Ref. Ares(2014)69302-14/01/2014 In the World Trade Organization ARGENTINA MEASURES AFFECTING THE IMPORTATION OF GOODS 's Responses to the Questions from the Panel Geneva, 14 January 2014
TABLE OF CONTENTS QUESTION 43... 1 QUESTION 46... 2 QUESTION 47... 2 QUESTION 48... 3 QUESTION 49... 3 QUESTION 50... 4 QUESTION 51... 4 QUESTION 52... 5 QUESTION 53... 6 QUESTION 54... 7 QUESTION 56... 8 QUESTION 94... 8 QUESTION 102... 9 QUESTION 120... 10 QUESTION 126... 11 QUESTION 127... 12 -i-
TABLE OF CASES Short Title EC Fasteners (China) Full Case Title and Citation Appellate Body Report, European Communities Definitive Anti-Dumping Measures on Certain Iron or Steel Fasteners from China, WT/DS397/AB/R, adopted 28 July 2011, DSR 2011:VII, p. 3995 -ii-
Question 43 (To the ) In their respective panel requests, the three complainants referred to a requirement allegedly imposed by the Argentine Government on economic operators to "limit the volume of imports and/or reduce their price". In response to Panel question No. 12, the United States and Japan have explained that the "reduction of prices" in their panel requests refers to the unit price of imports or the total value of imports, and not to the price at which imported products are sold in the Argentine domestic market. In contrast, in its first written submission (paragraphs 9, 19, 69, 176-182 and 325), the has referred to a commitment "to freeze or reduce prices of products sold domestically" as a condition to import goods: the "price control" requirement. Can the explain how the "price control" requirement described in its first written submission corresponds to the measures identified in the 's panel request. 1. Under the heading "Restrictive Trade Related Requirements" of Section 3 of its Panel Request, the EU identified several types of requirements. One of them is described as limiting the volume of imports and/or reducing their price. The "price control requirement" in the EU's first written submission is captured by the terms "reduce their price", i.e. the price of imports. 2. Of note, the EU Panel Request employs the term "imports". When read together with the EU's first written submission, it becomes evident that such a term refers to products that are imported, i.e. imported products. 1 Indeed, as explained in the EU's first written submission, Argentina imposes a variety of requirements that prohibit or restrict "the importation of products and/or the use of imported products in Argentina". 2 Among those, through the price control requirement, Argentina requires to freeze or reduce the prices of products sold locally, including imported products, as a condition to import products into Argentina. The EU brings its claims against the imposition of such a requirement with respect to imported products only. 3. As explained in Section 3.3.3 of the EU's first written submission, the evidence shows that the Argentine Government requires economic operators to freeze or reduce the prices of products sold in Argentina in order to continue importing products. In particular, the EU has provided examples where the Argentine 1 2 See e.g. Appellate Body Report, EC Fasteners, para. 598 ("It may be possible in some circumstances to refer to the initial written submissions of the parties to clarify the meaning of the terms used in a panel request"). See e.g. EU's first written submission, para. 325. -1-
Government has imposed such a requirement on supermarkets and premium clothing brands. In both cases, economic operators are committed to freeze or reduce the prices of products sold in Argentina, including imported products, in order to continue importing products. The price control requirement aims at controlling inflation as well as alleviating trade deficits, and is inconsistent with Article XI:1 of the GATT 1994. Question 46 (To the, United States and Japan) Can the complainants identify the evidence on the record which in their view demonstrates that a requirement to make or increase investments in Argentina (including in production facilities) as a condition to import goods into Argentina operates as a separate requirement (i.e., not in combination with other trade-related requirements). 4. At the outset, the EU would like to note the following with respect to Questions 46, 47 and 48. Usually these RTR requirements (i.e., the requirement to invest in Argentina as well as to refrain from repatriating profits) are imposed together with other RTR requirements (such as the one-to-one or the import substitution requirement), or as an alternative to them. For example, a company must either export a certain value or invest the same value. 3 The EU would like to stress that whether these requirements are imposed separately or in combination with other requirements is irrelevant from a WTO perspective because each of them is WTO inconsistent on its own, as explained in the EU's first written submission. 