RESTRICTED
WORLD TRADE WT/TPR/G/21
26September 1996
ORGANIZATION(96-3823)
Original: English
TRADE POLICY REVIEW
BRAZIL
Report bytheGovernment
Pursuant totheAgreement Establishing theTrade Policy Review Mechanism (Annex 3
oftheMarrakesh Agreement Establishing theWorld Trade Organization), theBrazilian
Government 'sinitial policy statement isattached.
Note:Thisreport issubject torestricted circulation andpress embargo untiltheendofthemeeting
oftheTrade Policy Review Body ofBrazil.Brazil WT/TPR/G/21
Page iii
CONTENTS
Page
I. INTRODUCTION 1
II. THE ECONOMIC AND TRADE ENVIRONMENT 1
III. TRADE POLICY DEVELOPMENTS 1992-1996 4
(i) TheUruguay Round 5
(ii) Regional integration 5
(iii) Mercosul 6
IV. INSTITUTIONAL AND REGULATORY FRAMEWORK 6
(i) Competition policy 6
(ii) Intellectual property 7
(iii) Trade remedies andsafeguards 7
V. FUTURE POLICY DEVELOPMENTS 8
(i) Multilateral issues 8
(ii) Foreign trade barriers 8
(iii) Commitment totrade liberalization 9Brazil WT/TPR/G/21
Page 1
I. INTRODUCTION
After three decades ofimport substitution policies, aprocess ofconsistent market opening
undertaken since 1990 hasexposed theBrazilian economy toincreasing international competition.
Infact,thetotaltrade flowofgoods increased fromUS$56 billion in1992 toUS$96 billion in1995,
mainly duetoanincrease inimports from US$20 billion toUS$50 billion, atthesame period. As
aresult, theBrazilian productive sector hasbeensubjected toadeepandwidespread restructuring,
which hasprivileged efficiency andcompetitiveness andencouraged agrowing number ofBrazilian
enterprises toadjust themselves totheemerging globalized economy.
Trade policy -strongly guided byBrazil 'sMercosul andWTO commitments -hasplayed a
central roleinthestabilization oftheeconomy. Tariff hasregained itsroleasthesingle mostimportant
instrument oftradepolicy, leading togreater predictability andtransparency intraderelations. Under
theframework oftheMercosul Customs Union, Brazil 'stariff structure reflects great regional
coordination, alongside enhanced institutional stability andgreater discipline.
TheBrazilianGovernmenthasbeencommittedtodeepentheprocessofeconomicmodernization
andliberalization. Inthisdirection, ithascarried outabroad programme ofConstitutional reforms
thatinclude theflexibilization ofStatemonopolies intheareas ofpetroleum andtelecommunications,
theelimination ofmarket reserve fornational companies incoastal cabotage, theendofpiped gas
monopoly, andtheelimination ofthelegaldifference between Brazilian companies ofnational capital
andother Brazilian companies. Thelatter action allows foreign investors toincrease theirholdings
insectors suchasmining, inwhich theirmaximum participation waslimited to49percentofthetotal
capital. Thethrust ofallthese reforms istodecentralize Government andtoreduce theState'srole
intheeconomy. Itisimportant tonotethatthisprocess hasbeenreflected atalllevels ofgovernment.
Thechange ismore fundamental inthesense thattheroleoftheStatemoves fromowner toregulator.
Thischange inapproach isnotonlyseenasameans toimprove economic efficiency butalsotofacilitate
theimplementation ofsocial policies.
II. THE ECONOMIC AND TRADE ENVIRONMENT
Since thefirstTPR(1992) theBrazilian economy haschanged significantly. Thischange has
beendriven inlarge measure byabroad economic stabilization program putintoforce inJuly1994 -
theRealPlan.
Theacceleration ofBrazilian inflation inthe1980s generated aseries ofeconomic stabilization
plans. Theprogrammes introduced prior totheRealPlanwere generally based onhighlevels of
intervention intheeconomy, intheform ofprice orwage freezes, while thefundamental question
ofstructural reform wasrelegated toaposition oflesser importance. Economic performance inall
these plans wasquite thesame: atfirst,adrastic reduction ininflation thatwassoonreversed inthe
absence ofthenecessary structural reforms, followed soonafterwards byanewandgenerally even
higher inflation spiral. Thispattern occurred inthecasesofthe"Cruzado" (1986), the"Bresser" (1987),
the"Verão"(1989), the"Collor I"(1990) andthe"Collor II"(1991) stabilization plans.
