Dispute Settlement between Developing Countries: Argentina and Chilean Price Bands26/11/2010
Diana Tussie and Valentina Delich*
* FLACSO, Argentina
The WTO is playing a novel role in regional trade relations. Access to a multilateral dispute settlement system is helping to scrutinize and anchor the more lax regional disciplines. Although accessible only to highly profitable sectors because participation is too costly and time consuming, the WTO provides the intangible benefit of exposure. Pressure through exposure can help countries unable or unwilling to retaliate to obtain more favourable results than in bilateral or regional instances. In fact, WTO rulings act as a magnifying glass of countries’ (WTO-incompatible) trade policies. In this picture, reputation, a high-value asset to attract business and negotiate trade agreements, is thus at stake. A dispute between Argentina and Chile over variable levies for edible vegetable oils is a case in point.
I. The Problem in Context
After a tariff reclassification in 1999, the Chilean price band system (PBS) resulted in higher customs duties for edible vegetable oils. In normal circumstances Argentina might have been able to absorb the drop that this implied in market share, but the restriction came in a very threatening international context for the sector. This is a flagship sector in Argentina: it weighs heavily in trade and production and thus its interests cannot be dismissed lightly. As a result, this issue became the first legally handled dispute with a regional partner to be submitted to the WTO. Due to the number of coterminous issues that peppered the relationship between the two countries, shelving for political reasons was always a risk.
Argentina is one of the top vegetable oil producers in the world. Total production, which includes soy, sunflower, peanut, olive, cotton, linseed, corn, turnip, edible mixes and tung oils, amounted to about 5, 283 thousand tons in 2001 (CIARA 2004). Nearly all domestic production is exported, with foreign sales varying between 80% and 90% of total production. Low domestic consumption, together with high productivity turns Argentina into the leading world exporter of sunflower and soy oil, followed by Brazil and the United States. Currently, exports of vegetable oil and fats represent about 28% of the value of total food exports and around 10% of the value of total exports.
Export performance has been erratic over the last seven years, due mainly to international market circumstances. Changes in both global demand and supply of grains led to a price drop in 1997—2001. On the demand side, south-east Asia and Russia, two of the most important buyers, were undergoing deep economic crises and thus making decreased purchases. On the supply side, the implementation of the deficiency loan system for soy in the United States, the production of Round-up-Ready (genetically modified) soy and a record harvest of sunflower and soy in two of the main world producers, namely Argentina and Brazil, contributed to increased global production of seeds. In particular, during the period 1999—2001 prices were 10% lower than those registered at the beginning of the decade and almost 40% below the 1997 peak (Schvarzer and Heyn 2002: 7). Locally, the collapse of prices meant that seven factories closed. Even the biggest companies were struck: Molinos closed one of its plants and dismissed 270 employees.
The price drop affected the operation of the Chilean PBS: it resulted in the collection of ad valorem customs duties of up to 64.41% for oils and 60.25% for wheat flour in 2000, thus violating the ceiling set at 31.5% in the Uruguay Round. At that time the Chilean market was purchasing about half of Argentina’s total exports of mixed oils (US$26 million). Sales of oil mixes to Chile soared while total exports to this market began to contract due to a fall in soy and sunflower that had been the object of safeguard measures. The Chilean market, despite its small size (US$80 million), was strategic in the sense that geographical proximity translated into accessibility for small and big exporters alike.
The determination of business to litigate was stoked when Chile reimbursed to Bolivia, but not to Argentina, duties collected on a (subsequently lifted) safeguard.(1) Moreover, collective action was relatively easy to articulate, given that production is highly concentrated. Pressure to take Chile’s measures to the multilateral dispute settlement system mounted and finally the government decided to do so. The fact that the Andean Community also has a PBS in place attracted the interest of business in turning the result of the conflict into an exemplary action of broader regional consequence.
The multilateral legal incident
It was not until diplomacy and regional jurisdictional representation proved ineffective that the conflict escalated to the multilateral level. Argentina first submitted the dispute to the Administration Commission of the Mercosur—Chile Agreement (Economic Complementary Agreement 35 (ECA35)). Chile had made a commitment in ECA35 neither to include more products nor to modify in any other way its PBS. After obtaining a favourable (though not binding) recommendation from the regional Group of Experts, Argentina decided to raise the issue at the WTO when Chile’s reluctance to comply became obvious.
