VZCZCXRO3604
OO RUEHBI RUEHCHI RUEHCI RUEHCN RUEHLH RUESLE
DE RUEHBU #1708/01 2411918
ZNR UUUUU ZZH
O 291918Z AUG 07
FM AMEMBASSY BUENOS AIRES
TO RUEHC/SECSTATE WASHDC IMMEDIATE 9070
INFO RUEATRS/DEPT OF TREASURY WASHINGTON DC
RUCPDOC/USDOC WASHINGTON DC
RUEHRC/DEPT OF AGRICULTURE USD FAS WASHINGTON DC
RUEHC/DEPT OF LABOR WASHINGTON DC
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UNCLAS SECTION 01 OF 04 BUENOS AIRES 001708 
 
SIPDIS 
 
SIPDIS 
SENSITIVE 
 
PASS NSC FOR MICHAEL SMART 
PASS FED BOARD OF GOVERNORS FOR PATRICE ROBITAILLE 
PASS USTR FOR KATHERINE DUCKWORTH AND MARY SULLIVAN 
TREASURY FOR ROSELLEN ALBANO 
USDOC FOR 4322/ITA/MAC/OLAC/PEACHER 
US SOUTHCOM FOR POLAD 
SEOUL PASS TO PUSAN 
 
E.O. 12958: N/A 
TAGS: ETRD EINV EAGR ECON AR CH HK IN ID KN KS MY PK
RP, SN, TW, TH, VM 
SUBJECT: ARGENTINA: CHINESE REACTION TO NON-TARIFF BARRIERS 
 
Ref:  (A) Buenos Aires 1648 
  (B) Buenos Aires 1644 
      (C) Buenos Aires 1642 
 
This cable contains business-sensitive information -- not for 
internet release. 
 
------- 
Summary 
------- 
 
¶1. (SBU) Ten days after President Kirchner announced the imposition 
of non-tariff barriers on burgeoning Asian imports, local media has 
reported that China struck back with retaliatory phytosanitary 
inspections of Argentine soy shipments, though two grain trading 
company reps say the inspections occurred before Kirchner's 
announcement.  Local media also reports statements by Chinese 
officials complaining that Argentine measures are WTO-inconsistent 
and claiming the right to take "necessary measures" in response. 
While GoA trade-related resolutions issued following the President's 
announcement have been non-discriminatory, a pending resolution to 
re-set customs inspection reference prices could include Asian 
country-specific designations.  The U.S. AmCham has sent a letter to 
Economy Minister Peirano highlighting U.S. company concerns that 
non-tariff barriers will affect incoming shipments from their Asian 
affiliates.  U.S. firms Dell, Honeywell, HP and IBM, which had 
earlier expressed concern to Post about goods held up by Customs, 
have reported their shipments released.  End Summary. 
 
-------------------- 
Chinese Retaliation? 
-------------------- 
 
¶2. (SBU) Local media reports that, in apparent retaliation for 
non-tariff barriers imposed by the GoA on Asian imports (Ref A), 
Chinese authorities subjected three shiploads of Argentine soy 
products in Chinese ports to rigorous phytosanitary inspections. 
However, a local representative of grain company Louis Dreyfus, 
which owned one shipload of the soy, said China's inspection 
actually took place two months ago.  Hugo Krajnc, Public Affairs 
Director for Cargill in Argentina (owner of another soy shipload) 
and Chair of the AmCham Trade Committee, confirmed to Post 
Agricultural Attache that China's inspection of Cargill's soy also 
 
BUENOS AIR 00001708  002 OF 004 
 
 
occurred prior to Kirchner's announcement.  While the shipments were 
eventually cleared for entry, media reports that this was the first 
time since 2004 that China had subjected Argentine agricultural 
shipments to such inspections.  Local media also quoted a Chinese 
Ministry of Trade official in Beijing saying the GoC "does not 
understand nor accept in any way" Argentina's actions that "ignored 
WTO regulations."  The official asked that Argentina's new Customs 
procedures be published "immediately," and asserted China's "right 
to take necessary measures" in response. 
 
¶3. (SBU) In an August 27 media interview, GoA Customs Director 
Ricardo Echegaray denied that his organization had worked to block 
or delay Chinese imports but noted that "there might be a bottleneck 
in Montevideo (Uruguay)," where containers have supposedly been 
awaiting transshipment to Argentina.  He also said the GoA had 
earlier requested cooperation from Chinese customs to combat 
under-invoicing, one of the primary justifications for the new 
measures, but received a response in May that the Chinese "were not 
interested" in the issue. 
 
