The World Trade Organization (WTO) yesterday rejected Argentina’s bid to overturn a ruling in favour of the United States, the European Union and Japan in a case against national licensing rules that the international body has said have been used to unlawfully restrict imports.

The WTO’s appellate body recommended that Argentina fix its trade rules after it upheld an earlier WTO panel report from August, which stated the country’s DJAI import permits and other import restrictions breached international trade rules.

President Cristina Fernández de Kirchner’s policy of controlling imports to shield local industries and bolster trade surplus could be affected severely by the ruling, but its application will not be immediate, with delays over implementation periods, negotiations between the countries and disputes over the reach of the decision likely to occur.

A US trade official said that, as a result of the ruling, Argentina would have a “number of months” to adapt its laws and make sure any import licences were automatic and transparent. But so far no deadline has been set and presidential elections in October means the issue could wait for the next government before its tackled by authorities.

“The deadlines are not immediate, there are bureaucratic hurdles that must be crossed,” foreign trade specialist Mauricio Claverí of Abeceb told the Herald.

After that period expires, Argentina could be forced into direct negotiations with the complainants, following which, if an agreement is not reached, the right of those countries to retaliate against Argentina by blocking its exports with WTO’s approval would kick in.

Ultimately, if the dispute cannot be resolved, trading partners could choose between restricting Argentine trade themselves or seeking financial compensation.

Around one-third of Argentina’s exports are sold in the US, Japan and the EU combined. According to Claverí, the government could still argue some of its requirements regarding import controls are legal onder WTO rules, by highlighting its role against tax evasion, money laundering or other crimes.

“Argentina’s protectionist measures impact a broad segment of US exports, potentially affecting billions of dollars in US exports each year that support high-quality, middle-class American jobs,” US Trade Representative Michael Froman said in a statement yesterday.

For its part, the European Commission said “Argentina should now renounce to its practices allowing European companies to re-start their businesses normally with their Argentine trade partners.”

IMPORT PERMITS

Even though the Domestic Trade Secretariat had been previously restricting some imports through resolutions and informal agreements with importers, the conflict with trading partners escalated in 2012 when Argentina imposed a system requiring prior approval of nearly every purchase from abroad, sparking the WTO case.

The DJAI import permits were at the heart of the US, EU and Japan’s cases, and the WTO also saw them as central in its ruling, although other control mechanisms were also mentioned. Japan had also complained about lenghty delays in authorizing DJAI permits before imports could go through, in similar fashion to local importers, who have sparked public clashes with government officials lately.

As a result, the government agreed this week to create an online system that would allow importers to automatize the approval of these permits, looking to ease the process, which today deals with 8,000 permits per day. Changes in the nature of the system could also be used by the government to argue sanctions should not apply.

According to the ruling, “the Argentine authorities’ imposition on economic operators of one or more of the five trade-related requirements identified by the complainants as a condition to import or to obtain certain benefits, operates as a single measure.”

This means that any of the restrictions currently applied or future variations of them could be struck down by the WTO without the need to open a new case.