At the WTO, the dispute revolved principally around two issues:
- whether the PBS was a violation of GATT Article — (bound tariffs); and
- whether the PBS was the kind of measure that should have been ‘tariffied’ according to Article 4.2 of the Agreement on Agriculture (AA).(2)
The PBS applies to agricultural products. When a product subject to the PBS arrives in Chile, the customs official will impose the ad valorem duty (8%) only when the reference price (RP) falls between the lower and upper thresholds of the PBS. The RP is not the price of that particular transaction but a price that the Chilean authorities determine each Friday using the lowest free on board (FOB) price in so-called markets of interest.(3) The applicable RP for a particular shipment is determined with reference to the date of the bill of lading. Once the reference price for the shipment has been determined, the customs official proceeds to compare it with PBS thresholds. The PBS, in turn, is determined annually on the basis of FOB prices observed on particular international markets over the course of the preceding 60 months. Unlike the prices used for the composition of the PBS, the reference prices are not subject to adjustment for ‘usual import costs’. If the RP is below the ‘floor’, the customs officer will impose specific duties to reach the floor. If the RP is above the floor, then the officer must reduce the duties down to the floor price.
Argentina argued that the PBS violated Article II(b) of GATT 1994 on the grounds that by virtue of its structure, design and mode of application it potentially led to the application of specific duties in violation of the Chilean bound tariff. Argentina alleged that in practice the PBS resulted in the collection of ad valorem customs duties exceeding the bound ceiling tariff of 31.5%. In addition, Argentina considered the PBS to be a variable levy or a minimum import price inconsistent with the AA, since Article 4.2 required that such measures be converted into ordinary customs duties.
Chile argued, in contrast, that the PBS duties are ordinary customs duties and therefore not subject to tariffication, and that there are two separate conditions to be met for a measure to be prohibited: it must be listed in Article 4.2 note 1(4) and it must be requested by a member country. The PBS was not listed and no member had ever requested tariffication. In addition, Chile argued that ECA35 was signed after the Uruguay Round; since it explicitly allows the PBS,(5) Argentina cannot claim that the PBS is prohibited.
The panel found that the PBS was a measure of the kind which should have been converted into ordinary customs duties and that by maintaining it, Chile had acted inconsistently with the AA. The panel also found that PBS duties could be considered as ‘other duties or charges of any kind’ imposed on or in connection with importation, under the second sentence of Article II(1)(b). Since Chile did not record its PBS in the ‘other duties and charges’ column of its Schedule, the panel found that the duties were also inconsistent with Article II(b) of GATT 1994.
The panel recommended that Chile bring the questioned measures into conformity with its multilateral obligations (April 2002).(6) The route to this pronouncement was marked by an interactive, time-consuming and costly process of building legal arguments and finding economic data. The Argentine government juggled constantly to avoid issue-linkage and political tension with Chile while at the same time upholding the claim of business. In the section that follows, we present the main attributes and idiosyncratic characteristics of the actors involved and the way in which they interacted in this case.
II. The players
The main Argentine players at the multilateral level were the government, in particular the Directorate for Multilateral Dispute Settlement (DISCO) at the Foreign Affairs Ministry, and the oil sector, in particular the Association of Argentine Edible Oil Industries (known by its Spanish acronym, CIARA). Other players included public officials in the Economy Ministry, the law firm contracted to work on the Argentine side and the freshly inaugurated business think tank, the Institute for International Agricultural Negotiations (Spanish acronym INAI). We first introduce the institutional/organizational features of the public sector, then profile the private sector and finally the way in which they interacted to build the case through the different for a and contexts.