TheRealPlanisdifferent from theprior plans since itwasbuiltonaseries ofpreviously
achieved reforms, including theopening oftheeconomy, thederegulation andliberalization ofthe
exchange market andthenormalization ofrelations withtheinternational financial community.
Asaresult, theRealPlanhasbrought inflation ratestothelowest levels inthelast35years.
Inthe12months prior totheRealPlan, theGeneral Price Index (GPI) increased by5,000 percentWT/TPR/G/21 Trade Policy Review
Page 2
(fivethousand percent); in1995, annual ratescame down to14.8percent, andthisyeartheGPI
isexpected toincrease by10percent. Itisimportant tostress thatthissharp andcontinuous drop
ininflation hasbeenachieved intheabsence ofpriceorwagefreezes, breaches ofcontracts orrecession.
TheRealPlanhasbeenundertaken through threebasicelements, amonetary reform including
thecreation ofanewcurrency (the"Real"), theelimination ofindexation incontracts -including wages
andexchange rate-andagreater reliance onmarket mechanisms. Theincrease ininterest ratesand
thecontraction ofcredit experienced initially havemore recently beenreversed asthePlanevolves
andmatures.
TheBrazilian Government isfocusing itsattention ontheneedtoimprove itsfiscal situation
and,inthemedium run,onthereform oftheroleoftheState intheeconomy. In1995, theoverall
public sector (which includes Federal, States, Municipalities, Social Security andState Enterprises)
wasbalanced inprimary terms (surplus of0.37percentoftheGDP). However, innominal terms
(including interest expenditures andmonetary indexation) there wasadeficit of7.34percentofthe
GDP, duemainly totheadaptation ofbudgetary spending tolowinflation rates.
Inthefirsthalfof1996, animprovement hastaken place intheconsolidated public result in
operational andnominal terms, while inprimary terms theresult remained virtually balanced. The
operational deficit wasreduced from 4.99percentin1995 to3.6percentoftheGDP attheendof
thefirsthalfof1996, innominal terms thedeficit declined from7.34percentto5.96percentofthe
GDP, inthesame period. Inaddition, thepublic sector debt(internal andexternal) reached
CR$241.5 billion inJune1996, equivalent tolessthan35percentoftheGDP -anamount which
isfullycompatible withthesizeoftheBrazilian economy. Forthewhole 1996fiscal year, anominal
deficit ofaround 5percentisexpected, duetochanges incorporate andindividual income taxregulations
social security contributions, andrestrictions onpublic sector current expenditures, among others.
Regarding thepermanent fiscal adjustment, itshould benoted thatstepshavebeentaken towards
thereduction ofGovernment spending atalllevels oftheconsolidated public sector, notably: (a)an
amendment totheConstitution isunder consideration inCongress which would imply amajor
administrative reform, oneoftheeffects ofwhich would betofacilitate thereduction ofthepayroll
ofcivilservants; (b)attheFederal level, aproposed reform ofthesocial security system would give
itcomplete independence fromtreasury funding onapermanent basis; and(c)asforStatecompanies,
theprocess ofprivatization iswellunder way.
Concerning therestructuring oftheroleoftheState intheeconomy, in1995, theBrazilian
Congress approved aseries ofConstitutional Amendments, proposed bytheExecutive branch tothe
economic provisions oftheConstitution. Firstofall,themore flexible rulesfortheStatemonopoly
ofthepetroleum sector willallow theGovernment tocontract private enterprises fortheexploration
andexploitation ofpetroleum andnatural gasdeposits andwillliftrestrictions ontheimportation of
oilanditsderivatives aswellasrefining andtransportation. Secondly, withtheliberalization ofthe
telecommunications sector, theGovernment willbeable,through public concessions, tocontract private
companies tooperate telephone, telegraph andother communication services. Finally, another two
major changes havebeenapproved. Thefirstoneeliminated the"erga omnes" discrimination against
foreign capital, bylifting theprevious distinction between Brazilian firms ofnational capital andother
Brazilian firms; and,thesecond eliminated market reserve fornational-flag ships inthecoastal and
inland cabotage.
