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70.               The important feature of the situation outlined is that its context is one in which the local economy is growing by 9 per cent a year, which means that Argentina is well placed competitively for integration into the global economy.  Foreign sales have ceased to be an exportable balance or surplus left over from local demand and have become a component of productive growth.  In this connection, it should be pointed out that Argentina's foreign sales grew by 16 per cent in 2005, while world exports grew by 13 per cent.  This growth rate, which is combined with an increase in export volumes (+15 per cent) more than twice as high as that recorded by the rest of the world (+6 per cent), shows that the local economy has enhanced its international competitiveness and, as a result, its external integration.  The same pattern of behaviour is being repeated in 2006, with strong export and import growth and the maintenance of a substantial trade surplus.

71.               An analysis of export destinations shows that MERCOSUR remains an important buyer, while other countries, Chile and China, regions such as the Andean Community and NAFTA, and other non-traditional markets such as the Middle East and Africa, to which Argentina has no preferential access, have become increasingly important trading partners.  MERCOSUR, and Brazil in particular, is the main recipient of Argentine exports of industrial manufactures, owing to integration of the production chain in the automotive, chemical and other sectors, and because it is one of the first export destinations chosen by small and medium-sized enterprises.  The regional bloc has frequently served businesses as a springboard to other markets by enabling them to achieve economies of scale and specialization, to promote the learning process and to increase the proportion of high-end technological products involved in trade.

72.               Another noteworthy development is the diversification of exports to include new products with higher value added, involving greater participation by small and medium-sized enterprises and an impact on regional economies.  In overall terms, among the sectors that have driven export growth, particular mention may be made of the performance of motor vehicles, metal products, chemicals and plastics, rubber and by-products thereof.

73.               The most noteworthy agricultural products and agricultural manufactures include soyabeans, dairy products and by-products, alcoholic beverages and liquids, fruit juices and sweets.  At the same time, industrial manufactures were driven by products with a medium to high technological content, including in particular motor vehicles, machinery and apparatus and chemical and related products.  Over the past year, industrial exports with a high technological content have increased their contribution to growth, particularly air, river and maritime navigation vehicles and certain chemical products.

74.               Manufactures of industrial origin (MIOs) are gaining export market share, as is evidenced by growth rates higher than those for primary products and manufactures of agricultural origin (MAOs), and this ensures their diversification and stabilization.

Exports by product line

(millions of dollars)

MAOs:     Manufactures of agricultural origin.

MIOs:      Manufactures of industrial origin.

Source:    Own compilation based on information from the Centre for Public Studies (CEP).

75.               A salient feature of Argentine foreign trade, especially over the past two years, has been the dynamic performance of services exports.  Following the stagnation of services exports, culminating in a substantial decline during the 2001-2002 crisis, the sector returned to the path of growth.  Unlike before, the change in relative prices from 2002, as a result of the floating exchange rate, once again enabled exports from the sector to meet growing world demand, and its growth rate was even higher than the world rate.

76.               Up to 2000, the trade balance in services showed a deficit of around US$4 billion.  This figure was reduced to roughly US$1.5 billion in 2005, exports being the main engine of this change.  The boom in services exports from Argentina is due mainly to the areas of travel and tourism, combined with sales of non-traditional services, such as business, professional and technical services and communications and information technology services.

77.               The increase in travel and tourism exports accounted for rather more than 50 per cent of total export growth for the sector in 2005.  As a result, tourism has become one of the main export items, ahead of cereals, oils and fats, chemical products and land transport equipment, and outperformed only by exports of animal feed meals.

78.               After the sharp decline in 2002, imports rebounded strongly, keeping pace with the rate of expansion of the local economy.  They amounted to US$28.692 billion in 2005, a 28 per cent increase over 2004, owing to the strong growth in demand for inputs related to production activities as well as the importation of machinery and equipment and parts and components thereof.  Import levels of close to US$35 billion are expected for 2006, a 20 per cent increase over 2005.

79.               As far as countries of origin are concerned, Brazil within the region and China as an extra-regional supplier increased their exports to Argentina.  The growing importance of Brazil is explained by the strong increase in Argentine imports of automobiles and machinery and apparatus.  At the same time, China has become a major supplier of capital goods, industrial inputs and durable consumer goods.

80.               In this connection, it is important to refer briefly to the Argentine legal system.  Under the Constitution, as a result of the constitutional reform of 1994, international law is assigned a dominant position in the Argentine legal system.  As a result of the above-mentioned reform, the supremacy of international treaties over domestic legislation is expressly recognized, as is the constitutional supremacy of treaties relating to human rights and the possibility of ceding sovereign powers, in specific circumstances, under certain integration agreements.  The constitutional provisions outlined demonstrate the value attached by Argentina to multilateral cooperation and an outward-looking approach to the international community.