The public sector
The process for requesting the government to pursue a trade dispute using the WTO Dispute Settlement Understanding has not been subject to regulation. There are no standing operating procedures to deal with a claim stemming from business or any guidelines on how different government offices should co-operate on bringng a case. There are no established proceedings for matters such as the window to which business must direct this kind of claim; what evidence must support it; how the government must handle the claim in terms of administrative proceedings; or under which circumstances the government should advance the private sector’s claims or not. In practice, the Ministry of Foreign Affairs puts together the cases and then upholds them internationally. While the decision to open a consultation (or to settle a dispute) always involves a political decision, the responsibility for its development, the co-ordination with business, the daily management of the dispute as well as the leading technical role pertains to DISCO. Since its creation in 1999, DISCO has managed thirty-nine conflicts, including consultations, mutually agreed solutions and panels. Considering Argentina’s negligible share of world trade, the number of cases is relatively high.
In contrast to the procedural void for WTO claims, the steps for business petitions are clearly stipulated within Mercosur’s dispute settlement system. The first step in a Mercosur controversy is usually a consultation through the Trade Commission (headed by the Economy Ministry). If the conflict leads to the establishment of a Mercosur tribunal, the Economy Ministry retains a leading role throughout the case.(7)
Interestingly enough, in the Mercosur—Chile Agreement, private-sector petitions for dispute settlement are not contemplated. However, the legal officer who handles Mercosur disputes in the Economy Ministry was also in charge of Mercosur— Chile, interacting with the private sector in the same manner as if it were a Mercosur case.
I am a member of the Administration Commission of ECA35 and therefore I was fully acquainted with all the details. I am in charge of Mercosur cases. Given that the Foreign Affairs Ministry desk that oversees Mercosur—Chile relations does not have dispute settlement experience, the Economy Ministry took the lead in this case: my interaction with private sector was not impaired by the lack of a formal procedure for petition.(8)
A flagship sector
The industry is a flagship business. First, foreign sales represent about 10% of total exports, in a context in which foreign currency is badly needed for complying with external payments. Production and commercialization generate about 8.5% of total employment (Bertello 2004). Second, the concentration of plants (and its upstream and downstream activities) in powerful provinces allows the industry to carry additional clout. Finally, the fact that there are relatively few actors makes collective action relatively easy to articulate.
Locally owned companies account for most of the production. Co-operatives have lost market share while foreign-owned plants have stepped up production capacity since 1994 and have notably increased their leverage within the sector (Ferrugia and Guerrero 2000: 122—5). The main exporters are Cargill and Vicentin. In 2001 Aceitera General, Deheza, Dreyfus and Bunge Argentina started to compete with Vicentin for second place; these five companies have gained market share rapidly, reaching more than 70% of the market today.
The logic of collective action is essentially co-operative. As a business source noted, ‘Generally, we consult and take steps to act together as Argentine companies in international conflict situations.’(9)
Companies articulate their demands through CIARA, which acts as broker and spokesperson and has a fluid and long-standing relationship with the government. CIARA was set up in 1980 with the objective of protecting and promoting the interest of the oilseed processing industry, and it now groups most of the vegetable oil and protein meal producers. When facing barriers in foreign markets, collective action is the first move. But once preliminary studies estimated the cost to be as high as US$1 million to initiate a case on soy, some companies opted out. At times a company decides to invest in the protection-seeking country rather than litigate, as was the case with anti-dumping duties in Peru.
In addition, INAI, the business think tank, provided technical assistance. INAI has a small but highly qualified staff — a manager, two lawyers and an economist. It was originally created in 1999 by the three Grains Exchange Markets ( Rosario, Bahia Blanca and Buenos Aires) with the aim of strengthening capabilities for dealing with agricultural negotiations. Subsequently other organizations joined, CIARA being one of them.
Altogether, cohesiveness, ‘political muscle’ and expertise were the three pillars on which business proceeded following the initiation of demands.