Alongside Constitutional reforms, theGovernment isaccelerating theprivatization programme.
Thesteelandpetrochemical sectors havealready beenprivatized. Theprogramme hasnowenteredBrazil WT/TPR/G/21
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anewphase withthecreation ofappropriate conditions forprivate investment andexpansion inpublic
services, suchaselectrical energy, water, gasandtransportation.
Regarding thetradeenvironment, theGovernment hascomplied withitscommitment towards
anincreasing degree ofexposure oflocalproducers toforeign competition. Acloser analysis ofimport
figures reveals astronger economic interdependence between theBrazilian productive sector andthe
world economy. Recent growth inimports hasnoprecedent intheBrazilian economic history. In
thelastthree years, imports grew, asstated before, by150percent, from US$20 billion toUS$50
billion. Increased reliance onforeign supply andthegreater competition indurable goods, made possible
bytrade liberalization, hasserved adouble purpose: toincrease industrial productivity (since 1990
productivitygrowthhasreachedanannualrateof7.6percent),whilealsobeinginstrumentalinfostering
market contestability andcontributing todomestic price stability.
Thestrong demand forimports resulting fromtheimplementation oftheRealPlangenerated
monthly tradedeficits beginning inNovember 1994andreaching anaccumulated totalofUS$5.5 billion
byJune1995(8-month-period). Suchlevels oftradedeficit could notbesoundly sustained, soitbecame
necessary tocontrol accelerated import growth. Inthefirsthalfof1995, aside frommeasures taken
torestrict aggregate demand growth, import taxes were increased foraseries ofdurable goods (for
thewhole yearof1995thetradedeficit stillreached US$3.2 billion). Inthefirsthalfof1996, however,
suchimport taxes were substantially reduced.
Exports havegrown moderately since 1992. Total exports grew by30percentbetween 1992
and1995. AsofJuly1996, Brazilian exports haveaveraged overUS$4 billion amonth, during the
last12-month period, incontrast withthecorresponding figure for1992: US$3 billion.
Insummary, thetrade flowofgoods increased fromUS$56 billion in1992 toUS$96 billion
in1995, atanannual rateof20percent, ahigher ratethantheincrease inworld trade atthesame
period. Iftheflowofservices isadded totheflowofgoods, therelevant figure for1995 was
US$134 billion. Theopenness oftheeconomy, measured astherelation between tradeflows andGDP,
grew from 12.5percent, in1992, to17percentthisyear.
Theincreased demand forcapital goods andrawmaterials canbetranslated astheresumption
ofinvestment andtheimprovement inBrazil 'sproductive capacity (imports offuel,rawmaterials and
capital goods account foraround 80percentoftotalimports in1995). Theamount offoreign direct
investment (FDI) received; bytheBrazilian economy thisyearwillbeahistorical record, reaching
around US$8 billion. FDIwillsurely increase evenmore asaresult ofthecurrent privatization
programme andflexibilization ofState monopolies. Theinvestment rateinrelation totheGDP is
expected toreach 20.5percentbytheyear1999, alevelclose tothose experienced inthefastgrowth
period ofthe1970s, andmuch higher thanthe13.7percentof1992.
Theperformance justdepicted highlights some dynamic features oftheBrazilian economy,
whose GDP grew 4.2percent,5.8percentand4.1percent, respectively, in1993, 1994 and1995.
Inspite ofsome localized problems, theindustrial sector grew 5percentperyearintheperiod
1993-1995. ThisyearaGDP growth of3percentisexpected.WT/TPR/G/21 Trade Policy Review
Page 4
III. TRADE POLICY DEVELOPMENTS 1992-1996
Since thefirstTPR(1992) significant progress hasbeenmade inBrazil 'straderegime. Thus,
theautonomous trade liberalization programme which started in1990wascompleted onschedule, in
July1993andtheregional economic integration process wasfurther deepened withtheestablishment
oftheCustomsUnionofMercosulinJanuary1995.Thetradeliberalizationprogramme(1990-mid-1993)
ledtothelifting ofimport prohibitions andtotheelimination ofnon-tariff barriers. Likewise, import
tariffs weresubstantially reduced withtheaverage import dutyfalling from32.2in1990 to14.2per
centin1993. Following theestablishment oftheMercosul Customs Union, which resulted inthe
implementation oftheCommon External Tariff (CET) on1January 1995, theaverage import tariff
wasfurther reduced to12.6percent. Themaximum tariff came down from 105percent, in1990,
to32percentbeginning on1January 1996(excluding afewitems likeautomotive vehicles andhome
appliances).
