Brazil: Brazil And The International Trade Negotiations And Disputes

Article by José Setti Diaz¹

Brazil is a key player in the multilateral trade negotiations and disputes. It is because of Brazil's growing capabilities as an exporter that it is fairly reasonable to estimate that Brazil's participation on international trade negotiations and disputes should increase in the coming years in two different paths: (i) trade negotiations and disputes in the World Trade Organization (WTO) with special focus to agricultural products; and (ii) trade defense measures and trade barriers concerning Brazil's industrial and agricultural products.

Since 1947, the General Agreement on Trade and Tariffs (GATT)’s scope was a set of rules aiming at trade liberalization and the regulation of the process to diminish trade barriers.

This process of trade liberalization among countries has initially started with industrial products. Presently, the rules applicable to such products have reached a high level of completeness and liberalization. Non-agricultural market access (NAMA) was certainly not a hot topic of negotiation so far. Other trade topics, such as those relating to non-trade barriers and trade defense measures became more important when industrial products are concerned.

Historically, trade rules had hard times to touch on agricultural products. Quantitative restrictions and export subsidies commitments were not applicable to agricultural products up to 1995, when the Uruguay Round Agreement on Agriculture (URAA) was approved under the auspices of the WTO. The URAA was the first multilateral set of rules governing market access, domestic support and export subsidies applicable to agricultural products. For the first time, there were commitments applicable to subsidizing countries, such as global limitation and reduction to some categories of agricultural subsidies.

Agriculture is now the central point of negotiations of the Doha Round and is blamed to be the main reason for disagreement between WTO members. The current status of negotiations according to the Director-General Pascal Lamy is that the WTO members gave green light to the Negotiating Group Chairs to take up again the normal process of negotiations, which was suspended as of July 27, 2006. The Chair of the Committee on Agriculture is also resuming the multilateral consultations along with the fireside chats to achieve progress in the main agriculture aspects under discussion: market access, domestic support and export competition.

The G-20, group of developing countries lead by Brazil, is concentrating its actions in agriculture and has taken a fundamental role in the development of the negotiating positions in the WTO. Within such group, Brazil has been in the forefront of the solid and politically consistent technical proposals that are being submitted to the negotiation group. Brazil and the G-20 will also be further demanded to balance their offensive and defensive positions in the referred three pillars of the agricultural negotiation.

In terms of WTO disputes, Brazil has been a leading member to demonstrate before the WTO dispute settlement system that agricultural subsidies and restrictions create distortions to world trade, such as, international price suppression, losses of market share, and also deviation of trade flows. The United States – Subsidies on Upland Cotton (DS 267) case and the EU - Sugar case (DS 266) were certainly good precedents to demonstrate such negative effects of subsidies to trade.

The cotton case was a landmark challenge because, for the first time, the WTO was forced to examine the legality of the agricultural subsidies and their distorting effects, affecting the US agricultural programs.

The sugar and cotton cases will certainly perform an important role in future agricultural cases that will be brought to the dispute settlement proceedings of the WTO. Those cases in combination with the expiry of the so called "Peace Clause", on December 31^st, 2003 have led to a legal reorganization of the rules applicable to the disputes concerning agricultural products. This means that the agricultural subsidies will be more likely to be challenged at the WTO and that new disputes related to agricultural subsidies may arise in WTO’s scenario and this may cause a direct impact in trade liberalization.

It should be expected that Brazil will continue to have an important role in connection with such disputes, either with a view to protect its own past achievements or to strengthen its negotiation position in the Doha Round based on new WTO decisions.

Locally, the Brazilian investigating authority - DECOM - Department of Trade Defense - was known for having a very conservative behavior in the initiation of investigations and application of definitive duties. Trade remedies statistics until 2005 are an evidence of such behavior. However, the recent 2006' trend shows that DECOM may now be following towards a different direction.

For instance, DECOM's report published as of 2005 informs that from 1988 until 2005, 239 investigations were initiated in Brazil (antidumping, safeguards and countervailing measures initiations and reviews) and only 122 of them were finished with the definitive measures. Out of these 122, 109 were anti-dumping measures, 9 countervailing duties measures and 4 safeguard measures. During the year of 2006, 23 anti-dumping investigations were also initiated, which represents approximately 10% of the total measures initiated in 17 years only in one year.

This sudden increase of investigations in 2006 may also be explained by the effort of the Federation of Industries of the State of São Paulo - FIESP to educate Brazilian businessmen/institutions on the importance and characteristics of trade defense measures. Such approach by the industry is the basis for this new set of cases and we may expect new investigations to be initiated even more frequently in the near future, generating several new cases.

Between 1988 until 2006, the countries that were more investigated by Brazil were China (47), United States (39), India (14), Russia (10), Argentina (9) and Mexico (8). Currently, Brazil has 24 ongoing investigations and China is in the top of the list with 16 products under investigation.

Other WTO members constantly investigate Brazil. Until 2005, the United States carried out subsidies and antidumping investigations against 21 Brazilian products, Argentina against 8; India against 7 and South Africa against 6. Only in 2006, Argentina has initiated 6 antidumping investigations against Brazil. Despite all these investigations, Argentina has also compelled Brazilian exporters to enter into several voluntary restriction export agreements.

This recent trend of trade defense measures and trade disputes between Argentina and Brazil may also show a new trend for the upcoming years. As Brazilian exports are also growing fast to other markets, one may also expect an increase of investigations against Brazilian exports elsewhere as well.

Footnote

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