The stock of U.S. foreign direct investment in Argentina was $5.7 billion in 1994, 30.8 percent higher than that in 1993. U.S. direct investment in Argentina is largely concentrated in manufacturing, banking, energy, telecommunications and transportation. A U.S.-Argentina bilateral investment treaty came into force in October 1994. Under the treaty U.S. investors enjoy national treatment in all sectors except shipbuilding, fishing, insurance and nuclear power generation. An amendment to the treaty removed mining, except uranium production, from the list of exceptions. The treaty provides for arbitration of disputes by the international center for the settlement of investment disputes or other mutually acceptable international bodies.

IMPORT POLICIES

The Menem Administration, since 1989, has made major progress in reducing traditional border measure barriers (such as tariffs and import licensing) and non-border measure barriers (such as investment regime reform and government procurement). Significant barriers remain, however.

Argentina, Brazil, Paraguay and Uruguay officially established MERCOSUR (the Spanish abbreviation for Southern Common Market) on January 1, 1995 with a common external tariff (CET) covering 85 percent of traded goods. The CET ranges from zero to twenty percent. Capital goods and informatics and telecommunications equipment are excepted from the CET until 2001 and 2006 respectively. In 1995 Argentina raised the tariffs on these goods to help counter an expected fiscal shortfall. Argentina's average tariff (CET plus exceptions) is around twelve percent.

At the request of the United States and other WTO members, the MERCOSUR countries agreed to the formation of a working party in the WTO to examine consistency of MERCOSUR with the WTO rules. The United States will also continue to engage this group of countries on a bilateral basis in an effort to expand trade and investment and reduce barriers to commerce.

In September 1995, the Government of Argentina imposed "specific duties" on textiles, apparel and footwear in response to alleged dumping from foreign competitors, mainly in the Far East. The specific duties are based on imputed values, and appear to violate Argentina's WTO commitments, especially under the Customs Valuation Code. The U.S. Government has asked Argentina to eliminate these measures or otherwise bring them into conformity with the WTO. Argentina has indicated it will issue new regulations by early April 1996.

Argentina no longer maintains an import licensing regime. Import quotas exist in the auto sector, but the quotas are supposed to be eliminated by January 1, 2000 as part of a MERCOSUR-wide automotive regime. Currently, there are separate quotas for Argentine auto assemblers, official distributors of foreign cars, auto dealers, as well as firms and individuals.

Argentina's internal tax system appears to discriminate against imported beverages. The highest taxes are assessed on whiskeys and cola-based soft drinks, while other liquors and domestically produced soft drinks are assessed lower duties. The U.S. Government is working with affected industries to address this problem.

In October 1995, Argentina suspended imports of fresh fruit from California in response to recent oriental fruit fly detections in that state. USDA provided Argentina's quarantine agency data and background information on the situation and has requested that the embargo be lifted. Despite a MERCOSUR resolution to lift the quarantine, Argentina has not taken action to rescind the suspension.

In addition, certain U.S. fruits, such as Florida citrus, are currently denied access to Argentina, while others face uncertain and non-transparent phytosanitary entry requirements.

LACK OF INTELLECTUAL PROPERTY PROTECTION

Patent Barriers

Reform of Argentina's patent system, particularly regarding pharmaceuticals, has been a contentious bilateral issue. In 1995, the Argentine Congress passed a new patent law, with amendments, that provided protection for pharmaceuticals only after a five-year transition period. The law contained no pipeline provision, allowed parallel imports and authorized compulsory licensing on a wide scale. Government regulations, issued in November 1995, improved the law somewhat, but Congress objected and passed another law invalidating the decree establishing regulations. The Menem Administration partially vetoed this law. The Menem Administration and Congress negotiated a new set of regulations, issued as this report went to print. The U.S. does not expect these regulations to improve patent protection in Argentina. Although the WTO TRIPs agreement was ratified by the Argentine Congress in late 1994, it is unclear the extent to which the new regulations will comply with TRIPs. The U.S. has persistently raised its concerns about inadequate patent protection with the Argentine Government.

Copyright Barriers

Argentina's copyright laws and regulations have generally been adequate. Although the copyright law, dating from 1933, did not cover computer software, the government issued a decree in 1994 extending copyright to software, thus meeting a TRIPs requirement. However, in late 1995, a local court nullified the decree conferring copyright protection to software. Local intellectual property attorneys have appealed the case to the Supreme Court, which has not yet issued a decision on whether it will hear the case. A government resolution, published in June 1995, stipulated that only software physical medium (disk, packaging) would be subject to import tariffs, thus conforming to a GATT customs valuation decision of 1984.

Video piracy is a severe problem and the home video rental market for legitimate tapes has suffered a serious and significant decline. Cable television piracy has diminished in recent years. According to an American firm which recently assumed control of Argentina's largest cable company, unauthorized transmission of U.S.-owned material occurs most often in rural areas, away from the major markets. Argentina has over a thousand cable networks. In addition, according to some estimates, pirated products, virtually all of them imported, account for 30 percent of the sound recording market.

In 1993 the Menem Administration issued a decree raising the term of protection for cinematographic works from 30 to 50 years after the death of the author to conform to the Berne Convention standard.

U.S. industry estimates that losses due to copyright piracy in Argentina total about $208 million annually.

SERVICES BARRIERS

Argentina has undertaken liberalization in the services area as part of its broader economic reform program. However, barriers continue to exist.

Fifty percent of the participants in the production of any broadcast advertisements must be Argentine, effectively barring use of foreign-based advertisements. Entry into the insurance sector, previously very limited, was liberalized in early 1992, allowing foreign firms established as local companies to compete on an equal footing with those owned by Argentines. However, foreign firms must have a subsidiary in Argentina in order to sell insurance locally. In order to speed the consolidation of the sector the Superintendent of Insurance is not issuing new licenses, except for pension funds, life insurance, burial services, and credit insurance. Since September 1993 foreign companies have been permitted to purchase existing life insurance licenses from Argentine companies, essentially establishing a new company with these acquired licenses. The state reinsurance firm, which was abolished by a decree promulgated on January 27, 1992, has been closed and is being liquidated. The decree also eliminated the requirement to reinsure 60 percent of each policy with the State and applied this retroactively to January 1, 1992. The privatization of pension funds has attracted a number of American firms.

In October 1994, Law 24.377 modified existing Argentine Film Law No. 17.741. Included in the new legislation is (1) a 10 percent tax on the rental and sale of all home video products; (2) a provision calling for the obligatory exhibition and remuneration of national short–subject films; and (3) a provision authorizing the Argentine Film Institute to oversee obligatory local processing, dubbing and subtitling of foreign films. The second provision, however, has yet to be implemented.

The United States sought liberalization of services barriers in the Uruguay Round and will continue to do so on a bilateral basis when appropriate.