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2007年2月WTO对阿根廷贸易政策审议-阿根廷政府政策声明(英文)

World Trade

Organization

RESTRICTED

 

WT/TPR/G/176

8 January 2007

 

 

(07-0038)

 

 

Trade Policy Review Body

Original: Spanish

 

 

 

 

 

 

 

TRADE POLICY REVIEW

 

Report by

 

Argentina

 

 

 

 

Pursuant to the Agreement Establishing the Trade Policy Review Mechanism (Annex 3 of the Marrakesh Agreement Establishing the World Trade Organization), the policy statement by Argentina is attached.

 

Note:    This report is subject to restricted circulation and press embargo until the end of the first session of the meeting of the Trade Policy Review Body on Argentina.


CONTENTS

 

                                                                                                                                                                                                Page

I.              introduction                                                                                                                                                        5

II.            ECONOMIC ENVIRONMENT                                                                                                                                   6

                (1)           Implementation of Convertibility and the Crisis                                                                 6

                (2)           Recovery                                                                                                                                                    7

                (3)           The Process of Restructuring the Public Debt                                                                        8

                (4)           Specific Issues                                                                                                                                         10

(a)           Economic activity                                                                                                                      10

(b)           Fiscal front                                                                                                                                  11

(c)           External front                                                                                                                              12

(d)           Social situation                                                                                                                          12

                (5)           Sectoral Trends                                                                                                                                   13

(a)           Industrial sector                                                                                                                         13

(b)           Agricultural sector                                                                                                                    18

                (6)           Trade and Employment                                                                                                                    22

(a)           The experience of the previous decade                                                                                 22

(b)           New growth model:  economic liberalization and job creation                                         24

(c)           The need to strengthen the growth model                                                                            26

III.           trade policy                                                                                                                                                        27

                (1)           Trends in Foreign Trade 2002-2005                                                                                                 27

                (2)           Trade Policy                                                                                                                                          29

(a)           Argentina and the WTO                                                                                                          30

(b)           Argentina and the Doha Round                                                                                              31

(c)           Argentina and regional integration                                                                                        33

                                (i)            Argentina and MERCOSUR                                                                                    34

                                (ii)           MERCOSUR and the LAIA                                                                                     36

                                (iii)          MERCOSUR and the FTAA                                                                                    37

                                (iv)          Extra-regional agreements in MERCOSUR                                                            37

                                (v)           MERCOSUR and the European Union                                                                   37

                                (vi)          Global system of trade preferences                                                                        38

                (3)           Trade Promotion                                                                                                                                 38

IV.           sustainability of trade policy                                                                                                               40

 

 

 


I.                   introduction

1.                   Since its previous Trade Policy Review in 1998, Argentina has experienced a deep recession caused by the economic and social crisis of 2001-2002, the most serious in its history, which placed its institutional framework at risk.  This situation necessitated a major policy overhaul and a substantive redesign of the economic model.  An economic programme characterized by fiscal solvency, monetary prudence, flexible exchange rates, social inclusion and export dynamism has been instituted and consolidated since mid-2002 and, more particularly, as from 2003, when the new constitutional Government took office, with the aim of reversing the disparities in economic development between different regions of the country.

2.                   The results of the above-mentioned policies, after nearly four years of implementation, are indicative of the correctness of the course of action adopted.  Strong economic growth has been achieved, with a 9 per cent average annual increase in GDP, while the rates of unemployment, poverty and destitution have been significantly reduced.  Private consumption, the engine of the economy, has shown a recovery, and there has also been a revival of investment, which is key to expanding Argentina's production capacity and preventing rising demand from stoking inflation.

3.                   At the same time, a trade policy based on WTO principles and disciplines has been introduced, which is characterized by pragmatism and an effort to expand Argentina's foreign trade on a sustainable basis, through a combination of multilateral, regional and bilateral approaches aimed at maximizing market access opportunities for exporters of goods and services.  Argentina's exports have thus practically doubled in less than four years, growing at an average annual rate of 16 per cent.  This non-stop growth during the period 2002-2006 is explained by the continuous expansion of trade flows in agriculture (boosted by the recovery of international prices) and agricultural and industrial manufactures (which have shown a strong increase in sales volumes).  As a result and despite the strong upsurge in imports in response to the demand for inputs, capital goods and components, Argentina has a healthy trade surplus, a novelty in terms of the country's economic growth cycles.

4.                   During this period, Argentina confirmed and extended its commitment to the liberalization of world trade, especially in the negotiations conducted within the World Trade Organization (WTO), without neglecting its strategy of improving trade links with the MERCOSUR countries and the rest of Latin America, as well as with other countries around the world.


II.                ECONOMIC ENVIRONMENT

General aspects

5.                   After the recession that started at the end of 1998 and culminated in the economic and social crisis of 2001-2002, considered the most serious in its contemporary history, Argentina initiated a process of recovery which is currently producing strong and sustained economic growth.

6.                   A number of features distinguish this upturn from previous cycles of increased economic activity:  combined fiscal and external surpluses of unprecedented duration;  reduction of the debt burden;  monetary prudence reflected in the adjustment of the money supply to public demand;  vigorous growth and diversification of exports;  increased investment in production;  halting of capital flight;  creation of millions of genuine jobs;  recovery of wage purchasing power;  reduction of poverty and destitution; and reversal of the deterioration in income distribution.

(1)               Implementation of Convertibility and the Crisis

7.                   Implementation of the convertibility model in the 1990s culminated in the 2001-2002 crisis.  The chain of events that led to that crisis is summarized below.  The starting point for the convertibility cycle was the adoption of a programme of privatization and deregulation at a time of increasing capital flows to emerging markets.  The launch of the programme was followed by massive inflows of capital, with an initial phase of reserve accumulation and high monetary and credit growth rates.  This resulted in a strong surge in domestic demand and bubble increases in the prices of real and financial assets, such as land, immovable property and shares.  The effects of this trend were far-reaching, given the increased flight of capital in relation to the local capital stock and the unsophisticated financial system.  This situation coincided with a phase in which governmental supervisory capacity was overstretched by a system that was expanding rapidly, in terms of both volume and the number of intermediaries.

8.                   With a fixed nominal exchange rate which initially enjoyed strong credibility, investment in local assets implied high dollar profitability, and this encouraged the adoption of positions that were financed with international currency indebtedness.  The real exchange rate, already high when it was fixed in 1991, appreciated even further in the period of expansion because inflation was higher than the sum of the devaluation rate (zero) plus international inflation.  As a result of exchange rate appreciation and expanding domestic demand, imports grew rapidly, leading to a substantial current account deficit in the balance of payments.  A further contributing factor to the external account situation was the interest burden resulting from the increased public indebtedness caused by the loss of revenues resulting from privatization of the pension system in 1994 and increased factorial transfers in payment of royalties and dividends due to the increased level of foreign capital in the economy.  Relative price changes in favour of non-tradeable sectors, as a result of exchange rate appreciation, slanted real investment towards those sectors, thereby having a negative impact on investment in production and exports of goods.

9.                   One general feature of the period of convertibility under the conditions described is that it leads to a continuous increase in the current account deficit that is not offset by capital flows at a particular point in time.  This leads to a contraction in reserves, money supply and credit and an increase in the interest rate.  The persistent increase in the current account deficit diminishes the credibility of the exchange rate regime and makes it more likely that the issued debt will not be honoured in a proper and timely fashion.  The maintenance of the exchange rate regime and the regular servicing of external obligations in such circumstances require enhanced capital inflows, with an attendant increase in risk.  Economic activity contracts and episodes of illiquidity and insolvency further contribute to reducing exchange rate credibility.  At the end of the process, interest rates are not high enough to sustain the demand for local financial assets.  There are runs against Central Bank reserves, which finally result in the collapse of the exchange rate system.

10.               There is no doubt as to the presence of an obvious public sector financial imbalance in the final stages of the convertibility regime.  However, that obvious fact does not by itself justify a causal inference.  Although the assessment of fiscal performance in the 1990s was obscured by the serious deficiencies in available data, the fiscal deterioration occurred not in the first decade cycle (from 1991-1995) but in the second, beginning in 1996, following the economic crisis in Mexico.  The appearance of the fiscal deficit can be traced to the social security system.  On the one hand, under the reform instituted at the end of 1994, a substantial proportion of social security revenues were transferred to the private pensions sub-system (the retirement and pension fund administrators), while public expenditure on social security remained intact.  On the other hand, the Government ordered a reduction in employers' contributions, in an attempt to improve competitiveness that had been weakened by the exchange rate appreciation.  As a result of the successive debt-financed budget deficits, the main component of public sector current expenditure in the second half of the 1990s became the sector's own interest payments on public debt.  The rise in interest rates that characterized the contractive phase of the cycle had a direct impact on rising indebtedness, contributing to a perverse dynamic of increased debt and increased risk.  In short, the crisis was a combination of the compound effect of external fragility caused by the convertibility regime, poor evaluation and organization of privatization processes, as in the case of the pension regime, lack of adequate regulatory frameworks for the capital market, the fiscal deficit and the contagious effect of the crises in Asia, Russia and Brazil.

(2)               Recovery

11.               The Argentine economy is experiencing its fourth consecutive year of growth after the crisis of 2001-2002, having substantially exceeded the highest level of gross domestic product (GDP) prior to that crisis, which was recorded in 1998.  Current growth trends have significantly boosted employment and this, in conjunction with the gradual recovery of wage levels, has resulted in a substantial improvement in real income, contributing to the reduction of the still high indicators of poverty and destitution.  The revival of economic activity, the favourable reaction of exports and the restored confidence of the economic operators have enabled the economy to move towards a "long-term" equilibrium involving restoration of basic macroeconomic balances in the external and fiscal fields.  At the same time, despite the impact of the crisis on the financial sector, the latter has recorded substantial improvement.  After dealing with their critical liquidity situation, the banking institutions began gradually to restore their balance sheets, helped by the genuine reversal of losses thanks to the rapid recovery of deposits and loans.