4 5. That being said, the EU refers to para. 234 of the EU's first written submission, Question 47 and in particular to footnotes 342, 349, 350, 358, 359, 365 and 367 where the investment requirement appears to have been imposed as a separate requirement on specific companies. (To the, the United States and Japan) Can the complainants identify the evidence on the record which in their view demonstrates that a requirement to refrain from repatriating profits from Argentina to another country as a condition to import 3 4 See e.g. the alternative to make an irrevocable capital contribution equivalent to the value of imported products that cannot be compensated with exported products in the automotive sector (see EU's first written submission, paras. 93, 94, 107, 109, 111, 112, and 156). See EU's first written submission, Sections 4.2.2.3 4.2.2.7. -2-
goods into Argentina operates as a separate requirement (i.e., not in combination with other trade-related requirements). 6. See the EU's response to Question 46. In particular, the EU would like to refer to the EU's first written submission, footnotes 360 and 366. Question 48 (To the, the United States and Japan) Can the complainants identify the evidence on the record which in their view demonstrates that, other than in the motorcycle sector, a requirement to limit the volume of imports as a condition to import goods into Argentina operates as a separate requirement (i.e., not in combination with other traderelated requirements). 7. See the EU's response to Question 46. The EU would like to note that the import reduction requirement was also imposed as a separate requirement for a period of time with respect to supermarkets and the automotive sector. Then, Argentina started adding more RTR requirements in these sectors, fundamentally to alleviate trade deficits. 5 8. The EU recalls again that Argentina does not impose a specific RTR requirement or a combination of them on a sector basis. This is not the EU's contention. Rather, the EU maintains that Argentina chooses the more suitable RTR requirement or a combination of several of them on a company basis, and sometimes on a sectorial basis if all economic operators are in a similar position and the imposition of the same requirements are needed to achieve Argentina's objectives of eliminating trade deficits and achieving import substitution. 6 Question 49 (To the, the United States and Japan) Can the complainants further explain how in their view the import reduction requirement allegedly imposed by the Argentine Government on supermarkets acts as a condition to have the right to import other products into Argentina. Please refer to the relevant evidence on the record. 9. As described by the EU in its first written submission, paras. 163 168, the Secretariat for Domestic Trade has ordered supermarkets not to import products for which there is an equivalent domestic product. Failure to do so can have the 5 6 See EU's first written submission, paras. 163 169. See e.g. EU's first written submission, para. 73. -3-
consequence that all imports, of any product without distinction, may be blocked. There may be also other negative consequences. 7 10. Thus, for instance, supermarkets must reduce imports of Italian or Spanish ham and sell Argentine "palmitos" instead. 8 In other cases, reductions lead to a lack of supply of basic products. 9 Question 50 (To the and Japan) In their respective first written submissions, the (paragraphs 9, 69, 183, 219, 325 and 361) and Japan (paragraphs 45 and 209) have argued that failure to comply with a requirement to incorporate local content into domestically produced goods (the import substitution requirement) can result in economic operators being unable to do business in Argentina. Can the and Japan identify the evidence on the record supporting this assertion. 11. As explained in the EU's first written submission (e.g. para. 77), the Secretariat for Domestic Trade has used or threatened to use other means, affecting the capabilities of operators to do business in Argentina, in order to enforce the RTR requirements. These include e.g. denial of tax benefits, denial of soft loans, unwarranted tax inspections, and threats of "taking over" or "freezing" the operations of a company. 10 12. The EU also refers the Panel to Section 3.3.4 of the EU's first written submission. Quite tellingly, failure to submit an import substitution plan in the mining sector can lead to the imposition of fines; 11 or the failure to reach a particular local content level can lead to the absence of finance to harvesters or tractors. 12 Needless to say, all those actions affect the competitive conditions of operators in Argentina, therefore affecting their capabilities of doing business in Argentina. Question 51 (To the, the United States and Japan) For each of the alleged restrictive trade-related requirements (RTRRs), can the complainants clarify when the specific RTRR was first imposed on economic operators in Argentina. Please indicate the evidence on the record supporting your assertion. 7 8 9 10 11 12 See EU's Responses to Questions 9 and 11. See EU's first written submission, footnote 225. See EU's second written submission, footnote 119. See also EU's Response to Question 9 and 11. EU's first written submission, paras. 194 197. EU's first written submission, para. 217. -4-
