Trading Complaints: Argentina faces Spain and the World

Ever since Argentina expelled Spain’s Repsol from developing the country’s oil fields, trade relations between the two nations have deteriorated.  Spain has since retaliated by denying many Argentine imports, most notably biodiesel, which composes 20-30 percent of all Argentine trade with Spain.

In response to the Spanish announcement – meant to protect the local production of alternative energy – Argentina filed a complaint with the WTO.  Argentina’s Foreign Ministry contested the Spanish decision as “an attempt to stop developing countries gaining more control of global value chains and evolving beyond their role as suppliers of raw materials.”  The government lamented the potential loss of $1 billion per year in export earnings, lambasting the Spanish policy as “protectionist.”

While the new barriers do block developing countries such as Argentina and Indonesia from selling their biodiesel to Spain, the intention was not to suppress development.  When certain countries conduct poor trade relations with others, they are liable to retaliation.  Back in April, the Argentine Government seized all 57 percent of Spanish Oil Firm Repsol’s stake in the development of oil resources.  Nationalization, which replaced Repsol with state-owned YPF, was made without proper compensation.  Moreover, Argentina has repeatedly increased tariffs and raised import barriers over the last decade.

This year alone, Argentina has been hit by a triple complaint at the WTO, joining China, which faces a similar hat trick maneuver.  The EU, Japan, and the US have all cried foul play to the WTO.  They criticize Latin America’s No. 3 economy of a policy of “trade balancing,” which requires importers to purchase equivalently valued Argentine goods to make up the difference in trade.  Argentina is expected to post a $674 million surplus for July, on resilient farm exports, despite an ongoing drought.

The triple complaint reflects a larger trend of trade disputes arising in 2012.  So far, the WTO received 18 complaints this year, more than double the eight complaints filed over the previous year.  The spike in disagreements reflects global uncertainty in the face of continued Euro Zone crises and a potential slowdown in Asia.  Countries have leaned towards protectionism to combat rising and persistently high unemployment.

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