EU Set to Defend Auto Makers From Argentine Import Restrictions

BRUSSELS – The World Trade Organization’s dispute-settlement body in Geneva is taking a close look at a complaint lodged by the European Union against Argentine import restrictions on automobiles and parts.

The organization is expected in January to determine whether to set up a panel to mediate the dispute.

A diplomat at the Argentine embassy to the EU in Brussels tells WardsAuto the EU complaint is “unjustified.”

Car and car parts exports to Argentina were worth €4.15 billion ($5.5 billion) in 2011, according to data provided by the European Commission, the EU’s executive body. This makes up 50% of all EU exports to the South American country.

As a result, European vehicle and parts manufacturers have been harmed by Argentina’s protectionist moves over the past two years, a representative of the ACEA, the European automobile manufacturers’ association, tells WardsAuto.

The EU says Argentina is imposing restrictions on all goods coming from the EU to balance its trade deficit.

“Argentina also requires importers to balance imports with exports, to increase the local content of the products they manufacture in Argentina (and) not to transfer revenues abroad,” says a note from the trade directorate-general of the European Commission. It says this control is “non-transparent” and violates WTO rules.

“We hear of goods being left in customs clearing for more than 30 days, creating additional fees for storage facilities (and) late deliveries to customers,” adds Eleri Wessman, director-trade and legal affairs for the CLEPA, the European association of automotive suppliers.

“Some ACEA members produce locally in Argentina and are mainly affected by the import of parts and components,” notes ACEA spokeswoman Cara McLaughlin. Volkswagen, Fiat, Renault and PSA Peugeot Citroen all operate plants in Argentina.

Wessman says there had been signs of improvement this year after a sharp dip in auto-parts exports to Argentina in 2011, but problems persist.

Argentine measures also have affected EU auto makers who export only completely built-up cars to the country, McLaughlin says. BMW and Daimler are among those companies.

The value of car exports from the EU to Argentina fell 5% to €345.7 million ($457.2 million) in 2011, from €365.4 million ($483.3 million) in 2010.

“This could also be partly explained by the diminishing market in Argentina, which has been going through a crisis for a number of years,” the ACEA’s McLaughlin says.

Meanwhile, demands these companies match imports with exports from Argentina – even when they do not make cars in the country – have sparked some bizarre countermeasures.

BMW freed its vehicles blocked at customs by agreeing to export rice, while Mitsubishi has offset its imports by exporting nuts and mineral water.

As a result, sales have been improving in 2012. From January to November, 2,105 BMWs were sold in Argentina, an increase of 23% from like-2011, according to the ACARA, the country’s car dealers’ association. But that is set against an abysmal 2011.

It “was a lost year,” Gustavo Albertoni, a sales executive at the A. Santos dealership in Buenos Aires province tells WardsAuto.

During the first nine months of 2011, the government blocked the entry of about 1,000 BMWs under its import-substitution rule, cited by the EC as an “unwritten and non-transparent” practice. Two BMW dealerships were forced to close and BMW’s imports plunged 77%, according to Carlos Cristófalo, an auto industry analyst in Buenos Aires.

Other auto makers also were affected. Imports of Jaguars and Volvos dropped by 82% and 39%, respectively, while Mitsubishi suffered a 19% decline.

Although sales at A. Santos this year almost have returned to normal at about 300 vehicles, Albertoni says, Argentina’s imposition of non-automatic import licenses means BMWs with 3.0L or V-8 engines continue to be denied entry.

Imports from Europe also include Renault and Peugeot turbocharged engines manufactured in France, as well as the Fiat Bravo, assembled in Italy, and the 500 Abarth, made in Poland.

And while these shipments are made more difficult by the rules, the restrictions “are far less significant than the conflict with Mexico, which has caused Argentina the most damage,” Cristófalo says.

Earlier this year, the Argentine governmentsuspended its ACE55 auto trade agreement with Mexico. Nissan Mexico, which exports the March, Tiida, Sentra and NP300 to Argentina, now pays a 35% duty. Nissan sold 3,985 cars in Argentina from January to November this year, down 70% from like-2011. Import licensing problems also have hit auto exports from Brazil.

The trade issues have hampered overall sales in Argentina this year, says Abel Bomrad, president of the ACARA dealer group.

The 2% sales decline in the first 11 months of this year is a result of “lack of supply of vehicles from Mexico and Brazil,” Bomrad says.

The non-automatic issuing of import licenses and restrictions on parts imported from Brazil also have hurt Argentine auto manufacturing. Production has fallen to 703,000 units through November, down from 776,000 in like-2011.

Fiat, for instance, had to suspend production at its Córdoba plant on three separate occasions – in January, March and June – due to lack of parts. It has produced 67,000 vehicles this year, down 50,000 units from year-ago.

– with Jonathan Gilbert in Buenos Aires