13. The RTR requirements as an overarching measure already started back in 2009, when the one-to one requirement was first applied. 13 Since then, the Argentine government has progressively added more RTR requirements. The examples of each requirement contained in the EU's first written submission are generally organised in chronological order. Thus, evidence of the first imposition of the import reduction requirement dates back to May 2010. 14 Evidence of the first imposition of the price control requirement dates back to early 2012. 15 Evidence of the first imposition of the import substitution requirement can already be found in the PEI 2020, and thus started in the course of 2011. 16 Finally, evidence of the first imposition of the investment requirement dates back to early 2011. 17 14. Thus, as of 2009 the Argentine Government is consistently imposing a set of requirements on economic operators in order to achieve its objectives of eliminating trade deficits and achieving import substitution. Question 52 (To the, the United States and Japan) With regard to the "price control" requirement, the complainants state that certain clothing companies such as Nike, Adidas, Lacoste, Zara, Falabella and Levi's agreed with the Argentine Government to halt price rises in order to continue importing goods into Argentina (see, 's first written submission, para. 181; United States' first written submission, para. 85; Japan's first written submission, para. 91; exhibits JE-174, JE-260, JE-437/EU-123 and JE- 515/EU-201). Can the complainants clarify whether this halt in price rises refers to a freeze in the total value of imports or to a freeze in the price at which products are sold in the Argentine market. 15. The EU understanding is that the price control requirement in those cases refers to the sales prices of the companies concerned in Argentina. In other words, those companies agreed to freeze or reduce the sales prices of their products in Argentina as a condition to import products. In turn, this may have had an impact on the price at which the products in question were purchased from foreign suppliers. In any event, the EU relies on the text of the press articles recounting the facts with respect to these companies, as found in EU's first written submission, 13 14 15 16 17 EU's first written submission, para. 85 ("[A]lthough it is uncertain when the Argentine Government first imposed it, the one-to-one requirement may be found as far back as June 2009"). EU's first written submission, para. 163. EU's first written submission, para. 178. EU's first written submission, para. 189. EU's first written submission, para. 234. -5-
footnote 246. They all explain that the companies concerned agreed to freeze or reduce their sale prices in Argentina in order to continue importing (and thus selling) their products in Argentina. Question 53 (To the and Japan) In their first written submissions, the European Union and Japan refer to three alternative ways to comply with the export commitments arising from the requirement to export a certain value of goods from Argentina related to the value of imports the one-to-one requirement ('s first written submission, para. 87; Japan's first written submission, para. 44; exhibit JE-379/EU-65). Please comment on the report contained in exhibit JE-755, which identifies five possible ways to comply with export commitments within the framework of the one-to-one requirement. 16. The EU does not see any contradiction between the source cited by the EU in its first written submission and the document adduced as Exhibit JE-755. Indeed, Exhibit JE-755 refers to the three mechanisms to comply with the one-to-one requirement cited in para. 87 of the EU's first written submission. In addition, Exhibit JE-755 mentions two alternatives to exporting products: using local products or buying capital from abroad. 17. In any event, importantly, the mechanisms mentioned in para. 87 of the EU's first written submission are manners found by economic operators in Argentina to deal with the one-to-one requirement imposed by the Argentine Government, i.e. : (i) exportation "por cuenta y orden", that is, when the importer concludes a sales contract with a buyer in a third country and uses an exporter as an intermediary; (ii) the importer purchases Argentine products and exports them directly; and (iii) the importer concludes an agreement with an exporter, such that all the exporter's usual transactions are to be computed as the importer's. 18. As explained by the EU, there may be other ways through which operators in Argentina deal with the one-to-one requirement to the satisfaction of the Argentine Government. For instance, the is aware that, as a variation of the one-to-one requirement, the Argentine Government has also required importers to provide exporters of domestic products with foreign customers. 18 This is another manner to increase exports from Argentina. 18 EU's first written submission, footnote 105. -6-