81.               Argentina is increasingly committed to the responsible and balanced liberalization of international trade, especially in the negotiations under way within the WTO, without abandoning its strategy of closer trade ties to the MERCOSUR countries and the rest of Latin America, as well as to other countries around the world that are interested in becoming trading partners.

82.               It is for this reason that, as from 2003, Argentina adopted a pragmatic trade policy which combines the priority accorded to the international trading system with regional integration and bilateral treaties consistent with WTO obligations.  In this way, it is seeking to take maximum advantage of market access opportunities for its exports of goods and services.  It pays particular attention to the overall strategy of promoting and developing exports with a view to properly administering and integrating those elements that are crucial to strengthening business competitiveness.

83.               It should be emphasized that, despite the fall in GDP recorded between 1998 and 2002, Argentina did not raise its applied tariffs.  On the contrary, tariffs were lowered even further in the period under review, falling from an average applied most-favoured-nation (MFN) tariff level of 12.7 per cent in 2001 to 10.5 per cent in 2005.  At the same time, tariff dispersion has recently been reduced.  This reaffirms Argentina's desire to maintain its trade ties with the world and to progress towards freer trade.

84.               Argentina is a founding Member of the World Trade Organization (WTO).  It upholds the principles, agreements and disciplines of the WTO as the basis for its international trade relations.  This is reflected in the supremacy of the agreements entered into under the Uruguay Round over domestic legislation and highlights Argentina's unwavering commitment to guaranteeing legal certainty to all the Members of the system.  In this connection, Argentina applies its commitments under the Uruguay Round fully and consistently in all the areas that were negotiated, and it has systematically brought its existing laws, rules and regulations into full conformity with its multilateral obligations.

85.               It participates actively in the regular activities at the WTO through the various committees.  It regularly submits the necessary notifications to the Committee on Subsidies and Countervailing Measures, the Committee on Anti-Dumping Practices and the Committee on Import Licensing, and has taken an active part in meetings of the Committee on Sanitary and Phytosanitary Measures, submitting several communications containing concrete proposals and making more than 80 notifications during the period under review.

86.               Argentina is a party to the Agreement on the Application of Sanitary and Phytosanitary Measures (SPS Agreement), having signed various bilateral agreements based on its principles and disciplines.  It complies with its obligations under the SPS Agreement, which are mainly concerned with identifying common rules, simplifying import controls, harmonizing certification requirements and facilitating bilateral trade and the entry of agricultural products into the markets of Member countries.

87.               Argentina actively participates in the Trade Policy Review Mechanism, being convinced that the review exercises undertaken contribute to the transparency of the multilateral trading system.  Argentina assigns great importance to the universal nature of the WTO, and supports the entry of new Members, on the understanding that this contributes to the strengthening of the multilateral trading system and boosts opportunities for the expansion of trade.

88.               Argentina recognizes the significance of the protection of intellectual property for development, the role such protection plays in stimulating innovation, and the need to protect these intangible values.  At the same time, it promotes respect for competition, protection of health, traditional knowledge and diversity through multilateral rules.  It supports the system of rights and obligations under the Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS).

89.               Argentina considers the dispute settlement mechanism to be one of the fundamental pillars of the multilateral trading system, inasmuch as it guarantees the transparency and predictability of compliance with multilateral rules by its Members.  This is clearly evidenced by the fact that Argentina is one of the ten countries that have made the greatest use of the system since the establishment of the WTO in 1995, having acted as complainant in 11 cases, respondent in 16 cases and third party in a further 16 cases, and has faithfully complied with the resolutions of the Dispute Settlement Body and the Appellate Body.  However, it considers that the raison d'être of the WTO does not lie in the dispute settlement mechanism, as it is not possible to build the future on the basis of disputes but essentially on areas of agreement to expand the multilateral system on the basis of greater benefits for all its Members.

90.               Argentina has actively participated in the multilateral trade negotiating rounds since acceding to the GATT in 1967.  It considers that, as provided in the preamble to the Marrakesh Agreement, the growth of international trade and the corresponding rules should contribute to raising standards of living and ensuring full employment.  These objectives have been central to the proposals it has put forward individually or in conjunction with other countries in the Doha Round.

91.               Argentina submits that the Doha Round should give priority to an ambitious agreement in respect of agriculture, a sector which continues to bear the burden of discriminatory trade-distorting and protectionist policies, to the detriment of the effective use of competitive advantage by efficient agricultural producers and domestic production in developing countries, preventing the latter from securing all the benefits that would be offered by an open trading system.

