MercoPress. South Atlantic News Agency

Milk and flour add to Chile/Argentina trade disputes

Argentina has begun steps to take Chile to the World Trade Organization in protest for the stamping of tariff safeguards on Argentine dairy imports.

Diplomatic sources in Santiago confirmed this week that the Argentine government called Chile for a round of consultations, which is the first step in the WTO process. If no agreement is reached in this stage, the issue could then be referred to a WTO arbitration panel.

Last August when the Chilean federation of dairy farmers and the Santiago government agreed there was an unusual surge in dairy imports from Argentina, president Nestor Kirchner administration announced "it was prepared to take the issue to the WTO, if necessary".

At the beginning of October the Chilean Market Distortions Committee accepted the dairy farmers' federation arguments and stamped a provisional 23% additional tariff on imports of liquid milk and gouda cheese.

However Argentina argued the decision was "arbitrary" since following on WTO thinking, the additional tariff was only "applicable to Argentine dairy imports".

But Argentina's Embassy Trade Department in Santiago downplayed the incident.

"No conflict has been unleashed", said diplomat Mario Verón Guerra adding that Argentine dairy imports are marginal for the Chilean dairy industry.

Neither Chile's Agriculture nor Foreign Affairs ministries commented on the latest events of the dairy dispute.

The 23% additional tariff is provisional with a maximum effective period of 200 days, following which if there's no agreement it becomes permanent.

This is the second major Argentine-Chilean dispute over agriculture. Next December a decision must be taken regarding Chilean import safeguards on Argentine wheat flour that were imposed at the end of 2004.

Since Chile can no longer extend the wheat flour safeguards Chile's Millers Association has requested the Market Distortions Committee impose compensatory rights thus avoiding the "massive influx" of Argentine flour.

Chile's Agriculture Association president Luis Schmidt went even further and requested the maximum tariff increase possible in the framework of WTO, which is in the range of 32.5%, beginning 2007.

"We are to about start the wheat harvest in central Chile and we need a solution to this problem that remains as a threat for Chilean farmers", underlined Mr. Schmidt.