III. The process and the outcome
The conflict was first brought to a regional forum: the ECA35 Administration Commission. The legal officer at the Economy Ministry in charge of Mercosur dispute settlement was responsible for oral presentations and submissions, working closely with CIARA to obtain data and articulate legal arguments. She emphasized that
In this instance costs are very low because there is no need for an external law firm. It is also a very flexible process, taking into account that the problem started in March 1999 and by April 2000 there was a recommendation from the Group of Experts.(10) Beyond the validity of our arguments, key to our winning strategy was to appoint Mr Sortheix as an expert. He is internationally recognized as a high-level expert on customs classification. Although he did not chair the Group, his knowledge and experience made him a natural leader.(11)
The regional dispute system was out of the public eye and at the same time it was both fast and low-cost. Chile did not, meanwhile, modify its reclassification. On the contrary, safeguards were applied in order to strengthen the legal basis of the increased protection. As observed by the Legal Senior Adviser,
We first believed that the reason had to do with the fact that the Mercosur— Chile dispute settlement system was not binding. We subsequently worked hard to negotiate and pass a binding dispute settlement system. But after Chile’s refusal to comply with the WTO’s ruling I have come to believe that the political economy underpinnings of a conflict are as determining of compliance as the features of the institutional mechanism.(12)
The expectation that Chile would comply with the ECA35 Group of Experts recommendation was widely shared. CIARA was convinced, because ‘ Chile has such a good reputation in international trade circles’.(13)
In two meetings held at the Ministry of Foreign Affairs, Chilean self-righteousness came as a surprise to everyone. Banking on their own spotless reputation (and Argentina’s tarnished record in this respect), the visiting team defiantly bragged that exporters would eventually come to accept the restriction and would not consider taking up the question in the multilateral arena.
To continue the story, after Chile’s refusal to change the PBS, business urged the Argentine government by means of a public letter to find a bilateral solution. Although CIARA was already in contact with the Ministry of Foreign Affairs, a formal letter was sent out, triggered by two other market shifts. Firstly and most importantly, India ( Argentina’s most important market) nearly doubled import tariffs on raw sunflower and soy oil. This threatened sales to a market that purchased 20% of exports. Second, China ( Argentina’s third buyer) attempted to introduce non-trade barriers that practically implied the closing of the market. The letter, addressed to the Minister of Foreign Relations by the Director of CIARA, asked for ‘a rapid and energetic claim with the adoption of bilateral instruments necessary to neutralize the negative effects of these measures’.(14)
Meanwhile, the government was concerned with other priorities in terms of its agenda with Chile: it was waiting for the Chilean Senate to ratify a bilateral mining agreement. This treaty was of strategic economic importance because it was expected to lead to a US$10, 000 million investment along the Andean frontier and to double the mining exports of the two countries. CIARA thus feared that mining interests would overshadow their case, and pressure on the government for the case to be taken to the WTO was stepped up. CIARA also pulled strings across the Andes, requesting a meeting with the Chilean Minister of Foreign Affairs. But it was not until five weeks after the signing of the mining agreement on 29 August 2000 that the government went into action and on 5 October requested consultations with Chile at the WTO. Argentina requested the formal establishment of a panel in mid-January 2001.
The decision to go to the WTO received a political push. According to a Ministry of Foreign Affairs official,
There were two moments when political drive was decisive. First, to request the establishment of a panel; second, during the panel process when some actors wanted to drop the case in favour of a mutually agreed solution. After a detailed technical explanation, the authorities decided to continue the case.(15)
DISCO was responsible for dissecting and drafting the legal and economic arguments of the case. The workload to present the first brief on time was quite hefty for all the actors involved, but mainly for DISCO staff — four full-time and two part-time officials.(16) CIARA and INAI experts collaborated in reading drafts, but DISCO officers were the ones working up to thirteen hours a day to get things done on time. In addition, a public officer from the Secretariat of Agriculture was asked to join some meetings because of ‘his experience in dealing with Chileans’.(17) This recruitment was seen to be necessary because a mutually agreed solution is still highly possible during the first stage of a dispute.
The interaction between DISCO and the private sector was intense and constructive throughout the dispute. CIARA paid for running costs and for the fees of the law firm. The contribution of the law firm, providing a first draft for the demand and being available for specific consultations, was less useful than expected. Both public and private actors agreed that its contribution could have been more useful had the firm been hired to fine-tune all the submissions rather than being responsible for the first brief. During the initial stages of the procedure some of the arguments directly related to facts, and the pool of local expertise could have done the job.