92.               Thus, Argentina is an active participant in two strong agricultural negotiating groups, of which it is a co-founder:  the G-20 and the Cairns Group.  In the Uruguay Round, the latter Group, and in the present Round, the two together, have helped to change the geometry of the agricultural negotiations.  The G-20 in particular has now made it possible for developing countries to form an alliance capable of counter-balancing the interests of the major trading powers, in order to guarantee significant outcomes in keeping with the ambitious goals of the Doha Mandate.

93.               The basic tenets of both Groups, which Argentina fully supports, are the following:

            (i)         Elimination of export subsidies (including the practice of disposing of commodity surpluses instead of providing genuine food aid);

            (ii)        the substantial reduction of domestic support that distorts international trade;

            (iii)       the substantial expansion of market access, especially for the products of developing countries, reducing and simplifying tariffs, reducing tariff peaks and eliminating tariff escalation.

94.               The negotiations on market access for non-agricultural products (NAMA) are also of vital importance to Argentina, which considers that they should be aligned with those relating to other areas, particularly the area of agriculture.  In this connection, Argentina, together with Brazil and India (ABI formula), have submitted a proposal for tariff reduction that provides for the principle of "less than full reciprocity".  The proposed formula, in accordance with the provisions of paragraph 16 of the Doha Ministerial Declaration, seeks to reduce or eliminate tariff peaks and tariff escalation.  With regard to non-tariff barriers, Argentina has submitted documents on the barriers faced by its exports in different markets.  It is also an active participant in the NAMA-11 group of developing countries, whose fundamental aim is to achieve an equitable outcome which, while providing for substantive liberalization with proportional cuts for developed and developing countries, at the same time does not hamper implementation of the industrial development policies of the developing countries.

95.               Argentina supports the wording of paragraph 24 of the Hong Kong Ministerial Declaration, which provides for a balanced level of ambition in both agricultural and NAMA negotiations.  Accordingly, and as a result of its active participation in the negotiations, in 2006 it submitted a Doha Round document (TN/MA/W/67 and TN/AG/GEN/14), which addresses the question of how the provisions of the above-mentioned paragraph 24 can effectively be gauged so as to ensure that the level of ambition in market access is balanced and proportionate, in keeping with the principle of special and differential treatment.  The analysis conducted shows that, in order to maintain the same level of ambition in the two sets of negotiations, the developed countries should make greater cuts in their agricultural tariffs and reduce their demands in NAMA.  The document presented by Argentina became a reference paper for the proposals submitted by various countries and for validating the offers and requests of the developed countries in relation to agriculture and NAMA.  Argentina is thus cooperating in the search for a balanced outcome that respects the interests of all the parties.

96.               At the same time, with a view to achieving greater security and stability for the expansion of world trade in services, as well as to ensure that the overall results of the Doha Round negotiations equitably benefit all countries, Argentina is committed to making progress in the negotiations on specific commitments in all the delivery modalities, including those of particular interest to the developing countries.  Similarly, it is working towards strengthening the disciplines of the General Agreement on Trade in Services (GATS).

97.               Both bilaterally and plurilaterally, Argentina has submitted requests for market access to various WTO Members with respect to agriculture-related services sectors, distribution services, information technology services and services provided under mode 4 (movement of natural persons).  Reciprocal requests have been received on virtually the entire spectrum of trade services, although not all of them contain the same level of demand.  Argentina has granted concessions in all areas relating to requests on information technology services, telecommunications, banking services, professional services, construction and distribution services;  and it provides adequate coverage in services relating to energy, insurance, postal services and logistics.  It also participates actively in the various GATS negotiating groups in order to draw up disciplines under Article VI, paragraph 4, on domestic regulation, Article X on emergency safeguard measures, Article XIII on government procurement, and Article XV on subsidies.

98.               With respect to trade in environmental goods, Argentina has submitted an integrated proposal for development.  The aim is that the relevant negotiating approach should ensure equitable environmental, trade and development benefits.

99.               Regarding the negotiations on rules, Argentina has submitted proposals relating to specific amendments to the Anti-Dumping Agreement.  In this connection, it has attempted to highlight those amendments that would benefit developing countries.  Similarly, Argentina has submitted a proposal in the "Friends of Fish" Group and another individual proposal for the negotiations on fisheries aimed at eliminating trade-distorting subsidies and ensuring special and differential treatment for developing countries.

