Disputes Roundup: Mexico Withdraws Panel Request against Argentina as Panama Brings Fresh Claim; China-US Row Escalates

19 December 2012

Mexico has dropped its dispute panel request from its WTO complaint against Argentine import policies, after the two countries resolved a separate spat over automobile trade. Buenos Aires is set to face a new WTO challenge, however, after Panama decided to file its own case against Argentina at the global trade arbiter.

Meanwhile, Beijing has been granted a panel to hear its claims in its WTO dispute with Washington over duties on imported Chinese products.

Renegotiation of Argentina-Mexico auto trade pact leads to withdrawal of WTO panel request

Ahead of Monday's meeting of the WTO Dispute Settlement Body (DSB), Mexico asked to drop from the DSB agenda the panel request it announced in late November in a case challenging Argentina's import policies. The decision came after the two countries finalised an auto trade deal, signalling an end to their ongoing disagreement over Mexico's renegotiation earlier this year of its version of a Mexico-Mercosur auto accord with Brazil.

The 2002 automotive trade pact, also known as ACE-55, was suspended by Buenos Aires in June after the Mexican government renegotiated its version of the same accord with Brasilia. According to Argentina, the process was a breach of prescribed procedures involving the Mexico-Mercosur pact. (See Bridges Weekly, 11 July 2012) At the time, Mexico had refused to enter into a similar renegotiation with Argentina, prompting Buenos Aires' decision to withdraw from the deal.

Under the newly completed auto agreement, both sides will gradually increase the duty-free imports of light vehicles from the other country with the goal of reaching free trade in this area in March of 2015. The new deal, explained Argentine Minister of Industry Débora Giorgi, "should restart the flow of trade between the two countries." As part of the agreement, Argentina has confirmed it will be repealing its suspension of the Economic Complementation Agreement.

Giorgi praised Mexico's decision to withdraw its panel request ahead of Monday's meeting. "We have exchanged tribunals and legal cases for work, more production, and the well-being of our people," the Argentine minister said.

The WTO case, brought by Mexico in August (DS446), is similar to challenges also tabled by the EU, US, and Japan to various Argentine import controls. These measures, the complainants argue, unfairly discriminate between imported and domestic goods.

The other parties, however, are proceeding with their claims (DS438, DS444, and DS445), confirming at Monday's DSB meeting that they are seeking a panel to hear the case. (See Bridges Weekly, 12 December 2012)

The Argentine rules at issue include a requirement - in force since February - that government approval be secured before importers may bring goods into Argentina. Other measures at issue include, among others, the requirement that import licences be obtained for certain goods entering the country, and that Argentine importers balance imports with exports. Critics report that import licences are frequently refused by Argentine agencies, and that approval is often delayed well beyond the 60-day timetable applied by WTO rules on the issue of non-automatic import licences.

Buenos Aires rejected all the three panel requests, arguing that both the pre-approval requirement and non-automatic licenses are in line with WTO rules. In its statement, Argentina also pointed to the increase in its bilateral trade with each of the complainants, and its growth in total imports during the 2003-2011 period - arguing that, with such clear increases, the South American country "cannot be singled out as [one] that restricts trade."

Should the requests be made a second time by the complainants, however, a panel will automatically be established to hear the three cases.

Meanwhile, Argentina's own panel requests in cases against the EU regarding its member state Spain's biodiesel policies, and against the US regarding restrictions of beef and lemon imports, were also rejected at the DSB meeting (DS443,DS447, and DS448). Should Argentina table second panel requests in these three challenges, separate panels will automatically be established to hear those cases.

Panama lodges challenge against Argentina

In a separate development, Panama confirmed last week that it would be launching its own WTO challenge to Argentina's policies regarding goods and services trade. Details of the claim were unavailable as Bridges went to press on Wednesday evening.

Argentina and Panama will now have 60 days to resolve matters through consultations, after which time Panama can ask for a WTO panel to be established to hear the case.

Panel established in US-China spat over anti-dumping and anti-subsidy duties

China is also moving forward with its challenge to countervailing - also known as "anti-subsidy" - measures and anti-dumping duties applied by US authorities to Chinese imports (DS449), after tabling its second request for a WTO panel to hear the case.

Reiterating its concerns before the DSB, Beijing representatives explained that Washington had launched over 30 countervailing duty investigations against Chinese products since 2006, affecting more than US$7.3 billion worth of products. (See Bridges Weekly, 19 September 2012)

China's claim focuses on underlying US legislation which forms the basis for the disputed US trade remedy investigations. In particular, Beijing cites a law passed by the US Congress back in March which preserved the Commerce Department's authority to impose countervailing duties on subsidised goods from non-market economies (NMEs). (See Bridges Weekly, 7 March 2012) The law had become necessary after the US Court of Appeals for the Federal Circuit had denied Commerce the ability to impose countervailing duties against NMEs.

Beijing argues that the US law, which allows for the retrospective application of anti-subsidy duties on products from NMEs, does not properly guard against the prospect of "double remedies" - the application of anti-dumping and countervailing duties on the same products for essentially a single violation. This, Beijing says, goes against WTO rules on transparency and due process. The law is also facing a constitutional challenge back in the US.

"The Government of China and Chinese exporters have consistently maintained that these investigations were unlawful because the US countervailing duties do not apply to countries that the United States designates as non-market economies," China said in a statement to the DSB.

The US, for its part, defended the measure as "within [its] rights under the WTO Agreement to levy countervailing duties to offset injurious subsidies bestowed by another member on the manufacture, production, or export of goods."

ICTSD reporting; "Mexico to drop WTO suit after auto pact with Argentina," REUTERS, 14 December 2012; "Ministra argentina anuncia retiro de demanda por parte de México," UPI ESPAÑOL, 14 December 2012.

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