Question 54 (To the, the United States and Japan) According to some of the evidence submitted with the complainants' second written submissions (exhibits JE-758 and JE- 764), complying with the requirement to export a certain value of goods from Argentina related to the value of imports (the one-to-one requirement) does not necessarily guarantee the approval of a DJAI. Can the complainants provide comments on how these assertions are compatible with the argument that complying with the one-to-one requirement is necessary in order to import goods into Argentina. If the one-to-one requirement is a condition necessary but not sufficient, please explain what other conditions must be met for economic operators to be allowed to import goods into Argentina. 19. The evidence provided in those exhibits shows that sometimes not even compliance with the agreed export and import amounts in a given year can guarantee that the Argentine Government will permit imports to enter into Argentina. This adds to the general lack of stability and predictability that economic operators currently suffer in Argentina. Indeed, as reproduced in those exhibits, there may be cases where the Argentine Government has changed the level of imports allowed for particular operators in the course of a year, in view of market developments. This does not imply that the one-to-one requirement is a condition necessary but not sufficient in all cases, i.e. with respect to all economic operators. To recall, with respect to certain operators the one-to-one requirement may be accompanied by other RTR requirements. In this respect, compliance with the one-to-one requirement will not be sufficient to guarantee the importation. However, with respect to other operators, the one-to-one requirement is the only condition and, thus, generally, would be a condition necessary and sufficient to import. 20. Thus, when the one-to-one requirement is imposed on an economic operator as a single requirement, compliance with such a requirement is necessary in order to import products into Argentina. In some cases, with respect to specific operators, such compliance has not proven to be sufficient to ensure importation, since the Argentine Government has imposed further requirements or, simply, in view of market developments, has decided to limit imports, often by blocking imports through the DJAI system. Question 56-7-
(To the, the United States and Japan) With reference to the proposal submitted by Unión de la Industria Cárnica Argentina (UNICA), Cámara Argentina de la Industria de Chacinados y Afines (CAICHA), Asociación Argentina de Productores de Porcinos (AAPP) and the Consejo Argentino de Productores (CAP), dated 7 May 2012 (exhibit JE-441/EU-127), can the complainants indicate whether: (a) the proposal was approved by the Secretary of Domestic Trade; and, (b) the pork products and inputs referred to in paragraph 5 were eventually released. Please indicate the evidence that supports your response and the dates in which these events took place. 21. The EU considers that Argentina is in a better position to answer this question, and looks forward to commenting on Argentina's response to Question 55. To the best knowledge of the EU, there is no public information as to what happened to those products. In view of the consistent pattern evidenced with respect to other sectors, the EU assumes that the proposal was agreed by the Secretary for Domestic Trade, and that both the company and the Argentine Government honoured their commitments. Otherwise, it would have been likely to find more evidence in public sources complaining about the situation of imports with respect to the pork association. 22. In any event, for the sake of clarity, the EU notes that there is no need for validation or approval from the Government of Argentina of the commitments sent by economic operators. Generally, letters containing such commitments are the result of several exchanges between the economic operators and the Government of Argentina (mainly the Secretariat for Domestic Trade). The Government of Argentina relies on those commitments as the guarantee that the economic operators concerned is willing to comply with certain RTR requirements. Question 94 (To the, the United States and Japan) According to some of the evidence on the record (exhibits JE-1, JE-82, JE-86, JE-95 and JE-398/EU-84), the Argentine Government requires economic operators to compensate imports with exports made by the same economic operator or by any other company of the same group, not necessarily operating in the same sector. Please explain how this is consistent with the statements (see exhibit JE-379/EU-65) that economic operators can comply with the one-to-one requirement by, inter alia, using an exporter as an intermediary to sell products to a buyer in a third country (exportación por cuenta y orden) or by concluding an agreement with an exporter to consider the exporter's transactions as its own transactions. 23. As explained before in Question 53, the EU has referred to ways in which economic operators have dealt with the one-to-one requirement, i.e. by, inter alia, -8-