100.            Argentina takes an active part in the debates on the Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS) and public health, geographical indications, protection of genetic resources, traditional knowledge and folklore, and electronic commerce, both within the TRIPS Council and in the World Intellectual Property Organization (WIPO).  In connection with geographical indications, the mandate under Article 23, paragraph 4, of the TRIPS Agreement states that negotiations shall be undertaken concerning the establishment of a multilateral system of notification and registration of geographical indications for wines and spirits.  Argentina, together with other Members (Australia, New Zealand and the United States, among others), has stated that such a system of notification and registration should not give rise to new obligations but should "facilitate" the protection of geographical indications.  Similarly, Argentina has repeatedly opposed the extension of the negotiating mandate, that is the extension of the negotiations on geographical indications to include products other than wines and spirits.

101.            Argentina plays an active role in the Working Group on Trade, Debt and Finance, based on the mandate given in paragraph 36 of the Doha Declaration.  In this connection, it submitted a Communication (WTO document WT/WGTDF/W/20) in April 2003 and made a statement (WTO document WT/WGTDF/W/33) in July 2005 as it holds the view that the relationship between a country's trade, its financial situation and its indebtedness needs to be examined.  Argentina therefore considers that the Working Group should be institutionalized so that, from a systemic perspective, through its analyses and proposals it can help to ensure that the multilateral trading system can offer developing and least-developed countries with external financial difficulties and a high external debt instruments that they can use to overcome such situations.

102.            In short, a central feature of Argentina's policy continues to be the assurance of implementation of their WTO commitments by all Members.  At the same time, in the negotiations under the present Round, Argentina continues to seek actively to ensure that the outcomes lead to a fair and balanced agreement which does not defer consideration of its national interest and those of the developing countries as a whole.

103.            Argentina regards economic integration agreements as an appropriate tool for reducing and gradually eliminating trade barriers, expanding markets and simultaneously strengthening the multilateral trading system as they pave the way for the ultimate goal set by the founders of the GATT, namely elimination of discrimination in international trade.  Accordingly, it participates in and champions integration both with the countries of the region and with those of other regions.

104.            Argentina is a member of the Latin American Integration Association (LAIA) and is a party to a number of the regional agreements adopted within its framework.  In particular, the Southern Common Market (MERCOSUR) has been incorporated in the above-mentioned Association under Partial Scope Economic Complementarity Agreement No. 18 (ECA 18).  Following establishment of MERCOSUR, preferential trade negotiations were conducted by the block with non-member States, leading in particular to the signing of Economic Complementarity Agreements with Chile (ECA 35) and Bolivia (ECA 36) and agreements with Colombia, Ecuador and Venezuela (ECA 59), Peru (ECA 58) and Mexico.

105.            Outside the LAIA, Argentina, as a State party to MERCOSUR, has signed a fixed preferences trade agreement with the Republic of India and another with the Southern African Customs Union (SACU).  It has also concluded framework agreements with Egypt, Morocco, Israel, the Gulf Cooperation Council and Pakistan.

106.            As regards other negotiations, MERCOSUR is holding talks with the European Union on the establishment of a political, economic and inter-regional cooperation association, and is involved in the negotiations for the establishment of the Free Trade Area of the Americas (FTAA).  As regards trade among developing countries, Argentina attaches great importance to the UNCTAD global system of trade preferences among developing countries (GSTP), having promoted the third round of negotiations launched in Sao Paulo, Brazil, which is currently ongoing.

107.            Argentina regards the Southern Common Market (MERCOSUR) as a central strategic project in its foreign policy and an important platform for promoting its further international integration.  Since the signing of the Treaty establishing MERCOSUR (1991 Treaty of Asunción), this regional integration agreement has become the priority regional integration objective of Argentina's foreign trade policy.  At the same time, MERCOSUR constitutes a key instrument for improving conditions of access for Argentine exports to other markets within and outside the region.

108.            Argentina took the decision to join the MERCOSUR regional integration project because regional and bilateral trade agreements between neighbouring countries, and more particularly, between developing countries, are an important and appropriate complement to worldwide trade liberalization based on the multilateral system.

109.            Argentina's membership of MERCOSUR, which is a customs union, means that some of its trade policy decisions are defined at MERCOSUR level.  Specifically, trade issues concerned with Argentina's relations with other non-MERCOSUR countries are covered by commitments undertaken at regional level.  In this connection, it is worthy of note that, as a result of the adoption of the Protocol of Ouro Preto (1994) and the establishment of the common external tariff (CET), the MERCOSUR partners agreed that they would negotiate free-trade agreements and trade preferences with third countries as a block.  In the year 2000, the partners ratified the decision to negotiate jointly and approved that commitment by means of Decision CMC32/00.