Thenegotiating process leading totheestablishment oftheCET provided fortransitional
instruments toallow Mercosul countries toadapt tothenewtariff structure. Although around 85per
centofalltariff lines (ofatotal ofaround 10,000) arebeing subjected toCET levels since
1January 1995. Eachcountry wasallowed tomaintain anational exception listcontaining 300items,
inthecaseofBrazil, Argentina andUruguay, and399items inthecaseofParaguay. These national
exceptions were defined individually andapre-established linear convergence schedule wassetfor
eachtariff line. According topre-established schedules, national exceptions willreach CET levels
on1January 2001, forBrazil andArgentina and1January 2006, forParaguay andUruguay.
Acommon listofcapital goods andinformation technology/telecommunication goods was
established andissubjected toaconvergence schedule toward theCETwhich willreach 14percent
in2001 (Brazil andArgentina) and2006 (Paraguay andUruguay) forcapital goods, and16percent
in2006 forallfourcountries inthecaseofinformation technology/telecommunication products.
Oneofthemostdifficult taskstheBrazilian Government hashadtoundertake intrade policy
inthelastfewyears hasbeentheattempt toreconcile objectives suchasprice stabilization ontheone
hand, withobjectives suchaseconomic resource allocation ontheother. TheRealPlan, launched
inJuly1994, inaddition toleading toadramatic dropininflation rates, hadaverysignificant impact
onaggregate demand. Excess indemand boosted imports and,insome cases, ledtoshortages. For
thatreason, inApril 1995, Brazil negotiated atemporary mechanism withitsMercosul partners, which
permitted thereduction, foraperiod ofuptoayear(until April 1996), ofamaximum of150tariff
linescorresponding toproducts facing difficulties related toinsufficient regional supply.
Withthegradual normalization ofsupply conditions since thesecond halfof1995, Brazil has
made lessuseoftariff reductions. Further, withtheendofthemechanism mentioned above, agood
dealofproducts returned totheirCETlevels originally agreed upon byallMercosul States. During
1995-1996, Brazil hasalsorevised afewitems initsException Listbringing itstilltoanumber below
theoriginally agreed 300itemlevel. Bothoftheseactions weretaken fullyincompliance withMercosul,
reflecting commitments made jointly byallfourMERCOSUL countries in1994. Similarly, ajoint
decision ofJune1996hasestablished anewregional mechanism todealwithshortage problems, which
allows foronly20tariff items andisbased onaverystrict consultation process.
TheBrazilian Government understands thatincarrying outtheprocess oftrade liberalization
itmusttakeintoaccount theneedtoremedy unfair tradepractices andtorespond tostructural failures.
Theapplication ofsuchmeasures reflects Brazil 'sstrong commitment totherules andprinciples of
themultilateral trading system.Brazil WT/TPR/G/21
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(i) TheUruguay Round
Thesuccessful conclusion oftheUruguay Round meant, above all,aguarantee thatthe
multilateral trading system willbepreserved and,moreover, strengthened, vis-à-vis theriskthatexisted,
attheturnofthenineties, ofthefragmentation ofinternational trade intoseparate, inward-looking
trading blocs. Brazil expects thattheagreements reached during theRound willstimulate economic
growth worldwide astheyhaveapositive impact onthree interconnected areas: international trade,
investment andemployment.
TheBrazilian Government hasconsistently implemented theresults oftheUruguay Round and
believes strongly inthenewandimproved structure ofthemultilateral trading regime, asembodied
intheprovisions thatcreated theWorld Trade Organization. Particular attention hasbeenpaidinBrazil
toimprovements, agreed during theUruguay Round, inareas asdiverse asdispute settlement,
anti-dumping andcountervailing duties andsafeguards.
