Slamming the Door on Trade Policy Discretion? The WTO Appellate Body\u27s Ruling on Market Distortions and Production Costs in EU—Biodiesel (Argentina)

This paper presents a legal-economic analysis of the Appellate Body′s decision in EU-Biodiesel (Argentina) that the WTO′s Anti-Dumping Agreement (ADA) does not permit countries to take into account government-created price distortions of major inputs when calculating anti-dumping duties. In this case, the EU made adjustments to the price of biodiesel′s principal input - soybeans - in determining the cost of production of biodiesel in Argentina. The adjustment was made based on the uncontested finding that the price of soybeans in Argentina was distorted by the existence of an export tax scheme that resulted in artificially low soybean prices. The Appellate Body found that the EU was not permitted to take tax policy-induced price distortions into account in calculating dumping margins. We analyze the economic rationale for Argentina′s export tax system, distortions in biodiesel markets in Argentina and the EU, and the remaining trade policy options for addressing distorted international prices. We also assess whether existing subsidies disciplines would be more effective in addressing this problem and conclude that they would not

MEASURING MARKET INTEGRATION IN THE GLOBAL ECONOMY

The increased level of market integration in the processed food industry through trade, foreign direct investment, and the expanded use of intellectual property rights are an observed phenomenon of the past three decades. Measurement of market integration is problematic, and the role of FDI in market integration has not been adequately taken into consideration. This study measures the growth in the market shares of multinationals in selected countries and industries to indicate the degree of market integration. We also employ a market share convergence type model to estimate whether the market shares of the multinationals and domestically owned firms in key markets have converged to some steady state during the years 1991 to 2003.Processed food industry, global integration, market shares, Argentina, Brazil, U.S., International Relations/Trade,

Doing Business in Argentina

[Excerpt] Foreign investors enjoy the same rights and undertake the same duties as domestic investors when investing in financial or productive activities. Generally, Argentine Law does not set any restrictions or prohibitions on foreign investments. They are no longer subject to prior government approval beyond those applicable to any domestic or foreign investor in each particular activity. The Ley de Inversiones Extranjeras (Foreign Investment Law) (hereinafter referred to as the “FIL”) (Law No. 21,382/76) was amended several times for the purpose of achieving a liberalization and deregulation of said investments. It was recently amended by Law No. 23,697 and Executive Order No. 1,853/93. The FIL sets forth that foreign investors shall be treated as local investors, provided they invest in productive activities. (i.e., industrial, mining, agricultural, commercial, service or financial activities, or any other activities related to the production or exchange of goods or services). Investments may be made in: (i) foreign currency; (ii) capital assets, (iii) profits from other investments; (iii) repatriable capital resulting from other investments made in the country; (iv) capitalization of foreign credits; (vi) certain intangible assets; (vi) other forms acceptable to the foreign investment authorities or contemplated by special legislation

Transmission of External and Internal Shocks In Argentina During the Convertibility Period: Some Empirical Findings From VARs

We use VARs to study the transmission of shocks in Argentina during the currency board regime. We focus on shocks to international commodity prices, U.S. monetary policy, the real effective exchange rate, and the sovereign risk premium on emerging market debt. Of those factors, only the sovereign risk premium affects output significantly, which we believe is really a proxy for beliefs about fiscal solvency. Both the monetary base and money market interest rates react to U.S. monetary policy, but such shocks do not affect Argentine output significantly. Finally, it does not appear that the appreciation of the U.S. dollar affected the economy adversely.International Transmission; Argentina; Currency Board; Monetary Policy.

Argentina\u27s System of Foreign Investments

The purpose of this article is to provide the practitioner with an understanding of Argentina\u27s foreign investment norms, supply some general information related to this area and, whenever possible, explain how the authorities have applied the law to specific cases. A discussion of the Anglo-Argentine South Atlantic confrontation and its effect on foreign investment is included

After Argentina

Argentina recently completed the largest sovereign bond restructuring in history. As soon as the government announced the results of its $100 billion tender in March 2005, editorial pages worldwide heralded a new era for sovereign debt, for the emerging markets and, occasionally, for international finance. Their views on Argentina\u27s lessons were as disparate as they were definite. Some said the exchange would close the markets to middle-income countries. To others, it reaffirmed the markets\u27 resilience. Some claimed it proved the need for statutory sovereign bankruptcy. Others said it clearly discredited the idea. Most spoke too soon. The deal took months to settle, and by the time it did, it had confirmed many presumptions about emerging-market debt and shattered none. The real lessons of Argentina\u27s restructuring so far are more subtle and complex than the surrounding commentary. The default and the debt exchange were both points in a longer financial restructuring process that began before the default and will go on for years after the exchange. Argentina\u27s unorthodox debt management immediately before and after the default is partly responsible for the outcome of the exchange. With$25 billion in defaulted debt still outstanding, Argentina\u27s most important innovations may well be ahead

Bargaining and sustainability: the Argentine debt swap of 2005

When Argentine sovereign default in December 2001 led to a collapse of the peso, the burden of dollar debt became demonstrably unsustainable. But it was not clear what restructuring was feasible, nor when. Eventually, in 2005 after a delay of more than three years, a supermajority of creditors accepted a swap implying a recovery rate of around 37 cents in the dollar. In this paper a bargaining approach is used to explain both the settlement and the delay. We conclude that the agreed swap broadly corresponds to a bargaining outcome where the Argentine government had “first mover” advantage: and that substantial delay occurred as negotiators seeking a sustainable settlement waited for economic recovery. Factors not explicit in the formal framework are also considered -- heterogeneity of creditors, for example, and the role of third parties in promoting “good faith” bargaining

Debt Management: Some Reflections Based on Argentina

A good liability management strategy is one that helps minimize the cost of borrowing over the medium and long term. The objective is not to save the last basis point in each transaction, but rather to bring down the overall borrowing cost. This paper uses Argentina`s experience to illustrate some important elements in the design of a liability management strategy. It takes into account the specific characteristics of the Argentine capital market and of the debt instruments that are available.

Is Informal Sector Work an Alternative to Workfare Benefits? The Case of Pre-Program Expansion and Economic Crisis

Limited availability of workfare programs and unemployment insurance and a large informal sector are features of the Argentine labor market at the outset of the 2001 economic crisis. This paper tests the hypothesis whether informal work is an alternative to workfare participation before a large-scale program expansion took place. Results from the propensity score matching indicate that observable characteristics of informal low-income workers and current workfare participants are significantly different. However, within these groups, it is possible to identify subgroups that exhibit similar observable characteristics. This indicates that only a subset of the individuals sees workfare and informal sector work as substitutable alternatives.South America, Argentina, informal labor market, workfare program, propensity score matching