110.            Argentina takes an active part in the internal negotiations within MERCOSUR which, fifteen years after its formal establishment and with the end of the macroeconomic instability which plagued Member countries between the end of the past decade and the beginning of this one, has in recent years made important progress towards achieving its primary objective, that of establishing a common market based on the necessary consolidation of the customs union.  The advances made include effective application of the CET in most areas of trade with the rest of the world, with a reduction in the number of products included in the list of exceptions and the establishment of a timetable for their phasing out by the year 2008.

111.            At the same time, MERCOSUR is engaged in harmonizing the special import regimes currently applied unilaterally by the States parties, by which total or partial exemption from the CET is granted for specific imports of parts and components and inputs.

112.            As regards the free movement of goods within the customs union, substantial progress has been made on the drafting of the MERCOSUR customs code, computer interconnection between customs authorities, elimination of double charging of the CET and distribution of customs revenue.

113.            Progress has also been made in integrating production, through promotion of balanced industrialization among the partners.  To that end, meetings are encouraged between entrepreneurs from the four countries to define alternatives in respect of regional production complementarity and to cooperate with governments in identifying the changes in public policy necessary to intensify this process.  In that connection, work is proceeding on the programme of competitiveness forums, with the aim of identifying areas in which regional industrial complementarity favours a greater degree of specialization to improve efficiency and, through concrete measures, to make MERCOSUR products more competitive in the international market.

114.            Similarly, studies and projects are being conducted on investment in infrastructure in the MERCOSUR countries and their partners, as well as highway and energy integration, development of port facilities and a renewed impetus to shipbuilding.  In view of the differences in levels of development within MERCOSUR, the question of structural asymmetries has become increasingly relevant to the further integration agenda, especially since 2003.  Within this context, it is worth noting the creation of the MERCOSUR Structural Convergence Fund – FOCEM (Fondo para la Convergencia Extructural) which started to function in 2006.  This is the first community mechanism to permit a net transfer of resources from the larger to the smaller MERCOSUR economies.  The Fund is intended to finance programmes to promote structural convergence, develop competitiveness and foster social cohesion, particularly in the smaller economies and less-developed regions, and to support the functioning of the institutional structure and strengthen the integration process.

115.            The MERCOSUR Protocol on Government Procurement was also adopted during this period.  The Protocol improves the transparency of government procurement on the basis of the MFN clause and the granting of "national treatment" for most tendering procedures in respect of goods, services and public works.

116.            In December 2003, MERCOSUR approved two important instruments designed to deepen integration in the services sector:  (i) the MERCOSUR Visa, which eliminates restrictions on movement and work affecting natural persons supplying services within MERCOSUR, by establishing a harmonized and uniform procedure in respect of migration and work permits;  and (ii) the "mechanism for the temporary exercise of professional services", which eases the conditions for professional employment of persons who enter temporarily to provide a service.  Moreover, continued progress was made in negotiating the liberalization of the services sectors under the Montevideo Protocol on Trade in Services, which entered into force in December 2005.

117.            Further and deeper institutionalization of the integration process is an ongoing objective and recent advances in this area include the new dispute settlement system established under the Olivos Protocol approved in 2002.  The most important aspect of that Protocol is undoubtedly the introduction of a system of review of decisions, similar to the one provided for in the WTO Understanding on Rules and Procedures Governing the Settlement of Disputes.  The planned establishment of the permanent review court is aimed at fostering the uniform interpretation of the entire body of MERCOSUR legislation and establishing a common jurisprudence, so as to strengthen the institutional framework of MERCOSUR and give it greater legal stability.  The court will also be responsible for monitoring compliance with decisions and regulating the implementation of retaliatory measures.

118.            Another important feature of the institutionalization of MERCOSUR is the adoption of the Protocol establishing the MERCOSUR Parliament, which will be set up in 2006.  The Parliament, as a body representing the peoples of MERCOSUR, will become a common forum reflecting the pluralism and diversity of the region and contributing to democracy, participation, transparency and social legitimacy in the development of the integration process and its regulations.

119.            It is also important to note the role played by the Committee of Permanent Representatives of MERCOSUR in consolidating the integration process.  This body proposes concrete measures with a community focus to enhance social, political and parliamentary relations within MERCOSUR.  Rules were also enacted, inter alia, to transform the MERCOSUR Secretariat into a body with technical and not just administrative functions, and the basis was laid for the establishment of a regional parliament.