----------------------- 
Customs Delays Resolved 
----------------------- 
 
¶4. (SBU) Following an emergency meeting of the American Chamber of 
Commerce (AmCham) trade committee on August 22 attended by Econ and 
FCS officers (Refs A, B) AmCham sent a letter to Economy Minister 
Peirano noting U.S. company concern about the non-tariff barriers 
imposed on Asian imports that affected incoming shipments from their 
Asian affiliates.  Subsequently, U.S. firms Dell, Honeywell, HP and 
IBM, which had earlier expressed concern to Post about goods held up 
by Customs (Ref A), reported that by August 27, their shipments had 
been released. 
 
----------------------------------- 
Measures thus Far...And Yet to Come 
----------------------------------- 
 
¶5. (SBU) Three official new trade-related measures have been 
published since Argentine President Kirchner and Economy Minister 
Peirano announced on August 17 that restrictions would be imposed on 
Asian imported goods.  The first (Economy Ministry Resolution 
47/2007), requiring a new non-automatic license for non-leather 
 
BUENOS AIR 00001708  003 OF 004 
 
 
suitcases and handbags (Ref B), was published August 17 and takes 
effect August 31.  The second (Economy Ministry Resolution 61/2007), 
imposing a similar non-automatic license for shoe uppers, was 
published August 23.  The third (Customs Resolution 50/2007), 
published August 24, limits the ports-of-entry for numerous tariff 
schedule groupings (including 20 whole chapters - all textiles, 
shoes, electrical machinery, metal and certain other manufactured 
goods, watches; partial chapter limits include plastic household 
goods, leather cases and apparel, porcelain and ceramic tableware 
and ornaments, household glass goods, imitation jewelry, household 
appliances, pots and pans, computers, car parts, motorcycles and 
parts, bicycles and parts, lamps, and toys). 
 
¶6. (SBU) Still pending is a measure earlier described to Econoffs by 
Ministry of Economy Trade Undersecretary Schale (Ref A) that will 
(1) update 5,000 - 8,000 customs "Reference Prices" and (2) subject 
goods from China, India, Hong Kong, North and South Korea, 
Indonesia, Malaysia, Pakistan, the Philippines, Taiwan, Thailand, 
Singapore, and Vietnam with values below these reference prices to 
additional scrutiny prior to Customs clearance (Ref A). 
 
--------------------------------------- 
China Trade with Argentina: Perspective 
--------------------------------------- 
 
¶6. (SBU) According to an August 24 report by the GoA's official 
statistics agency, INDEC, exports to China have risen 28% y-o-y 
through seven months of 2007 to US$ 2.6 billion, while imports from 
China have risen 62% to $2.6 billion.  The report notes that 
Argentine exports are primarily soy beans and oil, and attributes 
the rise in value primarily to increased prices.  Imports from China 
are primarily capital and intermediate goods, though the report also 
notes an increase in consumption goods from Asia, including Chinese 
motorcycles.  According to the Global Trade Atlas, China has been 
Argentina's second largest export destination in value terms for the 
first half of 2007. 
 
------- 
Comment 
------- 
 
¶7. (SBU) Argentina is certainly within its rights to subject imports 
to additional scrutiny to ferret out illegal under-invoicing.  But 
 
BUENOS AIR 00001708  004 OF 004 
 
 
any eventual GoA resolution that targets such non-tariff barriers to 
goods arriving from specific Asian countries will invite WTO 
attention.  The latest Customs regulation published by the GoA 
restricts the Argentine ports of entry for a number of products 
imported largely from Asian markets.  While this measure will 
certainly delay processing and increase the final costs of some 
Asian imports, it is, on its face, non-discriminatory.  Now, ten 
days after President Kirchner announced measures would be undertaken 
to restrict burgeoning Asian imports, the GoA has yet to publish a 
promised official resolution that will list new universal customs 
inspection reference prices and perhaps include Asia 
country-specific measures.  Argentine importers, including U.S. high 
tech companies, are waiting to see how this new resolution will be 
worded. 
 
¶8. (SBU) Even if China's inspections of Argentine soy were unrelated 
to recent announcements and measures, media coverage of these 
inspections may instruct the Kirchner administration about the 
consequences of populist trade restrictions.  The phytosanitary 
inspections are a pointed reminder that Asia is a key market for 
Argentine exports: roughly 20% of Argentine exports to date in 2007 
go to Asian markets, and China alone absorbs 11% of Argentine 
exports.  Seventy percent of Argentine sales to China are soy 
products, and export tariffs on primary commodity exports remain an 
essential source of GoA revenue.  Argentina is being reminded that 
trade populism can cut both ways. 
 
KELLY