using an exporter as an intermediary to sell products to a buyer in a third country ("exportación por cuenta y orden") or by concluding an agreement with an exporter to consider the exporter's transactions as its own transactions. These ways have been accepted by the Argentine Government as a manner to comply with the one-to-one requirement, and there may well be others, such as to provide exporters of domestic products with foreign customers. 24. This is consistent with the statement that the Argentine Government requires economic operators to compensate imports with exports made by the same economic operator or by any other company of the same group, not necessarily operating in the same sector. These are ways which have been accepted by the Argentine Government to comply with the one-to-one requirement. 25. In any event, and importantly, through the one-to-one requirement Argentina requires to export a certain value of goods from Argentina related to the value of imports as a condition to import products into Argentina. This is the core feature of the requirement in question. How a company in particular complies with such a requirement (such as compensating imports with exports made by the same economic operator, or by any other company of the same group, not necessarily operating in the same sector, or using an exporter as an intermediary to sell products to a buyer in a third country, or by concluding an agreement with an exporter to consider the exporter's transactions as its own transactions) is not part of the requirement per se. In other words, one has to distinguish between the requirement and how companies comply with such a requirement. Question 102 (To the, the United States, Japan and Argentina) According to some of the evidence on the record, the Argentine Secretary of Domestic Trade declared that import controls would not focus on small and medium enterprises (exhibits JE-3, JE-8, JE-139 and JE-348/EU-34). However, more recent exhibits on the record (exhibits JE- 765, JE-787/EU-437 and JE-791/EU-441) suggest that small and medium enterprises may be the operators that are most affected by import restrictions. According to these exhibits, small and medium enterprises have problems to get their DJAIs approved. Can the parties comment on this point. 26. First, the notes that the Exhibits cited in this Question confirm that Argentina imposes the DJAI requirement on the importation of all products. -9-
For example, Exhibit JE-765 states: "las trabas no se limitan a un producto en particular sino que son en general para todos los productos". This shows that Argentina never allowed, and still does not allow, small and medium enterprises to "escape" from the DJAI restriction. It applied and continues to apply the DJAI on all goods, irrespective of the size of the trading companies involved. 27. Second, the statements reproduced in the cited Exhibits indicate that the DJAI requirement has increased the costs of doing business in Argentina, has created unjustified uncertainties among traders and has affected the traders' business plans. These are factual elements that support the conclusion that the DJAI requirement is inconsistent with Article XI:1 of the GATT. Question 120 (To the ) In its opening oral statement (paragraph 42), Argentina has commented on a reference in the Plan 2020 to non-automatic import licences, that "nonautomatic import licences are not at issue in this dispute and have no bearing on the existence of the alleged measure that is the subject of [the] complainants' challenge". Can the comment. 28. Paragraph 42 of Argentina's opening oral statement refers to paragraphs 118 and 137 of the 's Second Written Submission. In those paragraphs of its Second Written Submission, the discussed certain examples of official statements of Argentina, which support the 's claim that the RTRRs constitute an "overarching" measure. 29. One of these examples was Argentina's description of the instruments through which it imposed limitations on imports at the time the "Plan 2020" was issued. At the time the "Plan 2020" was issued (i.e., September 2011), Argentina still had in place a system of sector-specific non-automatic import licences. As of January 1, 2012, Argentina introduced a generalised system of non-automatic import licenses, applicable to all products and all traders, in the form of the DJAI requirement. The DJAI replaced the system of sector-specific non-automatic import licences; the latter were abolished a few hours before the establishment of this Panel. 30. Therefore, Argentina's discussion in the text of "Plan 2020" of the instruments, through which Argentina limits imports in the context of the RTRRs, is still -10-