120.            The MERCOSUR Regional Employment Conference was held in April 2004 with the participation of the political sectors and social actors in the region.  Its aim was to place employment at the forefront of regional and national public policy.  In this connection, work is progressing on the MERCOSUR employment growth strategy, on the basis of the joint efforts of the Ministries of Labour, Economy, Education and External Relations of the States parties and the contribution of the trade unions and employers' organizations in the region.  The aim is to generate decent work and quality employment through the coordination of MERCOSUR's economic, trade, labour and social policies.

121.            Lastly, it is worthy of note, that the first enlargement of MERCOSUR was effected through the accession of Venezuela.  The terms and conditions of accession were set out in the Protocol of Accession of the Bolivarian Republic of Venezuela to MERCOSUR, signed at presidential level by the five countries on 4 July 2006.

122.            By fostering and following up all these actions, Argentina is promoting progress in the development and intensification of regional integration and the achievement of the main goal of the Treaty of Asunción, which is the establishment of the common market.

123.            Recent years have seen the deepening of agreements to liberalize trade among Latin American countries in the framework of the Latin American Integration Association (LAIA).  MERCOSUR has played a dynamic role in this process.

124.            Specifically, MERCOSUR was incorporated in the above-mentioned Association through Partial Scope Economic Complementarity Agreement No. 18 (ECA 18).  On that basis, common preferential trade negotiations were conducted between the States parties to MERCOSUR and third States, leading in particular to the signing of Economic Complementarity Agreements with Chile (1996) and Bolivia (1997), whereby they became associate members and have been granted regular increases in margins of preference for the achievement of an expanded free-trade area.

125.            In addition, through MERCOSUR, Argentina negotiated Economic Complementarity Agreements during the period covered by this review, which provide for the establishment of free- trade areas, to be concatenated by 2008, with Colombia, Ecuador and Venezuela (ECA 59, signed in 2004) and by 2019 with Peru (ECA 58, signed in 2005).

126.            Economic Complementarity Agreement No. 54 (ECA 54) between MERCOSUR and Mexico was signed in 2002.  This is a framework agreement for the establishment of a free-trade area, whose coverage extends, inter alia, to the agreements concluded or to be concluded by the United Mexican States with each of the States parties to MERCOSUR in the framework of the 1980 Treaty of Montevideo.  Moreover, MERCOSUR and Mexico have signed Economic Complementarity Agreement No. 55 with the aim of promoting the integration and complementarity of production and laying the groundwork for the achievement of free trade in the automotive and auto-parts sector.

127.            On the basis of ECA 54, Argentina and Mexico have promoted the expansion of their bilateral relationship, signing a supplement to Economic Complementarity Agreement No. 6 in 2006, which provides for reciprocal liberalization within a period of ten years for a large range of products in their reciprocal trade.

128.            Agreement was reached in 2006 on the Second Additional Protocol to Appendix I on trade in the automotive sector between Argentina and Mexico, under Economic Complementarity Agreement No. 55 between MERCOSUR and Mexico.  The Protocol provides for the liberalization of trade (zero tariff) for roughly 100 tariff items in the auto-parts sector.

129.            Also in 2006, an Economic Complementarity Agreement was signed between MERCOSUR and Cuba, which provided for the extension of the existing bilateral agreements between the MERCOSUR States parties and that country.

130.            Argentina is participating in the negotiations to establish a Free Trade Area of the Americas (FTAA), whose objective is the gradual elimination of tariff barriers among the countries of the western hemisphere.  The negotiating format was modified at the Eighth Ministerial Meeting (Miami, 2003), as it was not possible to overcome the substantial differences regarding definition of the level of ambition in various areas of negotiation, particularly agriculture.

131.            Argentina, through MERCOSUR, has signed various framework agreements.  The first was the one between MERCOSUR and the Republic of South Africa, signed in 2000.  This is a framework agreement for the negotiation of a free-trade area, which was subsequently extended to the remaining members of the Southern African Customs Union (SACU).  In December 2004, both parties signed a fixed preference agreement whose schedules of concessions are currently being finalized.  Protocols were also signed on customs cooperation, the MERCOSUR-SACU Sanitary and Phytosanitary Agreement, Trade in the Automotive Sector, and Fisheries.  This agreement represents a first step towards the negotiation of a free-trade area.

132.            Negotiations with India on a fixed preference agreement were initiated in 2003 and concluded in December 2004, making this the first agreement signed by MERCOSUR with a country outside the Americas.  The agreement contains lists of eligible products as well as annexes on rules of origin, safeguards and dispute settlement.  This agreement is currently under consideration in the respective Parliaments and is expected to be ratified in the near future.  The agreement itself provides for a second round of negotiations, for the establishment of a free-trade area.

