MARCH 2009 TRADE POLICY REVIEW OF BRAZIL

UNCLAS GENEVA 000230 EEB/TPP/MTAA FOR CRAFT USDA/FAS/ITP, MTND USDOC FOR ITA E.O. 12958: N/A TAGS: ETRD WTRO USTR SUBJECT: MARCH 2009 TRADE POLICY REVIEW OF BRAZIL ¶1. SUMMARY: WTO Members conducted the Trade Policy Review of Brazil on March 9 and 11, 2009. The head of Brazil's delegation, Ambassador Roberto Azevedo, described the economy's sound fundamentals and the government's stimulative policy measures that would help ease the effects of the global crisis. Azevedo made a plea for strengthening the multilateral trading system and concluding the Doha Round to minimize the loss of wealth stemming from the crisis. About 40 Members made interventions, praising Brazil for resisting protectionism, for their macroeconomic achievements, for binding 100% of their tariff schedule, and for their active participation in the WTO and the Doha Development Agenda. Many Members expressed concerns over the increase in the average applied MFN rate to 11.5% and the use of non-automatic import licensing, which affects over one-third of tariff lines. Some Members urged Brazil to reduce the wide gap between bound and applied rates, to join the Government Procurement Agreement, and to ratify the Fourth Protocol on telecommunication services and the Fifth Protocol on financial services. END SUMMARY. Chairperson's Summary Remarks ¶2. The Chairman, Ambassador Major of Hungary, summarized the meeting as follows: ¶3. "The fifth Trade Policy Review of Brazil has allowed this Body to appraise in detail the evolution of its trade policies since ¶2004. I thank His Excellency Ambassador Roberto Azevedo, Mr. Carlos Cozendey and their team for engaging so constructively in this Trade Policy Review exercise. I would also like to thank the discussant, Ambassador Noor, and the numerous Members who participated in the discussion as part of this exercise." ¶4. "This has been a very constructive review. We have heard widespread praise of Brazil's sound macroeconomic policies. Brazil's good economic performance has been linked to the expansion and diversification of trade, and thus to Brazil's liberalization efforts. Moreover, Brazil's economic growth had become more socially inclusive. While growth was slowing down amidst the global economic turmoil, it was the Members' sense that Brazil would weather the crisis better than most. However, Members also noted that Brazil continued to face important economic and social challenges and that, hence, further efforts were needed to meet these challenges." ¶5. "Brazil has received well-deserved commendation for its support of the multilateral trading system and its leadership role in all areas of the Doha Development Agenda. Members acknowledged Brazil's active participation in the development of the Aid-for-Trade process, and its twofold role both as recipient and as donor. As well, Brazil was encouraged to grant duty-free quota-free access to LDCs." ¶6. "Widespread appreciation was also expressed for Brazil's decision to resist protectionist pressures seeking to expand the scope of non-automatic import licensing. Nevertheless, some Members expressed concern with respect to Brazil's existing non-automatic licensing regime, noting that it affected just over one-third of all tariff lines. Brazil indicated that it was taking steps to minimize the impact of licences on imports, and that it did not intend to impose new licensing requirements on a broader list of goods. Concerns were also raised on the use of import prohibitions, with Brazil indicating that prohibition on used consumer goods were in place mainly for environmental and safety reasons. Some Members urged Brazil to enhance the transparency of its technical regulations, and sanitary and phytosanitary measures." ¶7. "In response to questions regarding the increase in the average applied tariff during the review period, Brazil explained that the tariff increases did not reflect its general trade policy, and that they had been concentrated in sectors that were particularly sensitive due to their labour-intensive nature. In this respect, Members encouraged Brazil to reduce bound tariff rates to give its import regime greater predictability. Replying to questions on the complexity of its taxation system, Brazil informed that a tax reform bill that seeks to reduce the number of taxes, improve tax neutrality and eliminate distortions was under discussion in Congress." ¶8. "Brazil was invited to consider joining the GPA, as this would reduce procurement costs and give domestic producers improved access to GPA member markets. Brazil responded that it was not currently considering joining or becoming an observer to the GPA." ¶9. "Some Members noted with satisfaction that Brazil had passed new IPR legislation and enhanced the effectiveness of enforcement but encouraged Brazil to further strengthen IPR protection." ¶10. "Some Members noted the use Brazil makes of preferential credit and other support schemes in sectors like agriculture and manufacturing, and expressed concern about domestic content and other requirements for accessing some of them. In this respect, Brazil considered that the management of its rural credit support did not cause major market distortions." ¶11. "Members encouraged Brazil to close the gap between its relatively liberal services regime and its GATS commitments. Brazil noted that although the ratification process of the Fifth Protocol on financial services was ongoing, it could not specify a timeframe for its completion. With regards to telecommunication services, Brazil indicated that it was not considering adopting the Fourth Protocol, nor relaxing commercial presence requirements, but that its revised conditional GATS offer included commitments in the telecom sector. Certain Members invited