relevant for the current proceedings. Argentina continues to restrict imports through the DJAI requirement, which constitutes a generalised non-automatic import licensing system applicable to all products and all traders. And Argentina's official statements in "Plan 2020" confirm that the RTRRs constitute an overarching measure. Question 126 (To the, the United States and Japan) In its second written submission (paragraphs 154-158), Argentina has referred to alleged shortcomings of the surveys submitted by the complainants (exhibits JE-56, JE-297, JE-312, JE-719/EU-405, JE- 726/EU-412, JE-750 and JE-754). Please provide your comments on Argentina's statements and your views on the probative value of such surveys. 31. The considers that it has already dealt with these issues in paragraphs 26 to 36 of the 's Opening Statement during the Second Hearing. 32. Paragraphs 154 to 158 of Argentina's second written submission are preceded by paragraph 151 of Argentina's second written submission, where Argentina asserts, among others, that a measure may fall within the prohibition of Article XI:1 of the GATT only where it is "quantifiable". Argentina goes on to assert that a complaining party must "adduce evidence to prove that the introduction of the DJAI procedure has resulted in a quantifiable restriction on imports into Argentina". In paragraph 153 of its second written submission, Argentina asserts that "not a single piece of evidence put forward by the complainants purports to demonstrate that the introduction of the DJAI procedure has had any quantifiable impact upon the importation of goods into Argentina". And, in paragraph 154 of its second written submission, Argentina states that the "principal evidence relied upon by the complainants" are the two surveys conducted by the US Chamber of Commerce and the Government of Japan. 33. This shows that Argentina's discussion of the alleged "shortcomings" of these surveys in paragraphs 154 to 158 of its second written submission, is based on two assumptions: First, that a claim under Article XI:1 of the GATT cannot be based only on the measure's design, structure and characteristics; and, second, that a -11-
complaining party has the burden of showing that the challenged measure is "quantifiable". 34. The has already shown that Argentina's legal theory is wrong. We refer the Panel to paragraphs 43 to 53 of the 's Second Written Submission, to paragraphs 26 to 36 of the 's Opening Statement in the Second Hearing, as well as to paragraphs 7 to 11 of the 's Closing Statement in the Second Hearing. The has established that a complaining party raising a claim under Article XI:1 of the GATT does not need to show that the challenged measure has had "trade effects". Therefore, in the present case, the and the other complainants do not need to provide evidence "quantifying" the "effects" of the DJAI requirement on Argentina's trade balance. 35. Consequently, Argentina's discussion of the alleged "shortcomings" of the two surveys in paragraphs 154 to 158 of its second written submission is not relevant for the current proceedings. 36. In any event and for reasons of completeness, the endorses the responses provided by the United States and Japan in Question 126. Question 127 (To the, the United States, Japan and Argentina) Please provide your views on the responses received from the WCO Secretariat on 2 December 2013, in respect of the consultation made by the Panel to clarify certain features of the WCO SAFE Framework. 37. First, the refers the Panel to paragraphs 57 to 61 of its Second Written Submission, where the has explained the reasons for which Argentina's reliance on the WCO SAFE Framework is irrelevant for the present dispute. An important legal reason for this irrelevance is that Argentina has not raised any defence under Article XX(d) of the GATT. As a result, any potential similarity between the DJAI and any WCO standards and suggestions would be irrelevant for the present case: such potential similarity (even if it existed) would fail to bring the DJAI requirement outside the scope of Article XI:1 of the GATT. -12-
38. The notes that Argentina has, in essence, acknowledged this point in Argentina's second written submission and in the written communication that it addressed to the Panel in relation to the Panel's questions to the WCO Secretariat (see paragraph 50 of the 's Opening Statement in the Second Hearing). 39. Second, on the substance of the responses received from the WCO Secretariat, the refers the Panel to paragraphs 52, 53 and 66 of the European Union's Opening Statement in the Second Hearing. -13-