the principles of fairness,
procedural dispatch, efficiency and mutual acceptance by the States involved in a dispute has been one
of the greatest contributions of the Uruguay Round to the multilateral trading system.
However, its importance as a key tool of the WTO should not be allowed to obscure the basic
fact that in this system, a dispute is a deviation from the proper functioning of the agreed disciplines.
The WTO should look to the future and not base its very existence on the dispute settlement mechanism,
since the future cannot be built on the basis of disputes .  The greater the consensus  achieved and the
greater the progress toward liberalization, the less the need to turn to dispute settlement as a means of
ensuring full adherence to the principl es of the multilateral trading system.
3.4.3 CONCLUSIONS
Looking to the future, Argentina's economic performance is linked to the entrenchment of
international disciplines that assure  progress toward free trade.  The st ructural reforms to the Argentine
economy have made for a very significant increase in the interrelations between our economy and the
rest of the world.  However, foreign trade's share in GDP continues to be small (less than 10 per cent for
exports and imports alike) and foreign investment's  contribution to gross capital formation continues to
be at relatively low levels.  This phenomenon is one more example of the importance and potential ofour economy in the field of foreign trade and investment.
Therefore, and with the goal of attaining the growth and development objectives of the national
economy, it is necessary to improve - in quantity a nd quality - Argentina's integration into the world
economy.  Consequently, our country will continue to play a constructive role in negotiations underWTO, with the firm purpose of ensuring that they take adequate account of national and regional
interests.