The Office of the U.S. Trade Representative, or USTR, recently revoked Argentina’s preferential trade status, citing the country’s refusal to respect the World Bank and pay $300 million in restitution to American investors. As a beneficiary, Argentina exported $477 million of goods to the U.S. duty-free last year.
So egregious is Argentina’s disregard for international law and covenants that it accounts for 78 percent of all cases brought against G-20 countries in the World Bank’s International Centre for Settlement of Investment Disputes. ICSID has issued awards totaling nearly $1 billion in cases so far against Argentina, which it refuses to respect.
Beyond ICSID, other countries find themselves in disputes over Argentina’s economic actions. This week, Spain is the most obvious example, with Kirchner’s peremptory nationalization of YPF/Repsol. Spain is committed to defend its interests and may ban biodiesel imports from Argentina in protest.
The Kirchner government also recently escalated its conflict with the U.K. over the Falkland Islands by issuing a boycott of British goods, turning away British cruise ships and pressuring Peru to do the same.
The International Monetary Fund, which has been prevented from conducting its mandatory fiscal review in Argentina, cited the Buenos Aries government for its lack of transparency and manipulation of inflation data, and announced that it will conduct compulsory reviews of Argentina’s public accounts.
U.S. patience with Argentina’s actions has been exhausted in other venues.
Assistant Secretary of the Treasury Marisa Lago testified before Congress that the U.S. now opposes further loans to Argentina from the World Bank and the Inter-American Development Bank until Argentina respects its international obligations. These obligations include more than 100 judgments by U.S. courts arising out of the 2005 restructuring of Argentina’s defaulted sovereign debt. When many U.S. investors declined the initial restructuring offer, the Argentine government simply and illegally repudiated those obligations. U.S. courts have upheld the rights of the investors, and the Kirchner government has refused to respect those holdings.
In light of these developments, it was distressing that last week the Justice Department sided with Argentina in an amicus brief opposing a U.S. court’s finding that Argentina must treat plaintiffs (U.S. investors) equally. It’s a classic example of one part of the government (the Justice Department) not knowing or appreciating what other parts of the government (Treasury and USTR) are doing.
In filing the brief, Justice Department lawyers may inadvertently undermine years of effort to hold Argentina accountable for its disdain of U.S. and international laws. It also created a context in which the Argentine government could seize on President Obama’s reference at the Summit of the Americas to the Falkland Islands by their Spanish name, “Malvinas,” as a signal of support and as a slap at the British.
Will Argentina ever rejoin the community of lawful nations? Accumulating pressures from the WTO, IMF and World Bank to induce Argentina to behave responsibly may yet work — if the U.S. takes the lead in consistently and unequivocally refusing to support or overlook Argentina’s bad acts.
Robert J. Shapiro, co-chairman of American Task Force Argentina, is chairman of Sonecon and former undersecretary of commerce in the Clinton administration.