133.            In 2004, MERCOSUR signed two further framework agreements with Morocco and with the Arab Republic of Egypt, both geared to the granting of fixed preference concessions between the two parties, as a first step towards a free-trade area.  Furthermore, in 2005, a framework agreement was signed with the Gulf Cooperation Council (Saudi Arabia, Bahrain, the United Arab Emirates, Kuwait, Oman and Qatar) under which the establishment of a free-trade area is being negotiated.

134.            In 2006, MERCOSUR made progress in the negotiation of a free-trade agreement with Israel, and a framework agreement on trade was signed with Pakistan, which establishes a basis for trade negotiations leading to the adoption of a fixed preference agreement.

135.            In addition, a MERCOSUR-China liaison group has been established to follow up and implement cooperation projects between the two parties and to establish coordination for resolving any situations or problems that may arise.  Contacts are also maintained with the Republic of Korea, the Dominican Republic, Panama, CARICOM, Sao Tomé and Principe, Guinea-Bissau, the Central American Integration System (SICA) and Japan.

136.            In 2000, MERCOSUR and the European Union entered into negotiations on the establishment of an inter-regional association agreement, which includes chapters concerning political dialogue, cooperation and trade liberalization.  As in the case of multilateral negotiations, Argentina is proposing ambitious targets which take account of mutual interests and the overall balance of offers.

137.            During the negotiating rounds and technical meetings, both parties have worked toward achieving an ambitious agreement.  Thus far, it has not been possible to conclude the work given the absence of equivalent offers in the different areas.

138.            In the multilateral sphere, MERCOSUR also attaches importance to accelerating the pace of negotiations under the global system of trade preferences among developing countries (GSTP), with the aim of achieving a comprehensive agreement in the course of 2007.  In the context of Round III of the GSTP and under the presidency of Argentina, MERCOSUR drew up a proposal on negotiating techniques and modalities for market access, based on two guiding principles:  a high level of ambition and the simplicity of the instruments selected.

139.            The effective organization of the GSTP will make it possible to expand markets for Argentine products, make better use of the capacities of the countries that are parties to the agreement, diversify production structures, increase efficiency and contribute to the growth of the international economy.  At the same time, the agreement will represent a qualitative step forward in the role of developing countries in international trade and will confirm the developing countries' firm commitment to the multilateral system and the liberalization of trade flows.

140.            The management of external trade promotion at national level is a task conducted by more than one entity in Argentina.  Ministerial Law No. 22.520 (text harmonized by Decree No. 498/92) stipulates that, in the area of trade promotion policy, the Secretariat of Industry, Trade and Small and Medium-sized Enterprises of the Ministry of the Economy and Production is involved in setting the policy, while the Secretariat of Trade and International Economic Relations of the Ministry of External Relations, International Trade and Worship, through the Undersecretariat for International Trade, bears prime responsibility for implementation. 

141.            Thus, multisectoral trade missions to foreign countries are organized, headed by senior national and/or provincial government officials, targeting markets where opportunities for the growth of Argentine exports have been identified, as well as various campaigns to publicize trade and investment offers and opportunities, the participation of businesses in international trade fairs and other measures, including the organization of special promotion activities.  Another noteworthy aspect is the active participation of provinces and municipalities in trade missions by businesses.  The programmes in force are implemented in conjunction with the federal institutions, in accordance with Argentina's political structure and the management of trade promotion.

142.            One important feature of the function of trade promotion carried out by the Ministry of External Relations is the design of the "Argentina Trade Net" business portal, which began functioning in October 2004.  The basic aim of this programme is to promote foreign trade through the centralization and standardization of information generated by embassies, consulates and promotion centres, so that Argentine enterprises can have direct access to updated data on international demand free of charge.

143.            Mention should also be made of the Fundación Export.Ar,a major trade promotion agency set up in 1993 as a non-profit-making organization with public and private sector funding (the private sector being represented by various business chambers).  Its activities are supported by the 120 embassies, consulates and economic and trade units of the various Argentine missions throughout the world.  Some of the main services provided by this entity to exporting enterprises are the following:  trade promotion programme, exporters group programme, international trade fairs, trade missions, business agendas (Agenda de Negocios) and reverse business agendas (Agenda de Negocios Inversas) etc.

144.            The Undersecretariat for Small and Medium-sized Enterprises and Regional Development of the Ministry of the Economy and Production also generates trade promotion instruments and mechanisms with a view to securing greater participation by small and medium-sized enterprises in export activity.  The most noteworthy mechanisms used by this entity include the following, inter alia:  support programme for exporter groups and consortia;  first export support programme;  information system on foreign trade;  and register of exporting SMEs.

