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