12.               In the initial phase, simultaneously with the stabilization of the financial and exchange rate situation, the recovery of economic activity took advantage of the abundant availability of idle resources (capital and labour) generated by the prolonged recession and the channelling into domestic activities of the dollar liquidity generated by the high external surplus (a consequence of the depreciation of the peso and its effect on the improved competitiveness of exports and domestic production in relation to imports, on the one hand, and of the reversal of the process of capital flight, on the other).  Subsequently, while the process of cyclical recovery was beginning to spread to all sectors of activity, the investment rate started to react positively and gross fixed internal investment gradually rose above replenishment level, so that the capital stock began expanding again, paving the way for a process of sustained growth.

13.               The determinants of the recovery and the improved macroeconomic situation were predominantly internal factors associated with the consistency of economic policy decisions.  The commitment to fiscal discipline and a monetary policy which, in that first stage, supported the recovery of public demand for real balances, created suitable conditions for the reduced impact or "pass through" of exchange rate depreciation to domestic prices, in contrast with previous experiences, when local currency devaluations had given rise to an inflationary spiral.  The other noteworthy feature which distinguished the post-crisis scenario from previous experiences and which may have also contributed to reducing price rise pressures is the fact that there was no change in the policy of trade liberalization pursued by MERCOSUR, of which Argentina is a member State.  Thus, the low inflation environment that characterized the end of the crisis served to maximize the effectiveness of the incentives offered by the new relative price structure with respect to the increase in economic activity and employment.

14.               It should not be overlooked that the international economic climate, though not the determinant factor, helped to explain the speed and intensity of the recovery and growth of economic activity and the improvement in the external accounts.  For one thing, the recovery of internal activity coincided with the upturn in the global economic cycle, under a scenario characterized by high international prices for raw materials and by-products, as well as low interest rates and the return of capital flows to the emerging economies.  This latter aspect (the application of favourable conditions of external financing) had a relatively small direct impact, inasmuch as throughout the first phase the Argentine economy was relatively disconnected from the international capital markets.  Moreover, the local economic recovery developed side by side with recessive trends in the Brazilian economy up to the end of 2003.

(3)               The Process of Restructuring the Public Debt

15.               At the end of February 2005, with the closure of the six-week window for acceptance of the swap offer by holders of defaulted securities, the process of restructuring the public debt was successfully completed.  Of the holders of total eligible debt (US$81.2 billion), 76.15 per cent (US$62.318 billion) accepted the Government's proposal, enabling Argentina officially to emerge from default after an arduous process of negotiation which, due to its scale and complexity, ultimately took more than three years.  The high rate of acceptance was the result of a high rate of participation in all the jurisdictions, currencies and instruments involved.  By way of compensation, US$35.261 billion in new debt instruments were issued (par, quasi-par and discount bonds).  In this way, adding the securities exchanged to the unrestructured debt, Argentina had at that point normalized 86 per cent of its stock of public debt.

16.               The great success of the exchange operation can be seen even more clearly if the various features of the restructuring process undertaken are considered.  First of all, it involved an unprecedented restructuring on the international financial markets in terms of both its scale and the number of actors, jurisdictions, currencies and instruments concerned, which required the negotiating team to engage in a consultation process demanding more than 70 meetings with the different groups of creditors.  This consultation process made it possible to draw up a comprehensive, sustainable and viable offer.

17.               A second aspect has to do with the strategy adopted by the authorities.  Instead of repeating the pattern observed during much of the 1990s, which consisted in seeking a rapid "solution" to the problem, giving priority to the acceptability of the proposal to the market, but ignoring the restrictions imposed by the country's payment capacity, the approach adopted was to seek to align the restructured commitments with Argentina's real payment capacity.  It was thus possible to reconcile the notion of market acceptability with a viable proposal.  The approach adopted by the authorities entailed a cautious and realistic appraisal of the Argentine economy's growth potential and the capacity to generate fiscal surpluses over the period of approximately three decades required for the new issues to mature, thereby avoiding non-feasible proposals.  In this connection, and with the aim of sharing with the holders of the new restructured debt the benefits of any economic growth above the level provided for in the proposal, a financial instrument linked to trends in GDP was devised, under which payments are triggered only in the event that the country actually has the resources to cover them.

18.               It should also be pointed out that the process of restructuring the Argentine public debt coincided with verification of a substantial reduction in the country's net exposure to its multilateral creditors, without the benefit of fresh injections of resources from those bodies.  As is well known, from 2002 until the date for completion of the swap, the country had made net payments (capital plus interest) to the international financing institutions (IMF, World Bank and Inter-American Development Bank) of approximately US$11.5 billion.

19.               Taking all these factors into consideration, the process of restructuring and emergence from default marks a fundamental shift in the way in which the Argentine economy functions.  Looking to the future, it can be affirmed that Argentina faces a very heavy debt burden but, unlike in the past, has the capacity to meet it.  This can be clearly observed from Table 1, which shows the considerable improvement in a number of the common indicators of fragility and solvency after the debt swap.  Compared with December 2001 levels, interest payments fell from 8 per cent to 2 per cent of GDP and from 70 per cent to 15 per cent of international reserves.  The debt stock, meanwhile, fell from a level of 540 per cent of annual exports in December 2001 to 360 per cent;  at the same time, the debt/GDP ratio fell to 72 per cent, compared with 113 per cent before the restructuring.  One of the clearest indicators of systemic vulnerability, the currency squeeze caused by the gap between public sector liabilities and income, has reduced significantly as a result of the increase in the share of debt denominated in pesos from 3 per cent to the present 37 per cent.

Table 1:  Public Debt Before and After Restructuring

Ratios

December 2001

April 2005

Interest servicing / Exports

38%

9%

Public Debt Stock / Exports

544%

364%

Debt Stock in Foreign Currency / Exports

527%

204%

Interest Servicing / International Cash Reserves

70%

15%

Interest Servicing / Tax Revenues

22%

10%

Interest Servicing / GDP

8%

2%

Debt /GDP

113%

72%

Debt in Pesos / Total Debt

3%

37%

Source:  Ministry of the Economy

20.               When it was decided to restructure the debt, the Ministry of the Economy and Production concluded that, although debt servicing would require a sustained fiscal effort over a very long period, it would cease to be a factor generating systemic fragility and permanent uncertainty and thus inhibiting economic growth in the medium and long terms.  This should result in the strengthening of the macroeconomic framework and an improvement in the outlook for sustainable, balanced and socially inclusive growth.  More than two and a half years after that assertion was made, all the economic and social indicators confirm a trend swing in the direction indicated.

(4)               Specific Issues

(a)                Economic activity

21.               Seventeen consecutive quarters of economic growth and a 40.2 per cent increase in GDP since the low point of the depression constitute an unparalleled event in the last 100 years of Argentina's economic history.  Economic activity for 2006 will mark a fourth consecutive year of growth, at an estimated rate of close to 9 per cent for the private sector, one of the highest rates in the world.  GDP has therefore already exceeded by nearly 12 per cent the maximum levels recorded in the pre-crisis period.  In per capita terms, following a contraction of more than 23.2 per cent from the beginning of the recession, the overhaul of the economic policy regime has already made it possible to achieve earlier levels within a short period of time, with an average per capita increase in output of nearly 7.8 per cent.  Once again, one has to go back to the early decades of the last century to find a similar performance.

22.               The vigorous growth of recent years was characterized by a marked recovery in activities that generate or conserve foreign currency, which are of crucial importance to an indebted country.  Thus, the share of these sectors in GDP (at current prices) rose from 23.5 per cent in 2001 to 36 per cent in 2005.  Within this group of activities, the industrial sector clearly led the recovery with growth of over 60 per cent and nearly a quarter of the total increase in GDP since the end of the crisis, exemplifying the emphasis placed by current policies on reconstruction of the industrial fabric.  The agricultural sector also showed considerable improvement, in response to favourable conditions of profitability generated by the combination of competitive parity and a favourable international price context.  The strong performance in this sector resulted in a substantial improvement of the situation in various regional economies, which were one of the engines of the recovery, so that today economic growth is much more evenly spread over the country's vast geographical territory.

23.               Unlike what happened during the previous decade, the growth process has tended to benefit the whole range of economic activities in a balanced manner, and has even spread to sectors producing goods and services that are not internationally tradeable.  The best performing among them were those more closely related to the sector producing tradeable goods.  Thus, there was an outstandingly strong recovery in construction activity, especially for reproductive purposes, which has doubled its output since the crisis, and in the areas of transport and communications and commercial activity, which grew by more than 45 per cent.  Moreover, and despite the scale of the financial crisis which led to the collapse of convertibility, the banking system rebounded strongly, with an accelerated recovery of liquidity.  Private sector credit began recovering from early 2004, and loans in this sector are now growing steadily at an annual rate of close to 30 per cent.

Gross Domestic Product.  Relative Contribution to Growth

Constant prices, seasonally adjusted

2002:I-2006:II

Source:  Ministry of the Economy

24.               The strong growth of employment, the recovery of real wages, increased consumer confidence and the reappearance of credit contributed to a significant rise in consumption, which has grown by 37 per cent since the end of the crisis.  The contribution of consumption to growth was nevertheless accompanied by that of other components of aggregate demand which are crucial to guaranteeing the process of sustainable growth under way.  In particular, a substantial improvement was observed in the rate of investment, following the 60 per cent fall of this variable, in real terms, during the crisis.  As a result of the subsequent recovery of roughly 173 per cent, capital formation has already equalled the highs of 1998.  The seriousness of the crisis and the subsequent strong recovery are put into perspective by the fact that the rate of investment in GDP terms rose from 11 per cent in 2002 (a rate not even high enough to replenish annual capital amortization) to somewhat more than 21.5 per cent during the second quarter of 2006.

