Argentina's trade benefits suspended

By Sarah Gonzalez

© Copyright Agri-Pulse Communications, Inc.

WASHINGTON, March 27, 2012-President Obama suspended Argentina from the U.S. Generalized System of Preferences (GSP) program, which allows certain goods from developing countries to be imported duty-free. The suspension, announced Monday, is effective 60 days after publication in the Federal Register and is part of an effort to pressure Argentina to pay more than $300 million in compensation awards to American investors.

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Obama decided to use his authority under the Trade Act of 1974 to suspend the South American country's trade benefits “because it has not acted in good faith in enforcing arbitral awards in favor of U.S. owned companies.”

Argentina owes arbitral awards to CMS Gas Transmission Co. in Michigan and Azuriz in Texas. In 2005, The World Bank's International Centre for the Settlement of Investment Disputes (ICSID) ordered Argentina to pay CMS Gas Transmission Co. more than $133million, plus interest. In 2006, ICSID ordered the country to pay Azurix more than $165 million, plus interest, in a separate dispute.

 “The suspension of Argentina's GSP eligibility is based on a finding that the country is not in compliance with the statutory GSP eligibility criteria set by Congress,” said U.S. Trade Representative Ron Kirk. “Specifically, the Argentine government has failed to pay two longstanding arbitral awards in favor of U.S. companies.”

“We urge the Government of Argentina to pay the subject awards,” he continued.  “This would allow us to consider reinstating Argentina's GSP eligibility and promote the growth of a mutually beneficial U.S.-Argentina trade and investment relationship.”

Argentine officials say the loss of GSP status will have a negligible effect on imports, covering some $500 million in exports that will lose the tariff reduction benefit of some $30 million, and representing less than one-hundredth of one percent of the nation's total exports.

The announcement coincides with meetings in Washington with Argentine trade officials who are seeking to resolve a trade deficit with the United States totaling more than $4 billion. The bilateral deficit reportedly grew some 53% in 2011 alone.

Some U.S. associations allege trade restrictions imposed by Buenos Aires. And while Argentine officials say the deficit suggests the restrictions are not hurting imports, they intend to keep the restrictions in place with any country that holds a trade surplus with Argentina until that trade balance evens out.

The U.S. waived more than $17 million in duties on goods from Argentina last year. The nation's top exports under the program included grape wine, prepared or preserved beef, sugar confections and olive oil. These goods totaled $477 million in 2011, which is about 11 percent of total imports from Argentina and makes the country the ninth-ranking source of imports under GSP that year.

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