R 181324Z MAR 09
FM USMISSION GENEVA
TO SECSTATE WASHDC 8145
INFO WORLD TRADE ORGANIZATION COLLECTIVE
DEPT OF AGRICULTURE WASHINGTON DC
USDOC WASHDC
AMEMBASSY BRASILIA

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