(b)               Fiscal front

25.               One of the main contributing factors to economic consolidation was the substantial improvement in the public accounts.  Thanks to a cautious expenditure policy, appropriate tax administration and the benefits of the economic recovery itself, the consolidated primary surplus for 2004 and 2005 reached a record high of an average 4.8 per cent of GDP.  Positive results of above 3 per cent of GDP for the national public sector are expected for the current year.  Taxpayer compliance was crucial to the improvement in the consolidated fiscal result:  VAT collection has tripled since the crisis, while current consumption has doubled.  The success achieved in restructuring the defaulted sovereign debt made it possible to begin re-establishing the long term solvency of public finances.  Additionally, action was taken on the decision for the early and complete write-off of around US$10 billion in liabilities with the IMF, leading to an additional reduction of roughly 5 GDP points in the consolidated gross debt.  The IMF payment resulted in a substantial reduction in short-term financing requirements, while at the same time enabling substantial savings to be made on interest payments.

(c)                External front

26.               In the external sector, the current account surplus of over 3.5 per cent of GDP in 2006 has been achieved as a result of the strong growth in exports of goods and services, which will close the year at levels of more than US$46 billion and US$7.5 billion respectively.  Moreover, the profile of sales abroad has begun to change.  Argentina is selling more and more high value-added products and services:  the volume of manufactures exported today stands at double the average for the past decade.  For 2006, the year-on-year increase in exports of manufactures of agricultural and industrial origin was 10 per cent.  Export destinations are also being diversified.  Compared with an average of 160 export destination countries ten years ago, Argentina today exports to nearly 200 markets.  As regards industrial exports, the number of destinations has risen from 120 to 140.  Professional services account for a growing share of services exports.

27.               The increase in exports has helped to sustain the necessary import revival.  Here again, there is a qualitative change, inasmuch as the share of purchases of capital goods and inputs for production has grown by 140 per cent and 100 per cent, respectively, since the end of the crisis.  Imports of consumer goods, which accounted for almost 20 per cent of the total during the past decade, today represent 11 per cent of purchases from abroad.  Even with the sharp rise and dynamism of imports, Argentina has maintained a high trade surplus, averaging some US$13.5 billion over the last three years.

28.               The flight of capital, as mentioned earlier, has been reversed, and since 2004 there have been net inflows of funds from abroad.  However, the Government has introduced a set of policies to regulate capital flows, with the aim of maintaining external saving at a level compatible with its positive contribution to long-term growth, thereby discouraging the flow of speculative investment to Argentina.

(d)               Social situation

29.               The economic recovery has been accompanied by a marked improvement in the social indicators.  The new macroeconomic environment, by promoting labour-intensive activities, has facilitated a considerable increase in employment.  The rate of unemployment (urban total) fell from 23.3 per cent in May 2002 to 11 per cent in the second quarter of 2005.  According to recent data, the unemployment rate stood at slightly over 10 per cent in the third quarter of 2006 and is expected to reach single digits, for the first time in 13 years, by the end of 2006.

30.               The sharp decline in unemployment is even more marked when it is considered that it is occurring in a climate of increased economic activity, namely, the inclusion in the ranks of job seekers of large numbers of people who were not registered as unemployed.  Thus, the economy has created 3.6 million genuine jobs since the beginning of the recovery, enabling more than 1.8 million persons to cease being unemployed and 1.3 million additional workers to enter the labour market.  As regards trends in government employment or social welfare schemes, the continuous creation of genuine employment since early 2003 has resulted in a reduction of 600,000 in the number of beneficiaries, reflecting the substantial improvement in employment opportunities, especially for those most in need.  In addition, for 2006, some 500,000 genuine jobs have been created.  Nine of every ten new wage earners are registered workers covered by pension and social welfare schemes.

31.               The minimum wage rose from Arg$250 during the crisis to Arg$800 in November 2006, representing a real increase, with adjustment for accumulated inflation, of 70 per cent.  The minimum pension has risen from Arg$150 to Arg$470 currently, a real increase of more than 60 per cent.  Meanwhile, the purchasing power of registered wage earners rose by 55.2 per cent from the low point of June 2002, and by 9.1 per cent in the first nine months of 2006.  The situation of non-registered workers and employees has also tended to improve.  Over the last year, according to available data (April 2006 versus April 2005), these wage earners have seen an improvement in their real wages of the order of 7.6 per cent.  The Government considers it essential to continue pursuing policies that stimulate formal employment, as a genuine way of reducing the continued high level of segmentation of the labour market.

32.               The increase in employment, the recovery of real wages in a context of accelerating labour productivity, and the Government's income policies have contributed to a significant decline in the levels of poverty and destitution, which had reached unprecedented highs for Argentina during the crisis.  Thus, from a poverty peak of 57.5 per cent and a destitution peak of 27.5 per cent of the population, the incidence rates have fallen to 31.4 per cent and 11.2 per cent respectively, which means that roughly 8.3 million people have succeeded in climbing out of poverty and 5,350,000 Argentines have ceased to be destitute.  These factors have been reflected in an improvement in the income distribution indicators.  The Gini coefficient, a standard measure of income distribution, has shown steady improvement, especially since the end of 2003, and the 5.4 percentage point decrease since that date represents a substantial shift for an indicator which measures structural characteristics of the economy and thus, by extension, measures minor movements over long periods of time.

(5)               Sectoral Trends

(a)                Industrial sector

33.               The industrial sector has been one of the main engines of the Argentine economy's sure-footed expansion in recent years, recording more than three years of sustained growth.  This is the result of the application of policies to improve the competitiveness of the tradeable sectors, which leads to a better distribution of income in society and recognizes industrial activity as a key factor in achieving that objective.  The construction of a competitive and integrated economic fabric and the development of small and medium-sized enterprises are key to advancing a model based on productive development and social inclusion.

34.               As mentioned before, the Argentine economy has been growing at an annual rate of 9 per cent over the past three years, and has achieved a record level of GDP.  Industry accounts for a substantial share of this growth, given high output and export levels, and the overall buoyancy of activity and employment in all industrial sectors.


Overall Economic Activity and Industrial Production

EMAE and EMI.  Seasonally adjusted series.  Base year 1997=100

Historical production peaks

 

 

                   Monthly Industrial Activity Estimator (EMI)

                   Monthly Economic Activity Estimator (EMAE)

Source:     Own compilation based on INDEC (National Statistics and Census Institute) data.

 

Overall Buoyancy of Production and Industrial Employment

Monthly Industrial Activity Estimator (EMI)

By subsector.  Change 2005 v. 2003

Index of Employed Workers

By subsector.  Change 2005 v. 2003

Source:    Own compilation based on INDEC data.

35.               This strong expansion is the result of the application of economic policies consistent with an active role for the State and the establishment of basic macroeconomic rules designed to foster corporate profitability and to generate high value-added growth.  The macroeconomic rules are supplemented by specific policies to promote sectoral, regional and small and medium business development, as well as the promotion of international negotiating strategies which pursue the same objectives.

36.               The aim is thus to build a long-term vision by sending clear signals that build investor confidence and promote a high level of growth in an integrated economic fabric.

37.               During the past decade, industrial activity was heavily concentrated in a few sectors and this was accompanied by the dismantling of the production framework of labour-intensive industries.  On the other hand, an analysis of industrial trends since 2003 reveals sustained growth with substantial job creation.

Comparative Trends in Production and Industrial Employment

Physical Volume of Production (IVF) and Employed Workers (IOO)

Year-on-Year Variation.  Period I 1993 / I 2006.

 

Source:    Own compilation based on INDEC data.

38.               With a wider spread among all subsectors, this new qualitative growth profile is essential to achieving a more equitable distribution of income.

Comparative Trends in Industrial Employment

Employment by Industrial Sector.  Thousands of Jobs.

 

Source:    Own compilation based on INDEC data.

 

39.               Small and medium-sized enterprises play a central role in the process, with differentiated high value-added production and strong job creation capacity.  In the context of a country that has recovered its fiscal health and a predictable macroeconomic environment, the State and private entities allocate institutional and capitalization resources for the improvement of infrastructure so as to guarantee the continuity of industrial development.

40.               Alongside the expansion and diversification of national industry, 2005 saw increased rates of activity which consolidated the commitment to growth.  Within this framework, various production sectors are making substantial investments with the aim of expanding their installed capacity, both by increasing existing capital and by creating new production units.  This becomes clear from an analysis of the behaviour of "capital formation" investments in a historical perspective.  Such investments have grown more dynamically over the past four years than the resources earmarked for "mergers and acquisitions", the comparative rates of increase for the period 2002-22005 being 666 per cent and 163 per cent, respectively.

Trends in Investment by National and Foreign Enterprises in Argentina

 

Source:    Compiled on the basis of data from the Ministry of the Economy

(b)               Agricultural sector

41.               The agricultural sector played a decisive role during the crisis and in the economic recovery, boosting and strengthening the return to a path of sustainable growth through foreign exchange earnings generated by the substantial increase in agricultural exports in recent years.  However, increased exports alone are no guarantee of growth.  Government action was crucial to enable the agricultural bonanza to translate into economic growth that is in turn socially sustainable.

42.               Active State involvement focuses on various objectives.  First, there is the establishment of clear macroeconomic rules to facilitate planning by producers.  Secondly, there are incentives for the technological development of the agri-food sector, including technical support, genetic improvement and health.  A further important aspect is the promotion of international negotiations and the establishment of quality standards to make possible the flow of more products to more destinations with higher value added.  Lastly, measures are being implemented to ensure that the sector's growth produces benefits for the entire economy and society, avoiding macroeconomic destabilization and facilitating long-term sustainable growth.