(ii) Regional integration
Alongside itscommitment tooverall economic liberalization, Brazil haspursued thedeepening
ofeconomic integration attheregional andsubregional levels. From ageographic perspective and
taking advantage ofexisting economic complementarities withneighbouring countries, Brazil 'sgoal
hasbeentofoster convergence anddevelopment through further tradeliberalization within thecontinent.
Thisstrategy, however, should notbeinterpreted asasetback inBrazil 'straditional approach
totrademultilateralism, confirmed byitsactive participation inandsupport formultilateral forasuch
astheGATT/WTO. Asatrulyglobal trader, (in1995, forinstance, Brazilian exports were, according
totheareaofdestination, distributed asfollows: 20.4percenttoLatin America, 27percenttothe
European Union, 16.8percenttoAsia, 18.9percenttotheUnited States and16.9percenttoother
countries), Brazil hasconsistently pursued openregionalism andhasstrongly defended fullcompatibility
withtheWTO agreements ofdisciplines negotiated under anyregional framework.
Regional integration hasplayed amajor roleinBrazil 'sinsertion intoglobal markets byinducing
greater productivity gains aswellasgreater coordination ofpublic policies andincreasing discipline.
Theprocess ofeconomic integration inBrazil isineffect three-fold: subregional integration,
withtheconstruction oftheMercosul; regional integration, withtheestablishment offree-trade areas
between Mercosul andthirdcountries intheregion, ashasbeenalready thecasewithChile andBolivia;
and,finally, hemispheric integration, withnegotiations incourse among 34nations toestablish aFree
Trade Area oftheAmericas (FTAA). Inaddition, inDecember 1995, Mercosul andtheEuropean
Union signed aninterregional cooperation agreement thathasimportant significance foreconomic and
political relations between thetwoblocs.
Brazil'sapproachinanyintegrationefforthasbeentobuildonwhathasalreadybeenconstructed,
fullytaking intoaccount pastachievements andfuture possibilities. This"building-block" approach.
islargely perceived astheonethatcould dojustice tothecomplex webofbilateral andplurilateral
agreements already inplace while notprecluding anyadvance intowider andbroader arrangements
ofthesortproposed intheFTAA negotiations.WT/TPR/G/21 Trade Policy Review
Page 6
(iii) Mercosul
Brazil, Argentina, Paraguay andUruguay signed, inMarch 1991, theAsunción Treaty for
theestablishment oftheCommon Market oftheSouth (Mercosul). TheTreaty itselfcontained some
innovativecontractualelementssuchasautomaticreductioninimporttariffswithinthebloc,aprogramme
fortheelimination ofnon-tariff barriers, theestablishment ofacommon external tariff, andthedefinition
ofacommontradepolicy.Thus,aprocesswhichbeganwithbilateraltalksbetweenBrazilandArgentina
inthemid-1980s, andwasconsolidated withthefulfilment ofcontractual elements intheAsunción
Treaty, would culminate inaCustoms Union among Mercosul States, intoforce on1January 1995.
Itisimportant toemphasize that,asfarasMercosul isconcerned, there aretwofactors that
madethewholeinitiativefeasible;thetransitiontodemocracyandtheredesignofpatternsofgovernment
intervention, notably intherealm oftradepolicy. Thelatter hasbeenreinforced sinceJuly1994, with
thelaunching oftheRealPlaninBrazil.
Asof1January 1995, dateofinauguration oftheCustoms Union, Mercosul 'smarket stood
at200million potential consumers withaGDPoverUS$700 billion. ForBrazil, Mercosul hasproved
tobeavery dynamic market. TheBrazilian trade with other Mercosul countries grew from
US$3.64 billion in1990, theyearprior tothesigning oftheAsunción Treaty, toUS$12.97 billion
in1995, thefirstyearoftheCustoms Union operations. Thisgrowth ofintra-zone trade ofover
250percentbetween 1990and1995occurred, inthecaseofBrazil, intandem withasubstantial growth
intotalforeign trade, which grewby85percentduring thesame period, fromUS$52 billion in1990
toUS$96 billion in1995.
