Jul 28, 1988

U.S. ACTIONS AGAINST BRAZIL PROTESTED IN GATT.

GENEVA, JULY 26 (IFDA/CHAKRAVARTHI RAGHAVAN) -- The unilateral actions of the United States against Brazil over the latterís refusal to comply with U.S. demands to change its domestic laws in order to protect U.S. pharmaceutical TNCS and their trade, came for sharp attack at the meeting of the Uruguay round Trade Negotiations Committee.

Brazilís under-secretary for Economic and Trade Affairs warned that the U.S. actions were in effect undermining the entire processes of the Uruguay round.

The statement by the Brazilian official Sebastiao Rego Barros got support, with varying nuances, from Peru, Colombia, Argentina, Uruguay, Chile, Yugoslavia, India and Egypt.

Many other delegates said that the issue having come up suddenly, they had no notice and instructions from their governments, and it was far too serious a matter for them to similarly comment by themselves.

The European Community too "regretted" and "deplored" the resort to unilateral action on the part of the United States, and noted that it had been repeatedly warning that "unilateralism is looming in front of our doors".

But the EEC statement also implied that if only Brazil had been accommodating to the demands of the U.S. (EEC and Japan and other industrialised countries), in the GATT round over the revision of intellectual property rights, the type of unilateral actions taken by the U.S. would not have been possible.

The U.S. delegate, Amb. Michael Samuels, quoted from President Reaganís statement, in announcing the decision to take retaliatory action against Brazil, and said that Brazil was guilty of "piracy".

Samuels remark in effect said that other countries had complied with U.S. demands in providing increased protection to U.S. TNCS "intellectual property rights", and it was for Brazil to comply with the U.S. demands for safeguarding of the interests of U.S. enterprises.

Brazil rejected this argument, and said it could not accept such unilateral restrictive measures, nor accept that one trade partner gave itself the right to penalise the actions of another trade partner without going to a multilateral forum. The Unites States had no political or moral authority to do this.

Under the scheme of the general agreement, any Contracting Party that feels that its GATT rights are being violated, has to bring the complaint before the general agreement, have it adjudicated by a panel, and take retaliatory actions only after authorisation from the general agreement, and that too limited to the amount of damages that the GATT adjudges the CP had suffered.

This is a salutary provision introduced in the general agreement to guard against the kind of situations in the inter-war years of unilateral retaliations that contributed to the collapse of the economic system.

But in recent years, after the advent of President Reagan and his view that his domestic mandate and popularity entitles him to unilaterally change the international system, the U.S. Administration has been having increasing recourse to such unilateral actions, in effect defying the aggrieved party to go to GATT and its lengthy procedures.

The Section 301 of the U.S. trade and tariff act under which the administration has acted is a clear violation of GATT, but the issue has never been brought before GATT (and cannot be brought except in terms of an actual trade action) and thus adjudicated upon.

The U.S. has always relied on the large size of its domestic market, and the anxiety of its trading partners somehow to settle rather than get into costly litigations, where the winner might still lose (since the only recourse after winning the adjudication is retaliation), to get U.S. will imposed on its trading partners.

But despite this "rambo" behaviour of the United States, GATT delegates from both industrialised and third world countries have been puzzled by the timing of the U.S. actions, just on the eve of an important meeting of the Uruguay round Trade Negotiations Committee.

Couched in diplomatic language, the Brazilians statement at the TNC said: "the intended U.S. measures do not prejudice Brazil alone. They threaten the very integrity of the negotiating process".

Brazil also announced that it was reserving its GATT rights, meaning it could still bring the dispute before GATT for adjudication.

Third world diplomats here suspect that the U.S. has announced its decision, and published the list of products which it plans to hid, in the hope that the Brazilian exporters of these products would raise domestic pressures and lobby the Sarney administration to yield to the U.S. demands.

In raising the issue at the TNC, Rego Barros said that Brazil had planned to raise a number of other issues like standstill and rollback, and questions relating to money, finance, trade, development and debt issues, but was not doing so, since already others had done so.

But even more, the U.S. decision against Brazil could not but have a very serious impact on he negotiating process, and on Brazilís determined efforts to increase its participation in the international trading system.

Outlining in this connection some recent actions of Brazil to liberalise its international trade, including by lowering tariff rates and eliminating some para-tariff and non-tariff measures, the Brazilian official said this was a clear demonstration of Brazilís belief in the objectives of the Uruguay round and its determination to contribute to the success of the round.

It was all the more regrettable, Rego Barros said, that just four days before the TNC meeting the U.S. should have announced its decision to impose unilateral trade-restrictive measures.

The intended level of the proposed restrictions, he noted, would bar Brazilian exports to the U.S. market, and if implemented, would violate the most elementary principles of international law and the GATT.

"Additionally, it would infringe on the commitment formally undertaken at Punta del Este "not to take any trade restrictive ... measures inconsistent with the provisions of the GATT".

"This unjustified and discriminatory application of U.S. legislation on account of alleged damage cited to the U.S. pharmaceuticals industry would result in a disproportionate and preposterous encumbrance to be borne by our trade sector".

"... the mere publication of the list of potential items ... is likely to disrupt trade through suspension of orders and similar steps taken by U.S. importers of products bound to be affected".

The U.S. measures did not threaten Brazil alone but the very integrity of the negotiating process.

"They not only try to coerce a party to change an internal policy which is perfectly consistent with internationally agreed instruments that regulate intellectual property rights. They also try to make that party mould its position in the Uruguay round in accordance with the wishes of a more powerful trading nation".

"If such a practice in condoned", the Brazilian delegate asked, "how can one trust that a commercial partner of the importance of the U.S. will abide by obligations still to be established, when in the very course of the round it takes upon itself to apply unilateral restrictive measures ..."

"Does one have to draw the attention of this specific trading partner that such measures clearly violate the provisions of the general agreement...?"