The Political-Economy of Antidumping and Safeguards in Argentina

1. The Political-Economy of Antidumping and Safeguards in Argentina World Bank December 6, 2005

2. Order of Presentation • 1989-1994 Trade liberalization • Macroeconomic background. • Legislative reforms. • Institutional reforms. • Effectiviness of liberal AD provisions. • Lessons.

3. Trade Liberalization Third attempt. One component of an ambitious reform program. Measures: - 70% reduction in average mfn tariffs. - Elimination of most NTBs. - Elimination for intra-Mercosur trade barriers. - Significat reduction of export taxes. - Elimination of export subsidies for manufactured exports.

4. Response to Trade Liberalization and other Structural Reforms

5. Macroeconomic BackgroundGDP Growth Rate From 1995 to 2003, unemployment remained above 15%.

6. Macroeconomic BackgroundConvertibility and Currency Overvaluation

7. Early Forecasts • Under accelerated import growth, demand for safeguards and AD protection would increase. • Intra-regional trade liberalization would add to the pressures for import relief. An effective policy of containing protectionist pressures required that the new AD legislation be supportive of mantaining an open economy. Policy reform should also ensure that the new instruments would not be hijacked by protectionist interests.

8. Reforming Legislation Steps: • Initially adhering to the GATT AD and CVD Codes and later, implementing the WTO agreements. • Administrative regulations: Government vs. Industrialists positions. • The outcome is a legislation that signals preference for: • Lesser duty. • Market prices. • Measure that minimize uncertainties to exporters. • Short duration. • Prospective measures. • National interest clause.

9. Institutional Reform • Lessons from injury and dumping investigations in final determinations. • Salient characteristics of the Comisión Nacional de Comercio Exterior (CNCE): • Selection of technical staff. • Decision-making mechanism (President and four Commissionares). • Binding decisions. • The issue of institutional independence.

10. Outcomes

11. Outcome of InvestigationsInjury Determinations Under recession and currency overvaluation the value of a technical approach in AD investigations was eroded. In 2001 at the peak of overvaluation and recession, tariffs on consumer goods were raised to the WTO bound levels.

12. Outcome of InvestigationsTarget Industries and Countries Source: Author’s elaboration based on Annex 1. Note: Brazil and China accounted for 39% of AD investigations.

13. Lessons • Liberalization and contingent protection: unlike past experiences, the latest liberalization program has been only partially reversed by AD and safeguard measures. • Value of WTO regulations and bifurcated mechanism: enhance transparency to the process of adopting protection measures. • Liberal AD regulations: While the economy was growing, they reduced the number and impact of protectionist measures.

14. Lessons • Political determination: impact on AD petitions until 1995 when the Customs Code regulations were superseded by WTO (69/135 petitions initiated). • Overvaluation: a misaligned exchange rate makes it impossible to sustain a technical approach in antidumping investigations. • Devaluation: for many if not most sectors, devaluation provided higher degrees of import relief than contingent protection measures.