Brazil to remove foreign ownership restrictions in maritime and air transport services. Brazil noted that draft legislation changing investment restrictions in air transport was under examination in Congress." ¶12. "In conclusion, this Review has highlighted the key roles that sound economic policies, continued reform efforts and a growing integration in the global economy have played in Brazil's economic success in recent years. As a result, Brazil finds itself relatively well prepared to face the current global financial crisis, in which it has set an example by resisting protectionist pressures. Additional domestic reforms would further help Brazil overcome the crisis, and enable it to continue reaping the benefits of trade. Binding these and earlier reforms in the WTO would enhance the predictability of Brazil's trade and investment regime, as well as contribute to its efforts to achieve a successful completion of the DDA." ¶13. "I would like to close this meeting by thanking, once again, the discussant and the Members who took part in this meeting for contributing to an informative review. I would also like to thank the delegation of Brazil for addressing the large number of questions posed by Members both in writing and orally." Statement of the United States ¶14. The representative of the United States made the following remarks: ¶15. "Thank you, Chair. It is a pleasure to welcome you as the new Chair of this body. The United States warmly welcomes the delegation of Brazil, led by Ambassador Roberto Azevdo, to this, Brazil's fifth Trade Policy Review." ¶16. "We would like to recognize the excellent work of the Secretariat and the Government of Brazil in compiling the reports before us. The reports thoroughly detail Brazil's key trade policy objectives since the government's last review in 2004, and they give us a more complete picture of Brazilian policies affecting trade. We also appreciate the responses to our questions, which we will be examining closely. We look forward to learning more about Brazil's trade policies in this session. I would also like to take this opportunity to thank the discussant, Ambassador Muhamad Noor Yacob, for sharing his thoughts with us in the context of Brazil's TPR." ¶17. "The United States has always viewed Brazil as a valuable partner in the western hemisphere. The ties between our two nations have expanded over the years with increased trade, capital flows, cross-border investment, and a wide range of educational, health, scientific and other joint activities." ¶18. "Brazil and the United States face many common challenges. Primary among them is the need to stimulate economic growth in the face of the current global economic slowdown without resorting to protectionist policies. President Obama has spoken clearly about the need to avoid protectionism in response to the financial crisis, and we support Brazil's commitment to the November 2008 G-20 pledge to refrain from raising new barriers to trade. In that respect, we were pleased to note that the members of Mercosur chose not to raise the trade bloc's common external tariff on a number of products during its December 2008 summit in Brazil." ¶19. "Clearly, Brazil has become a true global trader, and this year's report recognizes the considerable diversity in the geographic distribution of Brazil's exports and imports. Focusing for a moment on our bilateral trade, we note that two-way U.S. goods and services trade with Brazil totaled $64 billion in 2007 (latest data available). Brazil is currently our 11th largest trading partner in goods with $63 billion in total (two-way) goods trade during 2008. Brazil was the United States' ninth largest goods export market and 16th largest supplier of goods in 2008. Overall, U.S. goods imports from Brazil are up 51% over the last 14 years (since the conclusion of the Uruguay Round)." ¶20. "The picture was also encouraging for U.S.-Brazil services trade during the period of review. U.S. exports of private commercial services to Brazil were $9.8 billion in 2007. Brazil's supply of private commercial services to the United States was $4.0 billion in 2007, up 339% from pre-Uruguay Round levels. Business, professional, and technical services, as well as telecom services, led U.S. services imports from Brazil. Although Brazil participated in the WTO GATS negotiations on telecommunications, the government did not ratify the Fourth Protocol on telecommunications. The United States encourages Brazil to reconsider its decision in light of its international commercial presence." ¶21. "We are pleased to note Brazil's steps toward simplifying and modernizing its customs procedures, though much work remains. We have appreciated the opportunity to provide technical assistance to the Brazilian government regarding best practices in facilitating trade, and we hope that Brazil will remain committed to this objective." ¶22. "The significant economic growth experienced in Brazil during the 2003-2007 period is slowing due largely to the global economic and financial crisis. Despite the difficult international context, we are convinced that Brazil would benefit from continuing its efforts to give additional momentum to liberalized trade and investment policies, including eliminating the use of import prohibitions and lowering effective tariff protection that, the Secretariat's Report notes, increased to 11.5% in January 2008." ¶23. "In our view, there are some specific areas where Brazil could take action to improve its trade and investment regime for the purpose of creating additional growth and development opportunities. We have covered many of these areas in our questions but I would like to touch briefly on some of them here today. For example, we would call attention to Brazil's difficult import