145.            This agency has also developed the pro-Argentina.gov.ar portal, devised to promote exports by roughly 9,000 exporting SMEs.  Essentially, enterprises can use this portal to make their export potential known to the rest of the world and to gain access to market surveys.  The portal includes a directory of exporting SMEs with data on their products and services, information on exportable products, events, missions and trade fairs in Argentina and abroad, together with a special database for foreign users, commercial opportunities and market profiles.

146.            Despite having suffered the worst crisis in its history in 2001-2002, Argentina recovered rapidly thanks to the strenuous efforts of its Government and people.  The persistence of the current conditions of macroeconomic stability, based on the floating exchange rate, the fiscal surplus, monetary prudence and the active role of the State in promoting economic activity and foreign trade, make it likely that the economy will sustain its recovery and enter into a prolonged cycle of more equitable growth.

147.            Argentina considers that its economic development potential hinges crucially on avoiding crises in the external sector, such as those that occurred in the past as a result of violent macroeconomic upheavals that had an impact on finance, production and society, entailing serious losses of human and material capital.  Thus, the Government has placed strong emphasis on plotting a course of sound external sector management for the sake of harmonious long-term development, by creating the necessary conditions to expand exports of goods and services and attract investment and technology.

148.            In this new phase for Argentina, government policy is aimed at maintaining a healthy trade surplus, a novelty in the country's economic growth cycles, by stepping up its efforts to achieve greater diversification of products and markets, increase the proportion of non-traditional goods that are exported, and increase the number of exporters, especially exporters of manufactures.  However, the possibility of a significant enhancement of Argentina's presence in world trade depends not only on continued gains in output and competitiveness, but also on the country achieving greater market access, especially in sectors where it is more competitive, such as agriculture.

149.            With those aims in view, Argentina has established a trade policy devised as a system of instruments and measures which determine its external integration along with the achievement of economic development.  To that end, priority has been assigned to the successful establishment of stable and predictable conditions of market access in all areas (multilateral, regional and bilateral).  At the same time, through various instruments of public policy, Argentina is promoting export potential appropriate to the characteristics and requirements of external demand, while improving the competitiveness of production sectors and expanding the export base.

150.            The prospect of stable and predictable market access is essential for the purpose of attracting investment to the export sectors.  This should be complemented by competition policies that ensure improved integration into the international production chains so as to produce goods with higher value added.  In this connection, technological development and better training of the work force, with State backing, play a fundamental role.

151.            At the same time, the participation of small and medium-sized enterprises in external sales has an important role to play in diversifying export potential, bearing in mind that a high proportion of such enterprises export industrial manufactures.  Given that enterprises of this kind are more labour intensive, greater international integration is directly dependent on job creation.  In view of the sporadic pattern of foreign sales by such firms in the past, the Argentine State is building the institutional foundations needed to ensure their sustainable participation in the export trade.

152.            In the area of trade policy, Argentina assigns a role to multilateral negotiations, which is reflected in its active participation in the World Trade Organization (WTO).  Argentina reaffirms its commitment to the multilateral system and is doing its utmost to achieve the objective of open and fair world trade, facilitating the expansion of market access and thereby making a clear contribution to the sustainable development of Member countries, especially the developing countries.  In the present Doha Round, Argentina is seeking to achieve concrete outcomes which improve its potential for international integration, by placing strong emphasis on the liberalization of agricultural trade and the achievement of equitable outcomes in respect of industrial products and services, so as to facilitate the implementation of its industrial and economic diversification policy.  This will help to create the necessary conditions for ensuring an improvement in the quality of employment and its sustained growth.

153.            Regional integration is another basic instrument for increasing and improving the quality of Argentina's integration into the trading system.  In this connection, the development of MERCOSUR, and the consequent consolidation of the trade links among the countries of the region, boosts their intra-industry trade, a fundamental step towards MERCOSUR's integration into world production chains and towards the diversification of its production and export structure.

154.            MERCOSUR is an essential element of Argentina's trade policy and its unshakeable objective is to establish a common market among the member countries through the consolidation of the customs union.  At the same time, through MERCOSUR, Argentina plays an active role in integration with Latin America and with the other countries and regions of the world seeking the development of fair and equitable trade.

155.            In short, Argentina's further integration into the world economy is based both on an active trade policy which seeks to expand opportunities for access to external markets by Argentine companies, and on an economic policy that permits sustainable growth and encourages investment in the export sectors.

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