Only about 10% of their original ideas remained in the final paper. They were used as a general guide. As we proceeded it became obvious that the firm did not have much expertise on agricultural issues. I guess that the budget constraint was an obstacle at the time of selection.(18)
One public official has noted that
when interacting with a law firm one has to keep in mind that their interests do not coincide with the government. The law firms are tied to results while governments in addition have a systemic interest. When the government raises a case it also considers questions such as the impact on the AA, or the spill-over of the case onto general trading relations.(19)
The cost of the law firm amounted to about US$200, 000, of which an important part pertained to the claim on the AA. CIARA provided data and information related to the sector and INAI contributed to the building of arguments. In particular, INAI performed the economic analysis of the working of the Chilean PBS and reviewed the legal arguments of the case, especially Article 4.2 of the AA.
The contribution of the private sector in terms of people, provision of information and economic resources was impeccable. It cannot be replicated again except in one instance. I can think of only one other Argentine sector with the same global interests and with the skills to follow, to facilitate all logistical aspects and to provide and manage a data base [referring to another flagship sector, the producer of seamless pipes(20)].
The working dynamic for building the case included meetings between the officials of DISCO, representatives of CIARA and INAI’s experts, when the drafts of the law firm were reformulated. Occasionally, there were other participants (such as the Secretariat of Agriculture or representatives from leading firms such as Molinos and Nidera). At the WTO, sessions could technically be held in any official language; but, after the initial presentations in Spanish led to a member of the panel yawning and dozing off, a decision was taken to switch to English. In this context, an interviewee remarked that
It is tiring and time consuming to wait for the translation in hearings. But more relevantly, translation of documents may take ten days, so that panellists turn up without time to read them. This is a disadvantage vis-à-vis documents submitted promptly in English by the defendant. Panellists know where their arguments are headed while they have no clue about ours, and this is a great handicap.(21)
The Argentine delegation did not have external lawyers outside the room where sessions took place. By the second session the delegation started to feel that they were winning the case: most of the questions were directed to Chile and the questions denoted that the concerns of the panel tended to be in line with the Argentine position. The general tone also seemed ‘pushy’ when confronting the Chileans’ arguments.(22)
But not all the issues raised during the dispute were technical. Political calculations kept cropping up from all corners. First, business had to deal with those favouring diplomacy over litigation. Moreover, business feared that the President might withdraw the demand if Chile eliminated sanitary restrictions on beef. In order to avoid backsliding, the Grains Exchange and CIARA wrote a formal letter to the President backing the specialists and emphasizing that if the government dropped the dispute, it would seriously damage trade prospects. They argued that the WTO decision would pave the way for tackling similar conflicts with the European Union and the Andean Community.(23) Eventually, the fact that the case was becoming a ‘winning case’ helped to overcome other political calculations.
The struggle at home was mirrored at the WTO. The adoption of the panel recommendation (and the Appellate Body report) did not mean that the issue was closed. Chile has not complied so far, and still has its PBS in place. In this sense, several actors coincided in the view that the major flaw of the WTO is the reliance on unilateral retaliation. While some actors interviewed suggested financial compensation as an alternative, others emphasized trade compensation. However, some influential public officials have remarked that one must keep in mind the original objectives in assessing overall results. When the case started, oils were subject to a 70% tariff. Since the dispute the maximum is 31.5%, with a double assurance: a WTO ruling and a Chilean Congress law. In addition, vegetable oil was excluded from the PBS, and there is now an interpretation of how a variable levy minimum price works with considerable value as precedent.
True, for Argentina the tangible gain was the cap on Chilean tariffs as a result of the initiation of the WTO case.(24) There were also intangible gains in terms of reputation. In this sense, perhaps the biggest loss for Chile might also be an intangible in terms of its reputation for compliance. The WTO acted as a magnifying glass for a country’s reputation.
IV. Challenges confronted in the process
The government’s principal challenges were twofold: to construct a (winning) case at the WTO with no financial resources and scarce human skills, while at the same time avoiding issue linkage so as not to poison relations with a strategic regional partner. Business, in turn, had to articulate and sustain collective action, raise funds to cover the costs involved in litigation and absorb economic losses during the protracted proceedings. Both government and business had to accept a new partnership if success was to be achieved.
