MercoPress. South Atlantic News Agency

Chile looses wheat safeguards case with Argentina

Chile is preparing to appeal a World Trade Organization ruling which states that the price band system applied to safeguard Chilean farmers from Argentine imports of wheat, wheat flour and edible vegetal oil is not compatible with WTO regulations.

The WTO decision states that by maintaining a border measure similar to a variable import levy and to a minimum import price, Chile is acting in a manner inconsistent with Article 4.1 of the Agreement on Agriculture and has thus failed to implement the recommendations and rulings of the Dispute Settlement Body.

In practical terms this means Chile is not abiding by WTO mechanisms and therefore must dismantle the system, a fact admitted by Chile's Agriculture minister Alvaro Rojas who said alternatives have been under consideration for over a year.

However according to Rojas, Chile will appeal the WTO ruling since it disagrees with the arguments exposed by Argentina in the demand. But trade experts admit Chile could be facing a "lost battle".

Chile basically argues that the price band was created to protect Chilean farmers from Argentine production prices. For the same reasons, a similar safeguard measure was applied since October 2006 provisionally to Argentine milk and Gouda cheese.

Chilean farmers claimed that a withdrawal of the price band would imply to the Chilean government a huge amount of domestic legal demands. Fernando Serrano, president of the "Consorcio Agrícola del Sur" argues that the government compromises go back to 2003 when they signed an agreement with farmers to keep this system unchanged until 2014.

Chile has from January 8 to February 6 to appeal before the WTO, with a definitive resolution some time at the end of April, early May.

Minister Rojas said that whatever the final outcome it will not have an impact on this season's wheat harvest and insisted that the bands system does not contradict international trade, "as we are convinced together with previous administrations and the Chilean farming sector".

Some of the alternatives admitted by Minister Rojas are replacing bands by safeguards to wheat, compensatory levies, and tariffs or anti dumping measures

Regarding wheat flour one of the options considered is an anti-dumping levy of 16.2% to compensate price differences with Argentina.

Chile argues Argentina has regulated prices for cereals, below international values to protect the domestic market, plus "subsidized" energy costs.

Uruguay and Brazil which have also mounted systems to protect their wheat farmers from Argentine cereal production could also be affected by the latest WTO decision.

In related news the Chilean government is considering sending a high level delegation to Tokyo following the discovery by Japanese Customs of "fraudulent" shipments of Chilean beef and wine.