Oct 12, 1985

U.S. RETALIATION ON BRAZILIAN GOODS WILL VIOLATE GATT.

GENEVA, OCTOBER 10 (IFDA/CHAKRAVARTHI RAGHAVAN)— Any U.S. retaliation against import of "goods" from Brazil, arising from current U.S. investigations about purported unfair Brazilian practices in informatics would violate the general agreement on tariffs and trade, Brazil told the GATT Council Thursday.-

The Brazilian Ambassador to GATT, Paulo Nogueira Batista raised the issue at the GATT Council Thursday under any other business to clarify a document circulated by Brazil on this issue.-

In the document Brazil had served notice that it reserved its GATT rights in the matter.-

The U.S. president, Ronald Reagan, had recently announced the initiation Suo Motto of investigations by the administration under section 301 of the 1984 U.S. trade law against foreign governments for their purported "unfair trade practices", and had said in the event U.S. found such practices, it would retaliate by imposing restrictions on the "goods" coming from those countries into the U.S.-

In terms of this announcement, the U.S. president had also announced the start of investigations against Brazil over its informatics law, and restrictions on imports from U.S. of informatics "goods" services and restrictions on foreign investments in this sector.-

President Reagan had similarly announced the start of investigations against South Korea over its failure to allow U.S. enterprises to establish and sell insurance in South Korea.-

In raising the issue in the GATT Council, Batista is reported to have underlined that at the U.S. request, Brazil had held "consultations" with the U.S. in GATT as per article XXII.-

However, in these consultations held in June, Brazil had advised the U.S. that Brazil would address only "concrete trade problems related to goods", and that these should be identified and quantified in the present.-

Brazil had also said it did not find it appropriate to consult under GATT auspices on the "potential trade effects" of its law on informatics, which had not yet been brought into force and implemented through regulations.-

Since then, the U.S. has started investigations against brazil in terms of Brazilian practices on import of informatics goods, services and investment rules for foreign enterprises.-

Referring to this, Batista also reportedly told the GATT Council that Brazil would not take advantage of the 45-day period, provided in the U.S. law, for "interested parties" to make comments on the proposals for start of investigations.-

In the Brazilian view, it would not be appropriate for the Brazilian government to comment on procedures, which were part of another country's internal jurisdiction, since this would be tantamount to accepting the other country's jurisdiction over Brazil.-

In explaining why Brazil was reserving its GATT rights, Batista reportedly pointed out that the S. 301 investigations started by the U.S. administration about "unfair trade practices" by Brazil were not only directed against practices on "imports of goods" but also on Brazilian legislation on the establishment of foreign firms in Brazil and on foreign investment in Brazil.-

If following on these "investigations", and from their perceptions, the U.S. authorities were to make a determination or finding of "unfair trade practices" against Brazil, and if they decided to retaliate against Brazilian " goods", Brazil would have full right to bring the issue before the general agreement, the Brazilian diplomat underlined.-

Any such U.S. determination of "unfair trade practice" by the U.S. would be a unilateral action and procedure in terms of the U.S. law, and would be violative of GATT since both Brazil and the U.S. were Contracting Parties to GATT and the only applicable law and procedure were GATT rules and principles.-

(Under the general agreement, article XXII, any Contracting Party aggrieved by the action of any other Contracting Party, could seek consultations with the other Contracting Party to resolve the issue).-

(And if a Contracting Party felt that the actions of the other Contracting Party violated its GATT rights, and if direct consultations did not result in any agreement, the aggrieved Contracting Party could refer the dispute to the GATT Contracting Parties as a whole, who could investigate the matter and give a finding or ruling, and if this was not carried out, authorise the aggrieved Contracting Party to retaliate against the other by withholding equivalent concessions).-

Batista also stressed that if the U.S. proceeded to retaliate against Brazilian "goods", on account of unfair trade practices in respect of investments and services, the U.S. would have no case before GATT, since GATT applied only to trade in goods.-

In a brief intervention, the U.S. delegate would appear to have confirmed the start of the investigations against Brazil, and that this dealt not only with Brazilian restrictions on imports of informatic goods, but also establishment of firms and investment laws in the field of informatics.-

The U.S. delegate however hoped that the issue could be settled bilaterally.-

Brazil however made clear that any bilateral consultations would not be held within the context of the 45-day period in the U.S. law for aggrieved parties to make comments to the administration.-