The government strategy was to isolate this conflict from other bilateral issues and manage each in its own time. Such de-linking happened at least twice. First, at the time of signing the mining agreement in 2000 and, second, in 2003 to isolate the case from the sanitary restrictions applied to Argentine beef. In addition, by relying on CIARA and INAI experts and, to a lesser extent, on the external law firm, DISCO was able to overcome its limited financial and technical resources. Still, DISCO officials stressed the colossal personal effort undertaken to comply with deadlines under the WTO dispute settlement system and also the feeling that being a developing country always implies, if not negative, at least sceptical expectations regarding performance: ‘When asked, the international community doubts our capacity to defend ourselves and when acting as claimant our capacity to handle and lead the case.’(25)
Litigation costs and collective action are usually two barriers for business. The fact that the vegetable oil sector is structurally concentrated in only a few hands allowed the litigation strategy to be followed with relatively low transaction costs. Ultimately, the fact that the sector is a global player was an important source of leverage over the domestic policy process.
At the time of influencing policy, business had to wade through a maelstrom of informal channels, since there is no regulation or window for dealing with petitions for multilateral trade dispute settlement. This institutional vacuum posed a dual risk: on the one hand it could have allowed the government arbitrarily to dismiss the business claim and, on the other hand, it could have triggered an internal dispute among government agencies, ultimately impeding effective co-ordination of the case.
Last but not least, the protracted WTO process might have jeopardized Argentina’s market share in Chile: ‘When you are out of a market for about two years, it is extremely difficult to win back positions.’(26)
Faced with no prospect for compensation and with an accumulated loss of US$50 million, both business and government agents considered the question of retaliating against Chilean products. But retaliation was a completely inadequate solution. From the business angle, retaliation could not offset the losses. From the government perspective, retaliation was likely to poison overall relations with Chile.
V. Lessons for others
Recourse to the WTO dispute settlement procedures is not for everyone, nor is it a routine action that can be undertaken lightly. It is costly and time-consuming and thus discriminates in favour of big business and countries. At the same time it has political repercussions, especially if used against a close partner. However, the Argentine experience indicates that the WTO does contribute to limit discretionary trade practices; it acts as an international magnifying glass held to countries’ trade practices. Moreover, it was perceived as a neutral third party on a regionally divisive issue.
In particular, the main lessons left by this case are as follows.
- In terms of the domestic institutional setting, the lack of clear and pre-established mechanisms to handle disputes is detrimental to all actors. While the private sector risks arbitrary neglect or dismissal of its case, public agencies bear uncertainty about their competencies and decisions. The considerable cost and expertise required is a problem for developing countries. One feasible cost-effective solution would be to reallocate public officials to create a permanent and multidisciplinary corps of experts to handle trade disputes. In this way, experience and learning could be accumulated by the same agency and legal outsourcing would be limited to fine-tuning and/or data collection when needed.
- In terms of business participation, a key element of their successful involvement was the sense of shared responsibility with the public sector for the final outcome. It would have been impossible to do the groundwork for the case without the provision by business of factual information, statistical data and financial collaboration.
- In terms of capacity building, the case was a shared learning experience among all actors. While business was able to assess with much more precision the costs and benefits of potential cases post-Chile, the confidence of public agents was built up and they subsequently felt encouraged to take up litigation in the case of other products.
- In terms of bargaining strategy, the government’s temporal de-linking of issues and taking them one at a time was crucial for the avoidance of crosssectoral pressures at home and issue linkage in bilateral relations with Chile. In terms of the sector in question the key was calculating beforehand the maximum and minimum losses the sector was able to forego.
- In terms of the WTO process, beyond practical matters (such as the cost of the process, the need to present the case in English or the importance of having business representatives ‘next door’) an already well-known problem became evident: the pointlessness of recourse to retaliation. In effect, if the offending measure is not rescinded and the demanding country does not want to shoot itself in the foot to retaliate, it ends up empty-handed. Non-compliance and the low pay-off of retaliation restrict the impact of the action.