Thesuccess ofMercosul doesnotmean thatallworkhasbeencompleted. Brazil anditspartners
areworking towards greater coordination inalltrade related issues suchasharmonization ofcustoms
procedures,harmonizationoftradepreferenceswithotherLatinAmericanIntegrationAssociation(LAIA)
countries, andcoordination ofanti-dumping/countervailing actions.
Inaddition, Mercosul hasbeencomplying withitsobligations under theWTO Agreements,
withallrelevant information having being properly notified.
IV. INSTITUTIONAL AND REGULATORY FRAMEWORK
Intheareaofforeign trade, itisimportant tomention some institutional changes thattook
place since thefirstTPR(1992). Theministerial reform in1992, among other things, broke down
theMinistry ofEconomy, Finance andPlanning intothree newMinistries: Finance; Planning and
Budget; andIndustry, Trade andTourism. Inaddition, inFebruary 1995, theForeign Trade Board,
within thestructure ofthePresidential Office, wascreated withaviewtocoordinating trade policy
attheinterministerial level. TheForeign Trade Board ischaired bytheHead ofthePresidential Office
andcomprises fivemember Ministries: Finance; Industry, Trade andTourism; Planning andBudget;
Agriculture andExternal Relations.
(i) Competition policy
Competitionpolicyhasbecomeparticularlyimportantinthenewcontextofliberalization,market
opening andstabilization. Indeed, withliberalization amodern regulatory framework isincreasingly
necessary. Until thelate1980s anumber ofsectors were under official control obviating theneed
foranycompetition policy orinstitutional framework. Now, incontrast, most Brazilian prices are
formed bymarket forces andrequire astable andtransparent legalframework toensure thattheywillBrazil WT/TPR/G/21
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function efficiently. Moreover, price stabilization achieved bytheRealPlansince Julyof1994 has
permitted theprice system tooperate asameans tooptimize resource allocation.
Inthisnewcontext, itisnotsurprising thatagencies which dealwithcompetition policy such
astheAdministrative Council forCompetition Policy (CADE), theSecretariat ofEconomic Defence
(SDE) andtheSecretariat ofEconomic Surveillance (SEAE) havehadamore prominent roleinpolicy
making. Their actions areregulated byLaw8884ofJune1994which encompasses inlarge measure
mechanisms found inmost advanced competition legislation.
Thenewdevelopments incompetition policy inBrazil areimportant totheprocess ofregional
integration. Brazil isengaged intheeffort toharmonize legislation among thefourmembers of
Mercosul. Thisshould permit areplacement ofanti-dumping measures byactions based oncompetition
lawwhich isinlinewiththeconsolidation ofthecustoms union. Theefforts intheFTAA areequally
important insofarastheyshall allow forgreater convergence inthelegislation aswellasinthe
jurisprudence ofthedifferent countries ofthehemisphere. Inthecontext oftheWTO, Brazil favours
thediscussion oftherelevance ofcompetition policies asameans topromote greater convergence on
theissue.
(ii) Intellectual property
Inlinewithitscommitments under theTRIPS Agreement, Brazil approved newIndustrial
Property Legislation, on14May1996, covering thegranting ofpatents forinvention, forutility models,
registration ofindustrial designs andoftrade marks, repression offalsegeographical indications and
unfair competition. Thelawentered intoforce onthedateofitspublication withregard topipeline
protection forsubstances, materials orproducts obtained bychemical means orprocesses or
chemico-pharmaceutical orfoodsubstances, materials ormixtures ordrugs ofanynature, aswellas
therespective processes fortheirobtainment ormodification.
Under thenewindustrial property law,theprocedures forthegranting ofpatents havebeen
simplified, withaviewtoreducing thetime-limit andadministrative costsfortheconcession ofpatents.
Notwithstanding thetime-frame forthegranting ofapatent inBrazil, which iswithin theworld average,
theapplicant isalready conferred exclusive rights, suchastherighttoeconomic exploitation, onthe
dateoffiling forapatent. Also, thenewIndustrial Property Lawestablishes simplified procedures
fortheregistration ofmarks.
