availability of inputs at prices below those that would prevail in the absence of taxes and other export restrictions. Exports of manufactures have also been encouraged through a number of tax incentives schemes such as special customs zones and the free zones regime, with the latter permitting production only for export<sup>4</sup> .

# **2. RECENT TRADE PATTERNS**

**Since 2003, Argentina has experienced an impressive growth in exports** . After almost a decade of negative trade balance, the 2002 drastic currency devaluation had an important role in boosting exports and strengthening the trade balance (Figure 4). However, the boom has taken several years to materialize. Export volumes have grown considerably and have provided a hefty trade surplus. Part of this recovery is attributable to excellent terms of trade brought by the peso’s undervaluation and the rising commodity prices of Argentina’s main exports. However, even though exports have visibly increased in value over the last years, their share in world exports has remained quite stable, around 0.4 percent in the 2002-2007 period

.

**Figure 4. Trends in Trade Flows**

<!-- Start of picture text --> 60,000,000 0.6<br>Real Effective Exchange Rate (Dec 2001=100)<br>50,000,000 0.5 300<br>40,000,000 0.4 250<br>30,000,000 0.3 200<br>20,000,000 0.2<br>150<br>10,000,000 0.1<br>100<br>0 0.0<br>50<br>Share in WLD Exp Share in WLD Imp<br>Gross Exports Gross Imports<br>US$ thousands<br>Share in world Exp/Imp<br>1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007<br>Jan-91 Jan-92 Jan-93 Jan-94 Jan-95 Jan-96 Jan-97 Jan-98 Jan-99 Jan-00 Jan-01 Jan-02 Jan-03 Jan-04 Jan-05 Jan-06 Jan-07 Jan-08<br><!-- End of picture text --> _Source_ : Comtrade 2008 (Left graph) and Banco Central de la República Argentina (right graph).

**Some sectors have contributed more than others to export growth, with primary products and agro-industry registering the most noticeable export growth rates** (Figure 5). Export growth has been led by growth in quantity rather than prices, a fact that has been overturned in the 2006-2007 periods, when prices have clearly led exports growth (top graph). The agriculture manufacturing sector has experienced a decrease in the quantity of export, but a tremendously steep increase in prices, which has led the increase in export growth. On the other hand, industrial manufacturing has followed the opposite pattern: the increase in export growth is clearly attributable to an increase in quantity, as prices have experienced a downward trend since 2004.

**The bulk of industrial manufacturing exports (notably vehicles) go to MERCOSUR, mainly Brazil** . This explains the unsatisfactory performance of manufacturing exports between the 1990s and 2002, due to slow growth in Brazil. Afterwards, when the Brazilian economy picked up in 2004, manufacturing exports grew more rapidly compared to other categories of exports. Fuel exports decreased since 2004, with a negative growth rate in the quantity of exports and a decreasing growth rate in prices. In 2006 the trend was reversed by a sudden increase in prices and further decrease in

> 4 WTO Trade Policy Review: Secretariat Report.

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