Oct 24, 1988


GENEVA, OCTOBER 21 (IFDA/CHAKRAVARTHI RAGHAVAN)—The U.S. actions imposing penal tariffs on some imports from Brazil, announced Thursday in Washington, is expected to be brought before the GATT bodies soon by Brazil.

The unilateral U.S. action, as Brazil has already pointed out in GATT, is a violation of the fundamental GATT provisions and is also a clear effort to pressure Brazil to change its stance in the Uruguay round negotiations.

The U.S. trade representative, Clayton Yeutter had announced thursday in Washington 100 percent penal tariffs an about 40 million dollars worth of imports of drugs, consumer electronic and paper and paper products, as a retaliation over Brazil's refusal to provide greater "protection" to pharmaceutical products imported from the United States.

The United States had announced on July 22 the Administration’s intention to initiate proceedings against Brazil under S. 301 of the U.S. trade and tariff act.

Soon after, on August Brazil had sought "consultations" with the U.S. in GATT under article XXII, an essential first step towards GATT adjudication and settlement of the dispute.

In parallel, Brazil had also complained to the surveillance body of the Uruguay round negotiations that the U.S. action was a violation of the standstill commitments undertaken at Punta del Este, namely that no contracting party would take any measures that would improve its negotiating position.

The surveillance body is again due to meet on October 27, when Brazil could be expected to bring it up again.

But the surveillance body has become practically a toothless talking shop, hearing and recording the views of various parties, and forwarding them to the trade negotiations committee.

Since the last two years, after the Uruguay round was launched, the trade negotiations committee has failed to act on any violation of the standstill commitments, brought before the surveillance body.

Brazil had contended that the U.S. actions were unjustified, a violation of its obligations under the general agreement, and of the UNCTAD-VII final act which expressly repudiated such linkages - threat or actions in the area of goods linked to demands for concessions elsewhere like intellectual property rights, investment or services.

The U.S. however did not agree to hold the GATT consultations, arguing that it had only started "investigations", and had not yet decided to take action, and thus no right of Brazil in GATT had been violated.

Brazil, which again raised the issue at the GATT council meeting in September, however noted that even the announcement of investigations, and the prospect that the administration if it chose could impose penalties retroactively had already affected Brazilian exports to the U.S., and hence a cause for action in GATT already had arisen.

But the U.S. did not agree.

The U.S. announced actions are however prospective, to take effect only after ten days, and not retrospective.

It is now clear that the U.S. administration would appear to have taken the decision to impose unilateral sanctions at least early this week, and perhaps soon after the Islamabad meeting of same trade ministers early in october where Brazil and U.S. clashed over the intellectual property issue,

GATT diplomats here noted that the u-s would appear to have deliberately timed its decision and announcement, till after this week's special and regular session of the GATT council, so that Brazil's ability to bring it quickly before the GATT council could be hampered.

In principle, there is nothing to prevent Brazil from seeking a special or additional session of the GATT council, though the U.S. would try to use the GATT machinery to slow down the various steps needed before the reference of the dispute to a panel.

The meetings of the GATT council on October 19 and 20 were the last regular sessions, before the annual meetings of the GATT contracting parties fixed for November 7.

Normally the next meeting of the council would be only in the new year.

The GATT calendar is fairly crowded between now and the meeting of the contracting parties, and subsequently till the meeting of the Uruguay round trade negotiations committee in Montreal in the week of December 5.

It may even suit the United States better to have the issue referred to adjudication to a GATT panel, just before the contracting parties meeting or the Montreal meeting.

This would enable it to argue that the issue is pending before a panel, and there should be no prejudicial discussion or decision either at the CPS session or the meeting of the TNC.

Brazil is expected perhaps to weigh all these before deciding an its next step here.

Brazilian delegation sources said Friday morning that they were awaiting instructions from Brasilia.