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Mexico fights "protectionist" Argentina at WTO

GENEVA/MEXICO CITY (Reuters) - Mexico has launched its first dispute against Argentina at the World Trade Organization, accusing it of protectionism, a move that follows similar complaints by the European Union, United States and Japan.

The Mexican complaint, announced by the WTO on Monday, centers on Argentina’s import licensing rules, which critics say amount to a blanket restriction on imports.

The measures are among several policies adopted by the government of President Cristina Fernandez that have prompted accusations of protectionism against Argentina.

The worsening of trade relations between the two Latin American countries follows Argentina’s decision to pull out of a car trade pact two months ago.

“The government of Mexico reiterates its deep worry over the protectionist measures that Argentina is applying, as well as practices that lack transparency and affect trade between our two nations and generate uncertainty,” Mexico’s Economy Ministry said in a statement.

It said Argentina and Mexico should hold consultations over the next 30 days to try and find a mutually acceptable way out. It could ask the WTO to set up a panel to adjudicate if there is no resolution within 60 days, it said.

Mexico withdrew a zero-tariff agreement with Argentina on autos in July in a tit-for-tat trade dispute after the Argentine government’s decision to pull out of an auto trade pact between the two countries.

Mexico exported almost $2 billion in goods to Argentina last year, double the amount of trade coming the other way. But after Argentina introduced new import hurdles in February, trade has taken a knock. In June, the latest month for which data is available, Mexico exported goods worth $111 million to Argentina, down nearly 40 percent from 2011.

So far this year, about two-thirds of Mexico’s exports to Argentina were made up of vehicles and auto parts.

Sergio Martin, chief economist of HSBC in Mexico, said the row would only have a “minor impact” on Mexican foreign trade because Argentina was a relatively small market for Mexico, which exported goods worth $350 billion in total last year.

PICKING FIGHTS

In March, Mexico was embroiled in a spat with the Brazilian government over cars, but resolved the issue with an agreement to cap the volume of its auto exports to Brazil over the next three years.

HSBC’s Martin said Mexico could have pursued a similar tack with Brazil at the WTO as it had with Argentina, but had chosen a more pragmatic line with Latin America’s biggest economy.

“It’s not the same picking a fight with Argentina as it is to pick a fight with Brazil,” he said.

Mexico also previously criticized the nationalization this year of Argentine energy company YPF YPFD.BA, saying it would damage chances for future foreign investment in Argentina and hurt Repsol REP.MC, in which Mexico's state oil monopoly Pemex holds a stake of nearly 10 percent.

Argentina’s center-left government has tightened controls on imports and foreign-exchange purchases in recent months to improve its balance of trade, which is crucial to boosting international reserves used to pay debt.

Mexico’s inclusion in the WTO case, which has an unusually large number of complainants, may undermine Argentina’s arguments that its critics are all rich nations that are trying to restrain developing countries.

Defending the country’s policies against widespread criticism at the WTO, Argentina has asserted it cannot be accused of restricting imports when its imports grew by 31 percent in 2011.

Reporting by Tom Miles in Geneva, Krista Hughes and Dave Graham in Mexico City and Alejandro Lifschitz in Buenos Aires; Editing by Simon Gardner and Leslie Gevirtz

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