43.               The chart below shows the considerable increase in the share of agricultural activity in Argentina's production process.  Agricultural GDP grew by 12 per cent in 2005 compared with 2004.

Gross Value Added of Agriculture, Stockbreeding, Hunting and Forestry

Millions of 1993 pesos at producer prices

(*)           Preliminary estimates.

Source:    Compiled on the basis of DNCN (National Accounts Directorate) data.

44.               Below is a chart showing trends in the production of the three principal grains:  soyabeans, maize and wheat.  Particularly noteworthy is the marked upturn in soyabean production, which increased by 58 per cent between the 1998/99 and 2004/05 seasons.

Maize, Soyabean and Wheat Production (1998-2004)

 

Source:    Compiled on the basis of SAGPyA (Secretariat for Agriculture, Livestock, Fisheries and Food) data.

45.               The growth of the sector is reflected not only in primary products, as shown by the preceding chart, but also in manufactures of agricultural origin (MAOs).

Principal MAOs-Percentage Change in Production

 

Percentage change in production

1998-2001

Percentage change in production

2002-2005

Source:  Compiled on the basis of SAGPyA data.

 

46.               The recent agricultural upswing is correlated to the growth of investment in capital goods, which has driven the rise in productivity.  There has been strong growth in domestic production of agricultural machinery and equipment for the agricultural sector and subsidiary industries.  Related imports have also increased considerably.

Imports of Capital Goods for the Agricultural Sector (1995-2005)

Source:   Compiled on the basis of data from the Ministry of the Economy.

47.               Under the heading of the production and import of agricultural machinery, combine harvesters and tractors for agricultural use showed strong growth, especially in view of the fact that the devaluation pushed up the price of imports.  These data therefore demonstrate the sector's strong orientation towards exports and its capacity to sustain the growth of output.

Imports of Capital Goods for the Agricultural Sector

Source:    Compiled on the basis of data from the Ministry of the Economy.

48.               In the area of foreign trade, agro-industrial exports have shown strong and sustained growth since 2003, with rates of 22.5 per cent in 2003, 13.4 per cent in 2004 and 11.6 per cent in 2005.  According to the most recent data, a growth rate of 14 per cent was recorded in the first nine months of 2006, compared with the same period the previous year, which is evidence of sustained growth.

Trends in Argentine Agro-Industrial Exports (1998-2006)

Source:  Compiled on the basis of INDEC data.

49.               Three of the most important agro-industrial exports are wheat, maize and soyabean complex, the latter having recorded the highest growth in recent years.  They thus constitute a policy benchmark from the standpoint of both the overall economy and the development of rural areas.

Trends in Agro-Industrial Exports – Main Products (1998-2006)

Source:  Compiled on the basis of INDEC data.

50.               The economic crisis resulted in a continuous fall in agricultural imports between 1998 and 2002, followed by a recovery as from 2003, but without attaining pre-crisis levels.  These imports are highly diversified, although one of the most important is soyabeans from the main trading partners of Argentina, which accounted for 14 per cent of agro-industrial imports in 2005.  This product is imported mainly for the purpose of pressing, highlighting the importance of the production of soyabean oil and pellets in agro-industrial manufacturing in general.

(6)               Trade and Employment

51.               The Marrakesh Agreement begins with the recognition that trade should be conducted with a view to "raising standards of living, ensuring full employment and a large and steadily growing volume of real income and effective demand, and expanding the production of and trade in goods and services" ... "in a manner consistent with their respective needs and concerns at different levels of economic development".

52.               It is therefore true to say that a fundamental WTO principle involves the affirmation that trade must be linked to full employment and a constant improvement in the living conditions of the population.  That principle is complemented by the idea that there is no single way of formalizing this relationship and that its implementation depends on each Member's level of economic development.

53.               This section will analyse the links concerned in the light of Argentina's recent experiences, contrasting the policies of the previous decade with those that have been implemented since the country emerged from the crisis of 2001-2002.

(a)                The experience of the previous decade

54.               In the 1990s, Argentina relied on the expectation that the opening up of trade and the liberalization of the labour market, alone and without appropriate economic policies, would lead to growing employment and economic growth through the exploitation of static comparative advantages.

55.               The opening up of the Argentine economy between 1991 and 1998, furthered inter alia by the Uruguay Round Agreements, was an important development that served to improve the country's integration into the global economy.  The increase in imports, given the lacklustre performance of exports in the second half of the 1990s, was financed basically by means of greater external debt.  This structural fragility made it foreseeable that the degree of liberalization and integration was unsustainable within that economic policy framework.  As of 1998, the economic recession halted those processes and led to a dramatic decline in Argentina's share of world trade.

56.               At the same time, labour market flexibility led to a progressive worsening of working conditions, falling employment and a consequent decline in effective demand.  The latter phenomenon in turn caused a drop in output.

57.               The policy of trade liberalization in a context of exchange rate appreciation imposed a growth rate on the Argentine economy that was based on capital-intensive but labour-extensive production, as well as specialization in sectors making intensive use of natural resources and with low job-creating potential.  The shift in production towards the tertiary sector, and investment in capital goods which placed emphasis on labour-saving technologies, resulted in a significant decline in employment in the manufacturing sector.  During the crisis, that decline led to a 28 per cent reduction in jobs in industry.

Trends in Sectoral Employment

Period 1991-2003 (Base Year 1997=100)

Source:   Ministry of Labour, Employment and Social Security (MTEySS) ­ Undersecretariat for Technical Planning and Labour Studies (SSPTyEL), ­ Directorate-General of Labour Studies and Statistics (DGEyEL).  On the basis of INDEC data and the user bases of the Permanent Household Survey (EPH), data for May.

58.               On top of this reduction in industrial employment, the low level of job creation in the rest of the economy was well below the increase in the available labour supply, and this resulted in unprecedentedly high unemployment rates.  Moreover, employment was more heavily concentrated in services sectors, especially those with higher levels of job insecurity and a multiplicity of atypical forms of labour contract.

Undeclared Employment Rate by Branch of Economic Activity

Total Urban Areas Surveyed

 

1st Qtr 03

1st Qtr 04

1st Qtr 05

1st Qtr 06

Total

47.0

47.9

46.8

43.6

Branch of activity

 

 

 

 

Primary activities

69.1

54.5

53.3

46.5

Manufacturing industry

37.6

37.7

38.8

37.0

Construction

68.8

76.4

79.9

74.7

Trade

53.7

49.5

49.7

45.7

Hotels and restaurants

56.6

55.0

54.9

55.8

Transport, storage and communications

48.3

50.5

48.0

43.1

Financial, real estate, rental and business services

29.1

36.8

35.5

29.1

Public administration and defence

34.4

34.6

24.1

22.1

Education

19.8

18.8

14.2

12.6

Social and health services

47.0

52.5

43.8

40.9

Domestic service

91.6

93.9

95.2

93.4

Other community, social and personal services

55.5

45.7

51.7

44.9

Source:    Ministry of Labour, Employment and Social Security (MTEySS), Undersecretariat for Technical Planning and Labour Studies (SSPTyEL), Directorate-General of Labour Studies and Statistics (DGEyEL), based on the INDEC's Permanent Household Survey (EPH).

59.               This situation of economic depression, persistently high unemployment rates and consequent deterioration in the social situation was compounded by a political crisis unprecedented in Argentine history (2001-2002).  It is not surprising, therefore, that one of the basic objectives of the current administration is to ensure that economic growth is equitable and includes all the different sectors of society.  Only this type of growth can promote greater social cohesion and the strengthening of democratic institutions.  Accordingly, the labour market and, in particular, the objective of decent work, constitute the central plank of public policy.

(b)               New growth model:  economic liberalization and job creation

60.               The new growth model that has been in evidence since the crisis is based on the principle of creating quality employment and decent work.  Thus, in keeping with the founding principles of the WTO, the introduction of active labour market policies based on a renewed social dialogue has made possible a rapid economic recovery, a substantial reduction in unemployment, a higher rate of quality job creation, a fall in the levels of poverty and destitution, and a gradual improvement in income distribution.

61.               It should be emphasized that the domestic production of goods previously imported did not entail a decline in imports.  On the contrary, import volumes have been growing in tandem with economic growth.

62.               At the same time, the change in the growth model generated a substantial improvement in the employment/output ratio, and this helped speed up recovery from the 2001-2002 crisis.

63.               In this area also, firms in the industrial sector have played an outstanding role.  They have not only succeeded in restoring output to pre-crisis levels, but they have exceeded by 10 per cent the level of output recorded in the year of highest economic growth in the 1990s (1998).  This in turn has translated into a significant increase in industrial job creation as well as productivity levels.

Index of Employment in Industry

Year-on-Year Variation

* Most recent quarterly data available.

Source:    Monthly Industrial Survey, base years 1970, 1990, 1993 and 1997.

64.               The recovery in industrial employment has also been accompanied by a rise in employment in the other areas of economic activity and has done much to change the pattern of job creation from one based on undeclared labour to one in which the great majority of the jobs created are formal jobs.  It is very revealing, therefore, that between 1991 and 2001 undeclared employment grew by 52 per cent and declared employment by only 1 per cent, whereas between 2003 and 2005 the growth of declared employment was higher (32 per cent) and that of undeclared employment much lower (8 per cent).

 

Trends in the Level of Sectoral Employment

1st Quarter 2003 – 1st Quarter 2006 (Base year 2003=100)

Source:    MTEySS –  Undersecretariat for Technical Planning and Labour Studies – DGEyEL, based on the ongoing household survey (EPH) (INDEC).

 

(c)                The need to strengthen the growth model

65.               The continued buoyancy of job creation may be jeopardized if it is based exclusively on extensive economic growth.  The need to strengthen the current growth model, in accordance with the same principle of creation of quality employment and decent work, requires specific sectoral policies, including policies aimed at the industrial sector, as the increase in industrial activity favours the creation of highly productive jobs with higher incomes and the growth of effective demand which has beneficial effects on the rest of society.