Ferrugia, Olga and Guerrero, Irene (2000) ‘El complejo oleaginoso en la Argentina y en la provincia de Santa Fe’, in Mario Lattuada, Olga Ferrugia and Irene Guerrero, eds., El complejo oleaginoso, Ediciones del Arca: Ituzaingo & Rosario, pp. 98—136.
Franco, Daniel (2004) ‘ Aceite de soja. Análisis de cadena alimentaria ’, Secretariat of Agriculture, 24 May 2004.
Franco, Daniel (2004b) ‘ Aceite de girasol. Análisis de cadena alimentaria ’, Secretariat of Agriculture, 24 May 2004.
Schvarzer, Jorge and Heyn, Iván (2002) ‘El comportamiento de las exportaciones argentinas en la década del noventa. Un balance de la convertibilidad’, CESPA, technical paper, November
1.- This is a prime example of the legal spaghetti bowl. While the safeguard duties affected both Bolivian and Argentine products, Bolivia had recourse to a bilateral agreement with Chile with a binding dispute settlement system. As the ruling confirmed that the safeguard was not compatible with the Bolivia-Chile Agreement, and therefore duties had been illegally collected, Chile had to reimburse the duties.
2.- According to Article 4.2, WTO members shall not maintain, resort to, or revert to any measures of the kind which have been required to be converted into ordinary customs duties (there is a footnote listing measures) , except as otherwise provided for in Article 5 and Annex 5.
3.- Markets of interest include Argentina, Australia and Canada. The measures listed therein are quantitative import restrictions, variable import levies, minimum import prices, discretionary import licensing, non-tariff measures maintained through state-trading enterprises, voluntary export restraints or similar border measures other than customs duties.
4.- Art. 24: ‘When using the Price Band System provided for in its domestic legislation concerning the importation of goods, the Republic of Chile commits, within the framework of this Agreement, neither to include new products nor to modify the mechanisms or apply them in such a way which would result in a deterioration of the market access conditions for MERCOSUR.’
5.- Currently, Argentina is questioning Chile’s implementation of the report.
6.- Usually, the experts of the Ministry of Economy who have prepared the case in previous instances are designated as Argentine representatives before the Mercosur Tribunal.
7.- Dr Marina García del Rio, Legal Senior Adviser at the Ministry of Economy, interview, 25 June 2004.
8.- Interview, 2 June 2004.
9.- The Group of Experts is formed by one expert from Chile, another from Mercosur and the other — acting as president — from a non-member country.
10.- Dr Marina Garcia del Rio, interview, 25 June 2004.
11.- Dr Marina Garcia del Rio, interview, 25 June 2004.
12.- Raquel Caminoa from CIARA, interview, 9 June 2004.
13.-La Nación, 15 June 2000.
14.- Interview, 14 July 2004.
15.- Acording to the public officials involved, the workload was gigantic and the Ministry of Foreign Affairs offered them no encouragement. The resolution of these disputes remains out of the range of those who decide promotions within the ministry and salary is far below market rates.
16.- Dr Facundo Vila, Foreign Affairs Ministry and former lawyer at DISCO, telephone interview, 7 June 2004. Accordingly, Lic. Jorge Iturriza said that ‘I think I was important because I was acquainted with the Chileans after the negotiation of the Mercosur—Chile Agreement.’
17.- Vila, interview, 7 June 2004.
18.- Interview, 14 July 2004.
19.- In this sense, other regional developing countries, such as Brazil and Venezuela, are following the same pattern in litigation in only taking up flagship sectors. Brazil has litigated against Canada in defence of Embraer, a world leader in small aircraft manufacture, and has recently taken on the United States and the EU on sugar, poultry and cotton. Venezuela’s case on environmental standards with the United States was in defence of the PDVSA, accounting for 80% of Venezuelan exports.
20.- Vila, interview, 7 June 2004.
21.- Interview, 14 July 2004.
22.- Vila, interview, 7 June 2004.
23.-La Nación, 18 March 2002.
24.- In effect, a short time after the process began, Chile announced that the PBS would not result in a tariff higher than the one binding at 31.5%.
25.- Interview with a Ministry of Foreign Affairs official, 14 July 2004.
26.- Interview with a business informant (confidential), 2 June 2004.