In my eyes that's a penalty. Then again, anything that hits the arm which isn't glued to the body is a handball for me.
That's not the rule though.
What's the rule? A defender is taught from early age to always glue the arm to your body in the box. I'm not sure how this handball rule is, but I agree with Mike there's argument for both sides. Just check La Liga two seasons ago when they gave a yellow card for any ball touching a hand.
a free-kick or penalty will be awarded if a player "handles the ball deliberately (except for the goalkeeper within his own penalty area)"
Ever tried running with your arms by your sides? It's an absurd notion.