66.               Argentina's experience during the previous decade shows that greater trade liberalization alone is no guarantee of either full employment or sustained growth.  On the other hand, post-crisis developments bear witness to the fact that appropriate economic policies and timely interventions in the labour market based on social dialogue may simultaneously generate steady improvements in the social indicators and a greater opening up of the economy.  Although the results achieved on both fronts are encouraging, the need for continued improvement in employment levels and other social indicators calls for the new growth model to be strengthened by means of specific policies, including policies targeting the industrial sector, which boost Argentina's participation in an increasingly open, transparent system of world trade that is sensitive to the specific needs of developing countries with respect to quality job creation and decent work.


III.             trade policy

(1)               Trends in Foreign Trade 2002-2005

67.               The change in economic policy introduced after the 2002 crisis had a significant impact on Argentina's foreign trade.  In the short term, the change administered a sharp correction to Argentina's external trade imbalance, which had persisted for some years, initially through a substantial decline in local imports (-57 per cent between 2001 and 2002).  In the medium term, and following the establishment of a stable and sustainable macroeconomy, the change in policy is having a specific impact on both agricultural and industrial export performance, maintaining the trade surplus in a context of strong recovery and import growth.

68.               Exports have almost doubled in less than four years, growing at an average annual rate of 16 per cent.  The uninterrupted growth during the period 2002-2006 is explained by the continuous expansion of agricultural trade flows (favoured by the recovery in international prices) and of agricultural and industrial manufactures (which recorded strong increases in sales volumes).

69.               The liberalization coefficient has grown substantially since the crisis (25 per cent since 2002), exceeding the high point of 5 per cent achieved in 1998.  Not only is the degree of liberalization higher than the peak figure recorded in the 1990s, but it is gathering momentum because it is self-sustainable and not dependent on external financing.

Degree of Liberalization in Argentina

 

Source:    National Accounts Directorate (DNCN), X=Exports, M=Imports and GDP at 1993 prices.

70.               The important feature of the situation outlined is that its context is one in which the local economy is growing by 9 per cent a year, which means that Argentina is well placed competitively for integration into the global economy.  Foreign sales have ceased to be an exportable balance or surplus left over from local demand and have become a component of productive growth.  In this connection, it should be pointed out that Argentina's foreign sales grew by 16 per cent in 2005, while world exports grew by 13 per cent.  This growth rate, which is combined with an increase in export volumes (+15 per cent) more than twice as high as that recorded by the rest of the world (+6 per cent), shows that the local economy has enhanced its international competitiveness and, as a result, its external integration.  The same pattern of behaviour is being repeated in 2006, with strong export and import growth and the maintenance of a substantial trade surplus.

71.               An analysis of export destinations shows that MERCOSUR remains an important buyer, while other countries, Chile and China, regions such as the Andean Community and NAFTA, and other non-traditional markets such as the Middle East and Africa, to which Argentina has no preferential access, have become increasingly important trading partners.  MERCOSUR, and Brazil in particular, is the main recipient of Argentine exports of industrial manufactures, owing to integration of the production chain in the automotive, chemical and other sectors, and because it is one of the first export destinations chosen by small and medium-sized enterprises.  The regional bloc has frequently served businesses as a springboard to other markets by enabling them to achieve economies of scale and specialization, to promote the learning process and to increase the proportion of high-end technological products involved in trade.

72.               Another noteworthy development is the diversification of exports to include new products with higher value added, involving greater participation by small and medium-sized enterprises and an impact on regional economies.  In overall terms, among the sectors that have driven export growth, particular mention may be made of the performance of motor vehicles, metal products, chemicals and plastics, rubber and by-products thereof.

73.               The most noteworthy agricultural products and agricultural manufactures include soyabeans, dairy products and by-products, alcoholic beverages and liquids, fruit juices and sweets.  At the same time, industrial manufactures were driven by products with a medium to high technological content, including in particular motor vehicles, machinery and apparatus and chemical and related products.  Over the past year, industrial exports with a high technological content have increased their contribution to growth, particularly air, river and maritime navigation vehicles and certain chemical products.

74.               Manufactures of industrial origin (MIOs) are gaining export market share, as is evidenced by growth rates higher than those for primary products and manufactures of agricultural origin (MAOs), and this ensures their diversification and stabilization.

Exports by product line

(millions of dollars)

Type of product

1998

2001

2002

2003

2004

2005

Export variation

Contribution to variation

2005/1998

2005/2002

2005/2002

Primary products

6,604

n/a

5,273

6,224

7,215

7,916

19.9

50.1

18.4

MAOs

8,761

n/a

8,138

9,815

11,377

13,172

50.3

61.9

35.0

MIOs

8,624

8,298

7,601

8,821

10,225

11,935

38.4

57.0

30.2

Fuel and Energy

2,451

n/a

4,639

4,720

5,471

6,991

185.2

50.7

16.4

Total

26,440

n/a

25,651

29,580

34,288

40,014

51.3

56.0

100.0

MAOs:     Manufactures of agricultural origin.

MIOs:      Manufactures of industrial origin.

Source:    Own compilation based on information from the Centre for Public Studies (CEP).

75.               A salient feature of Argentine foreign trade, especially over the past two years, has been the dynamic performance of services exports.  Following the stagnation of services exports, culminating in a substantial decline during the 2001-2002 crisis, the sector returned to the path of growth.  Unlike before, the change in relative prices from 2002, as a result of the floating exchange rate, once again enabled exports from the sector to meet growing world demand, and its growth rate was even higher than the world rate.

76.               Up to 2000, the trade balance in services showed a deficit of around US$4 billion.  This figure was reduced to roughly US$1.5 billion in 2005, exports being the main engine of this change.  The boom in services exports from Argentina is due mainly to the areas of travel and tourism, combined with sales of non-traditional services, such as business, professional and technical services and communications and information technology services.

77.               The increase in travel and tourism exports accounted for rather more than 50 per cent of total export growth for the sector in 2005.  As a result, tourism has become one of the main export items, ahead of cereals, oils and fats, chemical products and land transport equipment, and outperformed only by exports of animal feed meals.

78.               After the sharp decline in 2002, imports rebounded strongly, keeping pace with the rate of expansion of the local economy.  They amounted to US$28.692 billion in 2005, a 28 per cent increase over 2004, owing to the strong growth in demand for inputs related to production activities as well as the importation of machinery and equipment and parts and components thereof.  Import levels of close to US$35 billion are expected for 2006, a 20 per cent increase over 2005.

79.               As far as countries of origin are concerned, Brazil within the region and China as an extra-regional supplier increased their exports to Argentina.  The growing importance of Brazil is explained by the strong increase in Argentine imports of automobiles and machinery and apparatus.  At the same time, China has become a major supplier of capital goods, industrial inputs and durable consumer goods.

(2)               Trade Policy

80.               In this connection, it is important to refer briefly to the Argentine legal system.  Under the Constitution, as a result of the constitutional reform of 1994, international law is assigned a dominant position in the Argentine legal system.  As a result of the above-mentioned reform, the supremacy of international treaties over domestic legislation is expressly recognized, as is the constitutional supremacy of treaties relating to human rights and the possibility of ceding sovereign powers, in specific circumstances, under certain integration agreements.  The constitutional provisions outlined demonstrate the value attached by Argentina to multilateral cooperation and an outward-looking approach to the international community.

81.               Argentina is increasingly committed to the responsible and balanced liberalization of international trade, especially in the negotiations under way within the WTO, without abandoning its strategy of closer trade ties to the MERCOSUR countries and the rest of Latin America, as well as to other countries around the world that are interested in becoming trading partners.

82.               It is for this reason that, as from 2003, Argentina adopted a pragmatic trade policy which combines the priority accorded to the international trading system with regional integration and bilateral treaties consistent with WTO obligations.  In this way, it is seeking to take maximum advantage of market access opportunities for its exports of goods and services.  It pays particular attention to the overall strategy of promoting and developing exports with a view to properly administering and integrating those elements that are crucial to strengthening business competitiveness.

83.               It should be emphasized that, despite the fall in GDP recorded between 1998 and 2002, Argentina did not raise its applied tariffs.  On the contrary, tariffs were lowered even further in the period under review, falling from an average applied most-favoured-nation (MFN) tariff level of 12.7 per cent in 2001 to 10.5 per cent in 2005.  At the same time, tariff dispersion has recently been reduced.  This reaffirms Argentina's desire to maintain its trade ties with the world and to progress towards freer trade.

(a)                Argentina and the WTO

84.               Argentina is a founding Member of the World Trade Organization (WTO).  It upholds the principles, agreements and disciplines of the WTO as the basis for its international trade relations.  This is reflected in the supremacy of the agreements entered into under the Uruguay Round over domestic legislation and highlights Argentina's unwavering commitment to guaranteeing legal certainty to all the Members of the system.  In this connection, Argentina applies its commitments under the Uruguay Round fully and consistently in all the areas that were negotiated, and it has systematically brought its existing laws, rules and regulations into full conformity with its multilateral obligations.

85.               It participates actively in the regular activities at the WTO through the various committees.  It regularly submits the necessary notifications to the Committee on Subsidies and Countervailing Measures, the Committee on Anti-Dumping Practices and the Committee on Import Licensing, and has taken an active part in meetings of the Committee on Sanitary and Phytosanitary Measures, submitting several communications containing concrete proposals and making more than 80 notifications during the period under review.

86.               Argentina is a party to the Agreement on the Application of Sanitary and Phytosanitary Measures (SPS Agreement), having signed various bilateral agreements based on its principles and disciplines.  It complies with its obligations under the SPS Agreement, which are mainly concerned with identifying common rules, simplifying import controls, harmonizing certification requirements and facilitating bilateral trade and the entry of agricultural products into the markets of Member countries.