With theapproval ofthenewIndustrial Property Law, andthecomplementary initiatives in
other fields ofintellectual property (software, plantvarieties, author 'srights, integrated circuits, etc.),
Brazil isfulfilling, onatimely basis, itscommitments under theTRIPS Agreement, notwithstanding
Article 65.2(Transitional Arrangements) ofthatAgreement. Thenewlegislation isconsidered tobe
animportant instrument fortheabsorbtion andgeneration oftechnologies, ontheonehand, allowing
foranadequate return ondomestic investments onR&D, and,ontheother, asamajor factor forthe
attraction offoreign investment.
(iii) Trade remedies andsafeguards
Inorder toimplement thenewprocedures unfair trade practices thatresulted from the
Uruguay Round, theBrazilian Government issued Decree No.1.602/95, dated 24August 1995, which
regulatedanti-dumpingmeasures,andDecreeNo.1.751/95,dated20December1995,oncountervailing
measures. Fouranti-dumping investigations havebeeninitiated under thenewrulesandoneprovisionalWT/TPR/G/21 Trade Policy Review
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anti-dumping measure hasbeenapplied. Nocountervailing investigation hasbeeninitiated since the
introduction ofthenewlegislation.
Concerning safeguard measures, Decree No.1.488/95, dated 17May 1995, modified on
20June1996 byDecree No.1.936, established therules andprocedures tobeapplied tosafeguard
investigations, inaccordance withtheAgreement onSafeguards resulting fromtheUruguay Round.
Oneinvestigation hasbeeninitiated sincethen,withtheapplication ofaprovisional safeguard measure.
Created byDecree No.1.757/95, dated 26December 1995, theDepartment forTrade Defence
(DECOM), asection oftheSecretariat ofForeign Trade oftheMinistry ofIndustry, Commerce and
Tourism, isthenational entity responsible fortheundertaking ofanti-dumping andcountervailing
investigations, aswellasforsafeguard procedures DECOM 'sconclusions andrecommendations are
submitted totheMinister ofIndustry, Commerce andTourism andtheMinister ofFinance whojointly
decide ontheapplication ofprovisional andfinalmeasures.
V. FUTURE POLICY DEVELOPMENTS
(i) Multilateral issues
TheBrazilian Government isready toreaffirm, attheMinisterial Meeting ofSingapore, its
firmcommitmenttotheprinciplesofmultilateralismandopenregionalismwithout,however,renouncing
totheagreed schedule tocomplete thetariffreduction plannegotiated attheUruguay Round andwithout,
also,starting, prematurely, exercises ofwidening thescope oftheexisting rules, aprocess which may
ultimately result intheweakening ofthemultilateral trading system.
Brazil understands thattheprimary objective oftheMinisterial Meeting consists inproceeding
withanin-depth critical analysis oftheimplementation oftheresults oftheUruguay Round. Itwill
beimportant toassess howthecontractual obligations arebeing enforced worldwide, bearing inmind
thatthelackofcompliance withtheliberalization commitments, onthepartofsome trading partners,
mayhaveasignificant impact ontrade flows ingeneral. Moreover, unlike what happens tosmall
andmiddle-sized economies, indeveloped countries, many ofthenewrulesagreed uponattheUruguay
Round, already reflect theprevailing legalinstitutional framework.
Brazil considers thattheministerial meeting oftheWTO willrepresent anunparalleled
opportunity forbeginning thepreparatory work fortheresuming ofthemultilateral negotiations on
agriculture in1999. Thissector isespecially important forBrazil, which already accounts forover
3percentoftheworld exports ofagricultural products. Also, thesector accounts for28percent
ofthetotalexports ofBrazil.
(ii) Foreign trade barriers
Although Brazil hascommitted itself toacomprehensive programme oftrade liberalization
thegrowth rateofitsexports isfarlower thanthatofitsimports. Toalargeextent, thesituation may
beexplained bytheexistence ofbarriers ofseveral sortstocountry 'sexports.
