MercoPress. South Atlantic News Agency

EU ready to cut trade benefits to Argentina because of YPF; warns the region on growing protectionism

De Gucht demands Brazil adopt a stronger position in the case of Argentina

European Trade Commissioner Karel de Gucht expressed concern Monday over what he called a “growing tendency towards protectionism across Latin America” and warned Europe is preparing retaliation measures against Argentina after YPF expropriation

“We will soon be moving forward with a response to Argentina's action in the Repsol case,” the official said during a speech at the EU-Brazil Conference, in Brussels.

The EC is already planning to file a complaint with the World Trade Organisation (WTO) in the next four weeks over Argentina’s alleged use of protectionist measures which harm European businesses – such as the use of non-automatic import licensing or pre-registration of imports.

But while the Lisbon Treaty specifies that the EU commercial policy is an exclusive competence of the Union, the Commission is still unable to take any legal actions before the WTO regarding YPF because of the lack of investment provisions in the multilateral agreements.

EU retaliatory measures explicitly aimed against Argentina over the Repsol case will therefore most likely take the form of a reduction of the country’s trade preferences with the Union by cutting it out of the EU Generalised System of Preferences (GSP).

Spain has already been calling upon De Gucht to remove the GSP benefits for Argentina. However, if De Gucht goes ahead with the move, it will only come after the complaint is filed with the WTO.

De Gucht also warned of a “growing tendency towards protectionism across Latin America,” urging Brazil to take a tougher stance on Argentina instead of adopting a number of “questionable policies” of its own.

“While Brazil has been heavily affected by Argentina’s import licensing regime, for example, its leaders have not yet taken a strong public stand against it,” De Gucht noted. He argued that, as 20% of Brazil’s exports are to other Latin American countries, it could only benefit from an integrated Latin American region.

Officials from both Spain and the EU institutions have warned against the negative impacts of recent protectionist measures on the negotiations of a free trade agreement (FTA) between the EU and Mercosur (Argentina, Brazil, Paraguay and Uruguay).

Brazil will be taking over the presidency of Mercosur from Argentina in July, which “means there is a window of opportunity to make progress,” according to De Gucht.

Negotiating an FTA “is in the best interest of our citizens on both sides of the Atlantic and in each of our countries,” said MEP Joseph Daul (France), chair of the European People’s Party (EPP). “If we don’t, it would be a suicidal strategy for globalisation: let’s overcome our differences and move forward,” Daul said.