87.               Argentina actively participates in the Trade Policy Review Mechanism, being convinced that the review exercises undertaken contribute to the transparency of the multilateral trading system.  Argentina assigns great importance to the universal nature of the WTO, and supports the entry of new Members, on the understanding that this contributes to the strengthening of the multilateral trading system and boosts opportunities for the expansion of trade.

88.               Argentina recognizes the significance of the protection of intellectual property for development, the role such protection plays in stimulating innovation, and the need to protect these intangible values.  At the same time, it promotes respect for competition, protection of health, traditional knowledge and diversity through multilateral rules.  It supports the system of rights and obligations under the Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS).

89.               Argentina considers the dispute settlement mechanism to be one of the fundamental pillars of the multilateral trading system, inasmuch as it guarantees the transparency and predictability of compliance with multilateral rules by its Members.  This is clearly evidenced by the fact that Argentina is one of the ten countries that have made the greatest use of the system since the establishment of the WTO in 1995, having acted as complainant in 11 cases, respondent in 16 cases and third party in a further 16 cases, and has faithfully complied with the resolutions of the Dispute Settlement Body and the Appellate Body.  However, it considers that the raison d'être of the WTO does not lie in the dispute settlement mechanism, as it is not possible to build the future on the basis of disputes but essentially on areas of agreement to expand the multilateral system on the basis of greater benefits for all its Members.

(b)               Argentina and the Doha Round

90.               Argentina has actively participated in the multilateral trade negotiating rounds since acceding to the GATT in 1967.  It considers that, as provided in the preamble to the Marrakesh Agreement, the growth of international trade and the corresponding rules should contribute to raising standards of living and ensuring full employment.  These objectives have been central to the proposals it has put forward individually or in conjunction with other countries in the Doha Round.

91.               Argentina submits that the Doha Round should give priority to an ambitious agreement in respect of agriculture, a sector which continues to bear the burden of discriminatory trade-distorting and protectionist policies, to the detriment of the effective use of competitive advantage by efficient agricultural producers and domestic production in developing countries, preventing the latter from securing all the benefits that would be offered by an open trading system.

92.               Thus, Argentina is an active participant in two strong agricultural negotiating groups, of which it is a co-founder:  the G-20 and the Cairns Group.  In the Uruguay Round, the latter Group, and in the present Round, the two together, have helped to change the geometry of the agricultural negotiations.  The G-20 in particular has now made it possible for developing countries to form an alliance capable of counter-balancing the interests of the major trading powers, in order to guarantee significant outcomes in keeping with the ambitious goals of the Doha Mandate.

93.               The basic tenets of both Groups, which Argentina fully supports, are the following:

            (i)         Elimination of export subsidies (including the practice of disposing of commodity surpluses instead of providing genuine food aid);

 

            (ii)        the substantial reduction of domestic support that distorts international trade;

 

            (iii)       the substantial expansion of market access, especially for the products of developing countries, reducing and simplifying tariffs, reducing tariff peaks and eliminating tariff escalation.

94.               The negotiations on market access for non-agricultural products (NAMA) are also of vital importance to Argentina, which considers that they should be aligned with those relating to other areas, particularly the area of agriculture.  In this connection, Argentina, together with Brazil and India (ABI formula), have submitted a proposal for tariff reduction that provides for the principle of "less than full reciprocity".  The proposed formula, in accordance with the provisions of paragraph 16 of the Doha Ministerial Declaration, seeks to reduce or eliminate tariff peaks and tariff escalation.  With regard to non-tariff barriers, Argentina has submitted documents on the barriers faced by its exports in different markets.  It is also an active participant in the NAMA-11 group of developing countries, whose fundamental aim is to achieve an equitable outcome which, while providing for substantive liberalization with proportional cuts for developed and developing countries, at the same time does not hamper implementation of the industrial development policies of the developing countries.

95.               Argentina supports the wording of paragraph 24 of the Hong Kong Ministerial Declaration, which provides for a balanced level of ambition in both agricultural and NAMA negotiations.  Accordingly, and as a result of its active participation in the negotiations, in 2006 it submitted a Doha Round document (TN/MA/W/67 and TN/AG/GEN/14), which addresses the question of how the provisions of the above-mentioned paragraph 24 can effectively be gauged so as to ensure that the level of ambition in market access is balanced and proportionate, in keeping with the principle of special and differential treatment.  The analysis conducted shows that, in order to maintain the same level of ambition in the two sets of negotiations, the developed countries should make greater cuts in their agricultural tariffs and reduce their demands in NAMA.  The document presented by Argentina became a reference paper for the proposals submitted by various countries and for validating the offers and requests of the developed countries in relation to agriculture and NAMA.  Argentina is thus cooperating in the search for a balanced outcome that respects the interests of all the parties.

96.               At the same time, with a view to achieving greater security and stability for the expansion of world trade in services, as well as to ensure that the overall results of the Doha Round negotiations equitably benefit all countries, Argentina is committed to making progress in the negotiations on specific commitments in all the delivery modalities, including those of particular interest to the developing countries.  Similarly, it is working towards strengthening the disciplines of the General Agreement on Trade in Services (GATS).

97.               Both bilaterally and plurilaterally, Argentina has submitted requests for market access to various WTO Members with respect to agriculture-related services sectors, distribution services, information technology services and services provided under mode 4 (movement of natural persons).  Reciprocal requests have been received on virtually the entire spectrum of trade services, although not all of them contain the same level of demand.  Argentina has granted concessions in all areas relating to requests on information technology services, telecommunications, banking services, professional services, construction and distribution services;  and it provides adequate coverage in services relating to energy, insurance, postal services and logistics.  It also participates actively in the various GATS negotiating groups in order to draw up disciplines under Article VI, paragraph 4, on domestic regulation, Article X on emergency safeguard measures, Article XIII on government procurement, and Article XV on subsidies.

98.               With respect to trade in environmental goods, Argentina has submitted an integrated proposal for development.  The aim is that the relevant negotiating approach should ensure equitable environmental, trade and development benefits.

99.               Regarding the negotiations on rules, Argentina has submitted proposals relating to specific amendments to the Anti-Dumping Agreement.  In this connection, it has attempted to highlight those amendments that would benefit developing countries.  Similarly, Argentina has submitted a proposal in the "Friends of Fish" Group and another individual proposal for the negotiations on fisheries aimed at eliminating trade-distorting subsidies and ensuring special and differential treatment for developing countries.

100.            Argentina takes an active part in the debates on the Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS) and public health, geographical indications, protection of genetic resources, traditional knowledge and folklore, and electronic commerce, both within the TRIPS Council and in the World Intellectual Property Organization (WIPO).  In connection with geographical indications, the mandate under Article 23, paragraph 4, of the TRIPS Agreement states that negotiations shall be undertaken concerning the establishment of a multilateral system of notification and registration of geographical indications for wines and spirits.  Argentina, together with other Members (Australia, New Zealand and the United States, among others), has stated that such a system of notification and registration should not give rise to new obligations but should "facilitate" the protection of geographical indications.  Similarly, Argentina has repeatedly opposed the extension of the negotiating mandate, that is the extension of the negotiations on geographical indications to include products other than wines and spirits.

101.            Argentina plays an active role in the Working Group on Trade, Debt and Finance, based on the mandate given in paragraph 36 of the Doha Declaration.  In this connection, it submitted a Communication (WTO document WT/WGTDF/W/20) in April 2003 and made a statement (WTO document WT/WGTDF/W/33) in July 2005 as it holds the view that the relationship between a country's trade, its financial situation and its indebtedness needs to be examined.  Argentina therefore considers that the Working Group should be institutionalized so that, from a systemic perspective, through its analyses and proposals it can help to ensure that the multilateral trading system can offer developing and least-developed countries with external financial difficulties and a high external debt instruments that they can use to overcome such situations.

102.            In short, a central feature of Argentina's policy continues to be the assurance of implementation of their WTO commitments by all Members.  At the same time, in the negotiations under the present Round, Argentina continues to seek actively to ensure that the outcomes lead to a fair and balanced agreement which does not defer consideration of its national interest and those of the developing countries as a whole.

(c)                Argentina and regional integration

103.            Argentina regards economic integration agreements as an appropriate tool for reducing and gradually eliminating trade barriers, expanding markets and simultaneously strengthening the multilateral trading system as they pave the way for the ultimate goal set by the founders of the GATT, namely elimination of discrimination in international trade.  Accordingly, it participates in and champions integration both with the countries of the region and with those of other regions.

104.            Argentina is a member of the Latin American Integration Association (LAIA) and is a party to a number of the regional agreements adopted within its framework.  In particular, the Southern Common Market (MERCOSUR) has been incorporated in the above-mentioned Association under Partial Scope Economic Complementarity Agreement No. 18 (ECA 18).  Following establishment of MERCOSUR, preferential trade negotiations were conducted by the block with non-member States, leading in particular to the signing of Economic Complementarity Agreements with Chile (ECA 35) and Bolivia (ECA 36) and agreements with Colombia, Ecuador and Venezuela (ECA 59), Peru (ECA 58) and Mexico.

105.            Outside the LAIA, Argentina, as a State party to MERCOSUR, has signed a fixed preferences trade agreement with the Republic of India and another with the Southern African Customs Union (SACU).  It has also concluded framework agreements with Egypt, Morocco, Israel, the Gulf Cooperation Council and Pakistan.

106.            As regards other negotiations, MERCOSUR is holding talks with the European Union on the establishment of a political, economic and inter-regional cooperation association, and is involved in the negotiations for the establishment of the Free Trade Area of the Americas (FTAA).  As regards trade among developing countries, Argentina attaches great importance to the UNCTAD global system of trade preferences among developing countries (GSTP), having promoted the third round of negotiations launched in Sao Paulo, Brazil, which is currently ongoing.

