US suspends Argentina from trade preference scheme
Online Publication Date: 02 April 2012
Bridges Weekly Trade News Digest | 28.3.2012
US suspends Argentina from trade preference scheme
Trade frictions are on the rise between Washington and Buenos Aires, after
US President Barack Obama announced on Monday that the US would be suspending
Argentina from its Generalised System of Preferences programme - which waives
duties on thousands of imports from developing countries - for failure to pay
arbitration awards in two disputes involving US investors.
The suspension goes into effect in 60 days, according to the White House
The US Generalised System of Preferences (GSP), which was re-authorised and
re-entered into effect in November 2011 following an eleven-month lapse,
provides preferential duty free access for up to 4800 products from 129
designated beneficiary countries and territories.
“[US law] provides that the President shall not designate any country a
beneficiary developing country under the GSP if such a country fails to act in
good faith in enforcing arbitral awards in favour of US-owned companies,” the
White House said in explaining Argentina’s suspension.
The decision follows a 2010 request by two US companies - Azurix and Blue
Ridge Investments - asking that Argentina be suspended from the preferential
trading scheme in light of Buenos Aires’ not paying compensation awarded to
both companies in two separate investment disputes.
The two countries have a bilateral investment treaty that entered into force
in 1994. The treaty, among other provisions, allows investors from one country,
if operating in a foreign country party to that agreement, to refer disputes to
an international arbitrator rather than having to use the foreign country’s own
In 2005, the World Bank’s International Centre for the Settlement of
Investment Disputes (ICSID) requested that Argentina pay US$133.2 million, plus
interest, to CMS Gas Transmission Co. on the grounds that Argentina had taken
action damaging the US company’s investment; that award was later transferred
to another company, Blue Ridge Investments.
The following year, ICSID ordered the South American country to pay Azurix
US$165.2 million in a separate dispute. While Buenos Aires asked that both
awards be annulled, the request was denied by ICSID.
“These are not new issues,” US State Department spokesperson Victoria Nuland
told reporters on Tuesday. “So the White House’s decision yesterday to suspend
Argentina particularly from GSP should not have come as much of a surprise. It
was based on a finding that they were not in compliance with the GSP eligibility
criteria set by the Congress.”
The White House, she continued, “didn’t have a lot of choice in this case,”
adding that while Washington is open to working with Buenos Aires on the
matter, the latter must pay the awards to move things forward.
Argentina is the ninth-highest source of US imports under the preference
scheme, with the US importing US$477 million worth of goods from Argentina in
2011 under the GSP, or 11 percent of total imports from the South American
While the decision is not expected to have much of an economic effect,
Washington’s announcement still drew a strong rebuke from Buenos Aires, with
the foreign ministry releasing a statement lambasting the action. “Argentina
laments the intent to oblige our country to take a decision that would violate
our national laws regarding the payment of awards.”
“These laws were respected by everyone who obtained favourable awards
against the Argentine state, including victims of the dictatorship who received
reparations from the state for human rights violations suffered during the
previous military regime.”
Argentina has argued that the two US companies involved must work with
domestic Argentine courts in order to collect the compensation awards, and that
US authorities never accepted an Argentine proposal to resolve a difference in
interpretation in the ICSID decisions.
The foreign ministry also called the decision to reduce by US$18 million the
benefits that Argentine exporting companies receive “manifestly incomprehensible,”
given the US$18 billion in bilateral goods and services trade.
“It’s not true that we don’t want to pay. We just wish to do so in line with
the norms of our country,” Jorge Argüello, Argentina’s ambassador to the US,
has said repeatedly in recent weeks in anticipation of the White House
South Sudan added to preference scheme
Also on Monday, the White House announced that newly independent South Sudan
would be receiving access to the US preferences programme.
“The GSP programme is an important tool for helping developing countries to
grow their economies through increased trade,” US Trade Representative Ron Kirk
said in a statement.
“The President’s designation of the Republic of South Sudan as a GSP
beneficiary country provides an opportunity for this newly independent nation
to use trade to boost its economic development and, we hope, will encourage it
to continue needed economic reforms,” Kirk added.
As South Sudan was designated as a least developed country under the scheme,
nearly 4,900 tariff lines will be eligible for duty free treatment. The move is
the first step toward South Sudan becoming eligible for the African Growth and
Opportunity Act (AGOA), which builds on the GSP by eliminating US import duties
on nearly all products exported from the 40 sub-Saharan African countries that
currently qualify for the special privileges.
ICTSD reporting; “E.E.U.U. acusó a la
Argentina de ‘no actuar de buena fe’,” LA NACIÓN, 27 March 2012; “Obama
sancionó a la Argentina y hubo una dura respuesta official,” CLARÍN, 27 March
2012; “UPDATE 3-Obama says to suspend trade benefits for Argentina,” 26 March
2012; “US extends trade benefit program to South Sudan,” REUTERS, 27 March
2012.ased in Brussels.