Theimpact ofthissituation canbeclearly shown through thefollowing figures which compare
Brazilian trade flows of1995 tothenumbers oftheprevious year, forthree major trading partners
(theEU,Japan andtheUnited States), comparing 1995to1994, theincrease inBrazilian imports from
these partners wasashighas50percent, 42percentand55percent, respectively. However, the
increase inBrazilian exports tothese partners amounted toonly6percentinthecaseoftheEuropeanBrazil WT/TPR/G/21
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Union, 20percentinthecaseofJapan andasfarastheUnited States areconcerned, there waseven
adecrease of2percent. Theoverall figure shows anincrease ofaround 50percentinimports, against
merely 7percentinexports, inthesame period.
Thefirstmajor group oftrade barriers totheBrazilian exports istheonelinked totariffs.
Notwithstanding theUruguay Round market access improvements, unjustifiably hightariffs stillinhibit
theexport ofBrazilian competitive products suchasleather, footwear, textiles, orange juiceandsugar.
Besides thehighleveloftariffs initself, thecriteria employed forthecalculation ofanti-dumping
duties insome countries lacktransparency. IntheUnited States, forinstance, theuseoftheso-called
"bestinformation available" oftenprecludes thecorrect assessment ofthemargin ofdumping, creating
aresult thatismuch higher thantherealone. Thisisthecasefortheexport ofseveral steelproducts.
Asfarasnon-tariff barriers areconcerned (such asquotas, technical andsanitary barriers)
there areseveral examples ofdiscrimination against Brazilian products. Exports ofbovine meatand
poultry totheUnited States forinstance arestillprohibited duetosanitary allegations, considered by
Brazil tobeunjustified, since thesame products donotfacebarriers ofthatsortinother markets such
astheEuropean Union.
Thediscriminatory nature ofsometechnical barriers, suchasthoseimposed bytheUnited States
against Brazilian exports ofgasoline wasevidenced byarecent decision oftheDSB, which haspassed
adecision determining thattheUnited States should dismantle those barriers.
(iii) Commitment totrade liberalization
Trade liberalization isakeyelement forconsolidating theeconomic stabilization process. It
provides thedomestic economy withincreased market contestability andalsoinduces substantial gains
inproductivity. Inthisrespect, astrengthened multilateral trading system should playanimportant
roleinsupporting amore balanced distribution ofgains from trade.
With trade liberalization, Brazil isreducing theprevious anti-export biasthatcharacterized
theinward-looking model ofimport substitution. However, thepaceofexport growth hasnotbeen,
inrecent years, asrapid astheoneobserved inimports. While exports grew by30percentbetween
1992 and1995, imports, inthesame period, increased by150percent. Toalarge extent, sucha
modest performance ofBrazilian exports reflects thelimitations imposed byhightariffs, tariff peaks
andnon-tariff barriers.
TheFederal Government isaddressing aseries ofpublic policy issues intheareaofforeign
tradewiththeobjective offurther reducing theanti-export biasandoffostering thegeneration ofincome
andemployment. Among thesehorizontal policy initiatives weshallmention thefollowing: therebate
ofindirect taxes suchasICMS (value-added taxattheState level) levied onexports ofprimary and
semi-manufacturedgoodsandthedevelopment,onamarketbasis,ofanexportcreditinsurancecompany
toallow areduction intransaction costs involved intheexport business. Inaddition, since 1991 the
Federal Government hasfostered theparticipation ofprivate enterprises ontheNational Programme
ofQuality andProductivity (PBQP) aimed atimproving managerial methods andskills, andhuman
resources onquality management. Asaresult, around 1,200 companies havealready obtained ISO9000
certification.
Thedeepening oftheglobalization process, paralleled bytrade liberalization andeconomic
stabilization inBrazil, hasraised theimportance ofaddressing microeconomic inefficiencies. ToWT/TPR/G/21 Trade Policy Review
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accomplish that,theFederal Government isintheprocess ofimplementing aseries ofmeasures in
thefields ofinfrastructure, taxes, deregulation, financial sector andlabour relations.
Theliberalization process undertaken since1990isirreversible. Thedifficulties found insome
sectors toadjust themselves notonlytothemost significant market opening inBrazilian history but
alsotothemost encompassing andprofound stabilization planeverimplemented inthecountry, in
nowayaffect Brazil 'scommitment totrade liberalization andgreater interdependence, whathasbeen
evidenced bythecountry 'sactive participation intheWTO, during thesenearly twoyears ofexistence
oftheorganization.