(i)                 Argentina and MERCOSUR

107.            Argentina regards the Southern Common Market (MERCOSUR) as a central strategic project in its foreign policy and an important platform for promoting its further international integration.  Since the signing of the Treaty establishing MERCOSUR (1991 Treaty of Asunción), this regional integration agreement has become the priority regional integration objective of Argentina's foreign trade policy.  At the same time, MERCOSUR constitutes a key instrument for improving conditions of access for Argentine exports to other markets within and outside the region.

108.            Argentina took the decision to join the MERCOSUR regional integration project because regional and bilateral trade agreements between neighbouring countries, and more particularly, between developing countries, are an important and appropriate complement to worldwide trade liberalization based on the multilateral system.

109.            Argentina's membership of MERCOSUR, which is a customs union, means that some of its trade policy decisions are defined at MERCOSUR level.  Specifically, trade issues concerned with Argentina's relations with other non-MERCOSUR countries are covered by commitments undertaken at regional level.  In this connection, it is worthy of note that, as a result of the adoption of the Protocol of Ouro Preto (1994) and the establishment of the common external tariff (CET), the MERCOSUR partners agreed that they would negotiate free-trade agreements and trade preferences with third countries as a block.  In the year 2000, the partners ratified the decision to negotiate jointly and approved that commitment by means of Decision CMC32/00.

110.            Argentina takes an active part in the internal negotiations within MERCOSUR which, fifteen years after its formal establishment and with the end of the macroeconomic instability which plagued Member countries between the end of the past decade and the beginning of this one, has in recent years made important progress towards achieving its primary objective, that of establishing a common market based on the necessary consolidation of the customs union.  The advances made include effective application of the CET in most areas of trade with the rest of the world, with a reduction in the number of products included in the list of exceptions and the establishment of a timetable for their phasing out by the year 2008.

111.            At the same time, MERCOSUR is engaged in harmonizing the special import regimes currently applied unilaterally by the States parties, by which total or partial exemption from the CET is granted for specific imports of parts and components and inputs.

112.            As regards the free movement of goods within the customs union, substantial progress has been made on the drafting of the MERCOSUR customs code, computer interconnection between customs authorities, elimination of double charging of the CET and distribution of customs revenue.

113.            Progress has also been made in integrating production, through promotion of balanced industrialization among the partners.  To that end, meetings are encouraged between entrepreneurs from the four countries to define alternatives in respect of regional production complementarity and to cooperate with governments in identifying the changes in public policy necessary to intensify this process.  In that connection, work is proceeding on the programme of competitiveness forums, with the aim of identifying areas in which regional industrial complementarity favours a greater degree of specialization to improve efficiency and, through concrete measures, to make MERCOSUR products more competitive in the international market.

114.            Similarly, studies and projects are being conducted on investment in infrastructure in the MERCOSUR countries and their partners, as well as highway and energy integration, development of port facilities and a renewed impetus to shipbuilding.  In view of the differences in levels of development within MERCOSUR, the question of structural asymmetries has become increasingly relevant to the further integration agenda, especially since 2003.  Within this context, it is worth noting the creation of the MERCOSUR Structural Convergence Fund – FOCEM (Fondo para la Convergencia Extructural) which started to function in 2006.  This is the first community mechanism to permit a net transfer of resources from the larger to the smaller MERCOSUR economies.  The Fund is intended to finance programmes to promote structural convergence, develop competitiveness and foster social cohesion, particularly in the smaller economies and less-developed regions, and to support the functioning of the institutional structure and strengthen the integration process.

115.            The MERCOSUR Protocol on Government Procurement was also adopted during this period.  The Protocol improves the transparency of government procurement on the basis of the MFN clause and the granting of "national treatment" for most tendering procedures in respect of goods, services and public works.

116.            In December 2003, MERCOSUR approved two important instruments designed to deepen integration in the services sector:  (i) the MERCOSUR Visa, which eliminates restrictions on movement and work affecting natural persons supplying services within MERCOSUR, by establishing a harmonized and uniform procedure in respect of migration and work permits;  and (ii) the "mechanism for the temporary exercise of professional services", which eases the conditions for professional employment of persons who enter temporarily to provide a service.  Moreover, continued progress was made in negotiating the liberalization of the services sectors under the Montevideo Protocol on Trade in Services, which entered into force in December 2005.

117.            Further and deeper institutionalization of the integration process is an ongoing objective and recent advances in this area include the new dispute settlement system established under the Olivos Protocol approved in 2002.  The most important aspect of that Protocol is undoubtedly the introduction of a system of review of decisions, similar to the one provided for in the WTO Understanding on Rules and Procedures Governing the Settlement of Disputes.  The planned establishment of the permanent review court is aimed at fostering the uniform interpretation of the entire body of MERCOSUR legislation and establishing a common jurisprudence, so as to strengthen the institutional framework of MERCOSUR and give it greater legal stability.  The court will also be responsible for monitoring compliance with decisions and regulating the implementation of retaliatory measures.

118.            Another important feature of the institutionalization of MERCOSUR is the adoption of the Protocol establishing the MERCOSUR Parliament, which will be set up in 2006.  The Parliament, as a body representing the peoples of MERCOSUR, will become a common forum reflecting the pluralism and diversity of the region and contributing to democracy, participation, transparency and social legitimacy in the development of the integration process and its regulations.

119.            It is also important to note the role played by the Committee of Permanent Representatives of MERCOSUR in consolidating the integration process.  This body proposes concrete measures with a community focus to enhance social, political and parliamentary relations within MERCOSUR.  Rules were also enacted, inter alia, to transform the MERCOSUR Secretariat into a body with technical and not just administrative functions, and the basis was laid for the establishment of a regional parliament.

120.            The MERCOSUR Regional Employment Conference was held in April 2004 with the participation of the political sectors and social actors in the region.  Its aim was to place employment at the forefront of regional and national public policy.  In this connection, work is progressing on the MERCOSUR employment growth strategy, on the basis of the joint efforts of the Ministries of Labour, Economy, Education and External Relations of the States parties and the contribution of the trade unions and employers' organizations in the region.  The aim is to generate decent work and quality employment through the coordination of MERCOSUR's economic, trade, labour and social policies.

121.            Lastly, it is worthy of note, that the first enlargement of MERCOSUR was effected through the accession of Venezuela.  The terms and conditions of accession were set out in the Protocol of Accession of the Bolivarian Republic of Venezuela to MERCOSUR, signed at presidential level by the five countries on 4 July 2006.

122.            By fostering and following up all these actions, Argentina is promoting progress in the development and intensification of regional integration and the achievement of the main goal of the Treaty of Asunción, which is the establishment of the common market.

(ii)               MERCOSUR and the LAIA

123.            Recent years have seen the deepening of agreements to liberalize trade among Latin American countries in the framework of the Latin American Integration Association (LAIA).  MERCOSUR has played a dynamic role in this process.

124.            Specifically, MERCOSUR was incorporated in the above-mentioned Association through Partial Scope Economic Complementarity Agreement No. 18 (ECA 18).  On that basis, common preferential trade negotiations were conducted between the States parties to MERCOSUR and third States, leading in particular to the signing of Economic Complementarity Agreements with Chile (1996) and Bolivia (1997), whereby they became associate members and have been granted regular increases in margins of preference for the achievement of an expanded free-trade area.

125.            In addition, through MERCOSUR, Argentina negotiated Economic Complementarity Agreements during the period covered by this review, which provide for the establishment of free- trade areas, to be concatenated by 2008, with Colombia, Ecuador and Venezuela (ECA 59, signed in 2004) and by 2019 with Peru (ECA 58, signed in 2005).

126.            Economic Complementarity Agreement No. 54 (ECA 54) between MERCOSUR and Mexico was signed in 2002.  This is a framework agreement for the establishment of a free-trade area, whose coverage extends, inter alia, to the agreements concluded or to be concluded by the United Mexican States with each of the States parties to MERCOSUR in the framework of the 1980 Treaty of Montevideo.  Moreover, MERCOSUR and Mexico have signed Economic Complementarity Agreement No. 55 with the aim of promoting the integration and complementarity of production and laying the groundwork for the achievement of free trade in the automotive and auto-parts sector.

127.            On the basis of ECA 54, Argentina and Mexico have promoted the expansion of their bilateral relationship, signing a supplement to Economic Complementarity Agreement No. 6 in 2006, which provides for reciprocal liberalization within a period of ten years for a large range of products in their reciprocal trade.

128.            Agreement was reached in 2006 on the Second Additional Protocol to Appendix I on trade in the automotive sector between Argentina and Mexico, under Economic Complementarity Agreement No. 55 between MERCOSUR and Mexico.  The Protocol provides for the liberalization of trade (zero tariff) for roughly 100 tariff items in the auto-parts sector.

129.            Also in 2006, an Economic Complementarity Agreement was signed between MERCOSUR and Cuba, which provided for the extension of the existing bilateral agreements between the MERCOSUR States parties and that country.

(iii)             MERCOSUR and the FTAA

130.            Argentina is participating in the negotiations to establish a Free Trade Area of the Americas (FTAA), whose objective is the gradual elimination of tariff barriers among the countries of the western hemisphere.  The negotiating format was modified at the Eighth Ministerial Meeting (Miami, 2003), as it was not possible to overcome the substantial differences regarding definition of the level of ambition in various areas of negotiation, particularly agriculture.

(iv)             Extra-regional agreements in MERCOSUR

131.            Argentina, through MERCOSUR, has signed various framework agreements.  The first was the one between MERCOSUR and the Republic of South Africa, signed in 2000.  This is a framework agreement for the negotiation of a free-trade area, which was subsequently extended to the remaining members of the Southern African Customs Union (SACU).  In December 2004, both parties signed a fixed preference agreement whose schedules of concessions are currently being finalized.  Protocols were also signed on customs cooperation, the MERCOSUR-SACU Sanitary and Phytosanitary Agreement, Trade in the Automotive Sector, and Fisheries.  This agreement represents a first step towards the negotiation of a free-trade area.

