Brazil Issues Retaliation List Of US Products; IP-Protected Items In Next Round

Brazil has announced the list of 222 American products that could suffer retaliation with tariff rates of more than 100 percent of the value when imported to Brazil. The list could be followed by another including potentially hundreds of millions of dollars in non-tariff items related to intellectual property rights such as lower-priced patented pharmaceuticals.

The retaliation list [pdf] was announced on 9 November and is open for public consultation until 30 November, said Lytha Spíndola, executive secretary of the Board of Foreign Trade (in Portuguese, Câmara do Comércio Exterior – Camex). The Brazilian government hopes to receive contributions from entrepreneurs who belong to associations or federations of the same branches of trade as those that would be affected by the tariffs.

The first retaliations will be applied to US products in January 2010, said Spíndola. The World Trade Organization (WTO) authorised Brazil to retaliate against products from the United States in the amount of US$ 900 million in exchange for past illegal US agricultural subsidies. Arbitrators used the year 2006 as a baseline for the ruling. Of the total amount ($900 million), half is expected to be in products facing tariffs. The other 50 percent, $450 million, could be applied to services and intellectual property, in a situation called “cross-retaliation.”

Cross-retaliation (retaliation in a trade area other than the one in violation) is permissible under WTO rules and could be used to lower prices on patented pharmaceuticals. According to the Camex executive secretary, the second stage sanctions involving exceptions to patents on drugs and more tariffs in services only will occur after the implementation of the first product tariffs. And a public consultation also will be held. Exceptions to patents such as compulsory licences already are permitted under WTO rules, but could be made easier through WTO sanctions.

The National Institute of Industrial Property [corrected], under the Ministry of Development, Industry and Commerce, is awaiting instructions to participate in a discussion on creation of a list of patent exceptions. The technical staff from the institute do not yet have details on retaliation in the area of intellectual property.

On 10 December, there will be a meeting of seven ministries involved with this subject and Camex. During this meeting, they will analyse the public suggestions to list. Of the content of these 222 products, the list includes food, medicine, medical equipment, cotton, appliances, cosmetics, and accessories for vehicles. According the Commerce Ministry, the total value of the list is $2.7 billion, and some products may be excluded.

At the end of August 2009, the Brazilian government was authorised by the WTO, after a seven-year battle, to retaliate against US products because subsidies to US farmers and cotton industry were judged inconsistent with WTO rules and harmful to Brazilian cotton exports (IPW, WTO/TRIPS, 7 September 2009). That action damaged the cotton markets of developing countries such as Brazil.

The Ministry of Foreign Relations (in Portuguese, Ministério das Relações Exteriores – MRE) said that during the process of arbitration the country formally requested countermeasures of U$ 2.5 billion and asked for freedom to choose other areas of retaliation, such as intellectual property rights, and not only use tariffs on imported products.

Employing the WTO rule on cross-retaliation, according to the Ministry of Foreign Relations, besides being a legal instrument, was justified in the face of the severity of the violation. Although the value stipulated by WTO was not equal to what Brazil asked, the ministry issued a statement that said: “it is a significant value, the second highest authorised in the history of WTO.”

If Camex really applies the retaliation in 2010, it will be the first time that Brazil has used this kind of response. The country received six opportunities in the past, but so far never used this authorisation.