licensing regime (which some others have referred to),its questionable SPS measures, the fact that it has not joined the WTO Government Procurement Agreement (GPA) and shortcomings in some areas of IPR protection and enforcement." ¶24. "A myriad of U.S. exporters continue to raise concerns about Brazil's extensive import licensing regime. We understand that Brazil already requires both automatic and non-automatic licenses for a large number of products that the Secretariat estimates cover 35.8% of all Brazilian tariff lines. Notwithstanding Brazil's efforts to computerize and streamline its system, individual ministries continue to administer import licenses without regard to the provisions of the WTO Agreement. We raise this issue constantly in both capitals, and now again in Geneva. Also, we would like to know where the government publishes the necessary detailed information regarding import licensing procedures across the entire range of ministerial import permits that are not notified or listed in Brazil's submissions to the Import Licensing Procedures Committee. We have also been advised that the approval of import license applications involving products from certain sectors, in practice, takes longer than the 30-60 days prescribed by the WTO Import Licensing Agreement." ¶25. "Most recently, we have received reports that Brazil had been planning to impose new import licensing requirements on a much broader list of goods. While we understand that this proposal was overturned, we are, nonetheless, concerned that Brazil may still be planning to expand the list of products subject to import licensing. The United States would be grateful to know Brazil's current thinking on this issue." ¶26. "The Secretariat's report makes multiple assertions that Brazil's sanitary and phytosanitary measures are strongly based on international standards and guidelines. However, significant issues remain that involve the government's restrictions or prohibitions of Brazilian imports of U.S. agricultural and food products. Our concerns include access to Brazil's market for such items as U.S. poultry meat and table eggs; wheat, and cattle; and, beef and beef products. We are interested in learning about Brazil's achievements since the last review, especially with regard to conformity with international practices and guidelines on SPS measures." ¶27. "We are also concerned with Brazil's non-transparent policies on government procurement as well as its lack of participation in the WTO GPA. We agree with the Secretariat's conclusion that Brazil ought to consider the benefits of joining the GPA inasmuch as membership 'would increase the predictability of its trade regime and could result in benefits to taxpayers by reducing procurement costs, and to domestic producers as there are Brazilian firms that could realistically compete for contracts in foreign markets'." ¶28. "We want to acknowledge the important progress that Brazil has made in enhancing the effectiveness of intellectual property rights enforcement, particularly with respect to pirated audio-visual goods. Nonetheless, shortcomings in some areas of IPR protection and enforcement continue as obstacles to U.S. exports and investment. In particular, the United States encourages Brazil to strengthen its IPR enforcement legislation, take more vigorous action to address book and Internet piracy, and consider acceding to and implementing the WIPO Internet Treaties." ¶29. "We welcome the priority that the Brazilian government attaches to the multilateral trading system as the main pillar of its trade policy. The Secretariat advises that Brazil conducts more than seventy-five percent of its trade with MFN trading partners. We are encouraged by Brazil's active participation in the WTO, but call upon the government to take on the additional responsibilities that come with its increased influence in the global economy. Brazil is well positioned as a "genuine" world trader to help ensure that all markets remain open for business." ¶30. "The United States recognizes that Brazil, in addition to its active participation in the WTO, is a leading voice among developing countries, in particular in the context of the Doha Development Agenda (DDA). While we appreciate Brazil's active role in the negotiations, we are, nonetheless, disappointed that the government has not pursued a bolder outcome. In light of Brazil's position as one of the fastest growing economies, we urge the government to make commitments that result in meaningful new trade flows in all three pillars of the negotiations, and contribute to an ambitious conclusion to the negotiations." ¶31. "One area where we see bolder action from Brazil is in the fisheries subsidies negotiations. The United States appreciates the leadership Brazil has shown in these negotiations and hopes that such leadership will not only continue but also will spill over into other negotiating areas. As a Friend of Fish, we have worked closely together through the years to achieve an ambitious outcome, based upon a strong prohibition, with appropriate and effective special and differential treatment that would not undermine the overall disciplines and contribute to the further exhaustion of marine resources." ¶32. "In closing, the United States appreciates the importance that Brazil places on continuing to ensure that the global trading order remains open. I would like to express my Government's expectation that, going forward, Brazil will continue to pursue further reforms and open markets that enable it to reap the benefits of expanding trade and global economic opportunity. In addition, we welcome further cooperation on trade matters with our Brazilian colleagues both here at the WTO and in the context of our growing bilateral relationship. Thank you." ALLGEIER