132.            Negotiations with India on a fixed preference agreement were initiated in 2003 and concluded in December 2004, making this the first agreement signed by MERCOSUR with a country outside the Americas.  The agreement contains lists of eligible products as well as annexes on rules of origin, safeguards and dispute settlement.  This agreement is currently under consideration in the respective Parliaments and is expected to be ratified in the near future.  The agreement itself provides for a second round of negotiations, for the establishment of a free-trade area.

133.            In 2004, MERCOSUR signed two further framework agreements with Morocco and with the Arab Republic of Egypt, both geared to the granting of fixed preference concessions between the two parties, as a first step towards a free-trade area.  Furthermore, in 2005, a framework agreement was signed with the Gulf Cooperation Council (Saudi Arabia, Bahrain, the United Arab Emirates, Kuwait, Oman and Qatar) under which the establishment of a free-trade area is being negotiated.

134.            In 2006, MERCOSUR made progress in the negotiation of a free-trade agreement with Israel, and a framework agreement on trade was signed with Pakistan, which establishes a basis for trade negotiations leading to the adoption of a fixed preference agreement.

135.            In addition, a MERCOSUR-China liaison group has been established to follow up and implement cooperation projects between the two parties and to establish coordination for resolving any situations or problems that may arise.  Contacts are also maintained with the Republic of Korea, the Dominican Republic, Panama, CARICOM, Sao Tomé and Principe, Guinea-Bissau, the Central American Integration System (SICA) and Japan.

(v)               MERCOSUR and the European Union

136.            In 2000, MERCOSUR and the European Union entered into negotiations on the establishment of an inter-regional association agreement, which includes chapters concerning political dialogue, cooperation and trade liberalization.  As in the case of multilateral negotiations, Argentina is proposing ambitious targets which take account of mutual interests and the overall balance of offers.

137.            During the negotiating rounds and technical meetings, both parties have worked toward achieving an ambitious agreement.  Thus far, it has not been possible to conclude the work given the absence of equivalent offers in the different areas.

(vi)             Global system of trade preferences

138.            In the multilateral sphere, MERCOSUR also attaches importance to accelerating the pace of negotiations under the global system of trade preferences among developing countries (GSTP), with the aim of achieving a comprehensive agreement in the course of 2007.  In the context of Round III of the GSTP and under the presidency of Argentina, MERCOSUR drew up a proposal on negotiating techniques and modalities for market access, based on two guiding principles:  a high level of ambition and the simplicity of the instruments selected.

139.            The effective organization of the GSTP will make it possible to expand markets for Argentine products, make better use of the capacities of the countries that are parties to the agreement, diversify production structures, increase efficiency and contribute to the growth of the international economy.  At the same time, the agreement will represent a qualitative step forward in the role of developing countries in international trade and will confirm the developing countries' firm commitment to the multilateral system and the liberalization of trade flows.

(3)               Trade Promotion

140.            The management of external trade promotion at national level is a task conducted by more than one entity in Argentina.  Ministerial Law No. 22.520 (text harmonized by Decree No. 498/92) stipulates that, in the area of trade promotion policy, the Secretariat of Industry, Trade and Small and Medium-sized Enterprises of the Ministry of the Economy and Production is involved in setting the policy, while the Secretariat of Trade and International Economic Relations of the Ministry of External Relations, International Trade and Worship, through the Undersecretariat for International Trade, bears prime responsibility for implementation. 

141.            Thus, multisectoral trade missions to foreign countries are organized, headed by senior national and/or provincial government officials, targeting markets where opportunities for the growth of Argentine exports have been identified, as well as various campaigns to publicize trade and investment offers and opportunities, the participation of businesses in international trade fairs and other measures, including the organization of special promotion activities.  Another noteworthy aspect is the active participation of provinces and municipalities in trade missions by businesses.  The programmes in force are implemented in conjunction with the federal institutions, in accordance with Argentina's political structure and the management of trade promotion.

142.            One important feature of the function of trade promotion carried out by the Ministry of External Relations is the design of the "Argentina Trade Net" business portal, which began functioning in October 2004.  The basic aim of this programme is to promote foreign trade through the centralization and standardization of information generated by embassies, consulates and promotion centres, so that Argentine enterprises can have direct access to updated data on international demand free of charge.

143.            Mention should also be made of the Fundación Export.Ar, a major trade promotion agency set up in 1993 as a non-profit-making organization with public and private sector funding (the private sector being represented by various business chambers).  Its activities are supported by the 120 embassies, consulates and economic and trade units of the various Argentine missions throughout the world.  Some of the main services provided by this entity to exporting enterprises are the following:  trade promotion programme, exporters group programme, international trade fairs, trade missions, business agendas (Agenda de Negocios) and reverse business agendas (Agenda de Negocios Inversas) etc.

144.            The Undersecretariat for Small and Medium-sized Enterprises and Regional Development of the Ministry of the Economy and Production also generates trade promotion instruments and mechanisms with a view to securing greater participation by small and medium-sized enterprises in export activity.  The most noteworthy mechanisms used by this entity include the following, inter alia:  support programme for exporter groups and consortia;  first export support programme;  information system on foreign trade;  and register of exporting SMEs.

145.            This agency has also developed the pro-Argentina.gov.ar portal, devised to promote exports by roughly 9,000 exporting SMEs.  Essentially, enterprises can use this portal to make their export potential known to the rest of the world and to gain access to market surveys.  The portal includes a directory of exporting SMEs with data on their products and services, information on exportable products, events, missions and trade fairs in Argentina and abroad, together with a special database for foreign users, commercial opportunities and market profiles.


IV.              sustainability of trade policy

146.            Despite having suffered the worst crisis in its history in 2001-2002, Argentina recovered rapidly thanks to the strenuous efforts of its Government and people.  The persistence of the current conditions of macroeconomic stability, based on the floating exchange rate, the fiscal surplus, monetary prudence and the active role of the State in promoting economic activity and foreign trade, make it likely that the economy will sustain its recovery and enter into a prolonged cycle of more equitable growth.

147.            Argentina considers that its economic development potential hinges crucially on avoiding crises in the external sector, such as those that occurred in the past as a result of violent macroeconomic upheavals that had an impact on finance, production and society, entailing serious losses of human and material capital.  Thus, the Government has placed strong emphasis on plotting a course of sound external sector management for the sake of harmonious long-term development, by creating the necessary conditions to expand exports of goods and services and attract investment and technology.

148.            In this new phase for Argentina, government policy is aimed at maintaining a healthy trade surplus, a novelty in the country's economic growth cycles, by stepping up its efforts to achieve greater diversification of products and markets, increase the proportion of non-traditional goods that are exported, and increase the number of exporters, especially exporters of manufactures.  However, the possibility of a significant enhancement of Argentina's presence in world trade depends not only on continued gains in output and competitiveness, but also on the country achieving greater market access, especially in sectors where it is more competitive, such as agriculture.

149.            With those aims in view, Argentina has established a trade policy devised as a system of instruments and measures which determine its external integration along with the achievement of economic development.  To that end, priority has been assigned to the successful establishment of stable and predictable conditions of market access in all areas (multilateral, regional and bilateral).  At the same time, through various instruments of public policy, Argentina is promoting export potential appropriate to the characteristics and requirements of external demand, while improving the competitiveness of production sectors and expanding the export base.

150.            The prospect of stable and predictable market access is essential for the purpose of attracting investment to the export sectors.  This should be complemented by competition policies that ensure improved integration into the international production chains so as to produce goods with higher value added.  In this connection, technological development and better training of the work force, with State backing, play a fundamental role.

151.            At the same time, the participation of small and medium-sized enterprises in external sales has an important role to play in diversifying export potential, bearing in mind that a high proportion of such enterprises export industrial manufactures.  Given that enterprises of this kind are more labour intensive, greater international integration is directly dependent on job creation.  In view of the sporadic pattern of foreign sales by such firms in the past, the Argentine State is building the institutional foundations needed to ensure their sustainable participation in the export trade.

152.            In the area of trade policy, Argentina assigns a role to multilateral negotiations, which is reflected in its active participation in the World Trade Organization (WTO).  Argentina reaffirms its commitment to the multilateral system and is doing its utmost to achieve the objective of open and fair world trade, facilitating the expansion of market access and thereby making a clear contribution to the sustainable development of Member countries, especially the developing countries.  In the present Doha Round, Argentina is seeking to achieve concrete outcomes which improve its potential for international integration, by placing strong emphasis on the liberalization of agricultural trade and the achievement of equitable outcomes in respect of industrial products and services, so as to facilitate the implementation of its industrial and economic diversification policy.  This will help to create the necessary conditions for ensuring an improvement in the quality of employment and its sustained growth.

153.            Regional integration is another basic instrument for increasing and improving the quality of Argentina's integration into the trading system.  In this connection, the development of MERCOSUR, and the consequent consolidation of the trade links among the countries of the region, boosts their intra-industry trade, a fundamental step towards MERCOSUR's integration into world production chains and towards the diversification of its production and export structure.

154.            MERCOSUR is an essential element of Argentina's trade policy and its unshakeable objective is to establish a common market among the member countries through the consolidation of the customs union.  At the same time, through MERCOSUR, Argentina plays an active role in integration with Latin America and with the other countries and regions of the world seeking the development of fair and equitable trade.

155.            In short, Argentina's further integration into the world economy is based both on an active trade policy which seeks to expand opportunities for access to external markets by Argentine companies, and on an economic policy that permits sustainable growth and encourages investment in the export sectors.

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