Oct 31, 1988

U.S. ACTION AGAINST BRAZIL ASSAILED IN SURVEILLANCE BODY

GENEVA, OCTOBER 27 (IFDA/CHAKRAVARTHI RAGHAVAN)óThe U.S. unilateral and coercive trade measures against Brazil, announced last week in Washington, were assailed thursday in the Uruguay round Surveillance Body, the mechanism set up to monitor the observance of the standstill and rollback commitments in the Punta del Este declaration.

In raising the issue, the Brazilian delegate, Amb. Rubens Ricupero said the U.S. action was a challenge threatening "the very foundations" of the Uruguay round negotiations.

The challenge, he added, had to be met multilaterally, and this was a responsibility for all participants, "not with respect to Brazil and the present problem, but in relation to the future of the Uruguay round and of the multilateral trading system".

Several third world countries supported Brazil and expressed their "extreme concern" that the U.S. was using unilateral means to attain its negotiating objectives in the Uruguay round and, a more worrisome, that such measures were being used against third world countries.

Among the countries who spoke in support of Brazil were Argentina, Chile, Colombia, Peru, Cuba, Uruguay, Egypt, India and Yugoslavia.

India expressed its unhappiness at the attempts being made to find solutions to problems outside the area of trade in goods.

Uruguay and Peru reportedly noted that only last week there h been concern expressed (in the GATT council special session) over the latest U.S. trade law and its "super S. 301". At that time the U.S. delegate had given assurances about how the act would be used "these assurances are now highly questionable."

In responding to Brazil's complaint, U.S. delegate, Carroll Mill reportedly made no bones about the fact that the U.S. had taken the actions to force Brazil to change its patent laws, and argued that the U.S. action underscored the importance of negotiating in GATT the intellectual property rights issues.

While the U.S., EEC and other industrial countries want to negotiate substantive norms inside GATT framework on Intellectual Property Rights (IPRS), and for its enforcement through GATT mechanisms, most third world countries have been resisting this and insisting on compliance with the Punta del Este mandate and respecting the competence in this area of the World Intellectual Property Organisation (WIPO).

For the European Community, John Beck expressed the Community great concern over what he called "a possible breach" of the standstill by the United States through its unilateral actions S. 301 of its trade law.

At the same time Beck would also appear to have argued that only way to avoid such unilateral action was "to have the right kind of framework within GATT for intellectual property rights".

In the Community's view there was no easy answer to such issue "until the Uruguay round led to a situation where countries did not have to resort to such actions".

Beck also said the Community understood the problems faced b the U.S. pharmaceutical industry.

A third world observer later commented that the EECís advice to Brazil and other third world countries that they should ease up on their objections to the U.S./EEC demands in the TRIPS Negotiating Group reminded one of what a member-state of the EEC, 50 years had advised another European state that the way to avoid war and have peace was to yield to the territorial demands made upon it by another state.

On october 20, the U.S. had announced imposition of prohibitive 100 percent increases in duties charged an a range of products imported from Brazil, which over the last three years averaged in value about 40 million dollars.

In July, following an investigation under S. 301 of its trade law, the U.S. had announced its intention to impose such duties, and had listed some 270 million worth of Brazilian exports from which a selection would be made to hit Brazil over its failure to comply with U.S. demands for changes in its intellectual property laws relating to pharmaceuticals.

Brazil had soon afterwards raised the issue in GATT, and had sought consultations with the United States under article XXIII, but the U.S. had put off consultations, arguing it had not yet taken any decision, a position which Brazil had challenged noting that even the intention to act was already harming Brazilian trade interests.

The Brazilian Minister had at that time described the U.S. announcement, and publication of a hit list of Brazilian products, as "international economic terrorism", while Ricupero had called it in the GATT council as the equivalent of "hostage taking".

Brazil had also notified the surveillance body of the proposed action and said it was an attempt "to coerce Brazil to change its legislation" which was perfectly consistent with relevant international conventions, and "to improve the U.S. negotiating position in the Uruguay round".

At the meeting of the Surveillance Body Thursday, Ricupero tabled a revised version of his original complaint, listing the products on which the U.S. had now imposed the penal duties.

The Brazilian delegate also served notice that his delegation reserved its rights under GATT, and intended "to fully exploit all possibilities under the general agreement to redress and defend" its GATT rights.

Ricupero recalled that in July, while announcing its intention to impose trade measures, a spokesman of the U.S. president had referred to the U.S. success in securing "strengthened" patent laws in many countries and in multilateral commitments to address these issues in the Uruguay round, and that this progress was "in stark contrast to Brazil's lack of action".

The U.S. explanations, Ricupero said, established "an admitted link" between unilateral U.S. actions and enhancement of U.S. negotiation position in the Uruguay round, and was an acknowledgement of the breach of political commitment of standstill.

Brazil fully intended to pursue this matter with GATT, and "we are determined to fully exploit all possibilities under the general agreement to redress and defend our nullified and impaired rights", Ricupero declared.

Brazil, he added, intended to propose dates for the unduly delayed consultations under article XXIII, and reserved its right to resort to further remedies should the consultations fail.

Apart from violation of GATT rights, the U.S. action was also a breach of the standstill and the appropriate way to address it was to raise it in the Surveillance Body, even though Brazil was aware of the limitations imposed on the body to give an adequate response, even in such indisputable cases like Brazil's.

This "frustrating feeling of impotence" in the Surveillance Body, he said, was due to the nature of the standstill commitment, which was viewed as "a political commitment and deprived of an elaborate dispute settlement mechanism as in GATT".

However this did not mean that the standstill was intended for purely unilateral application.

Such an interpretation "would make a mockery of a solemn engagement central to the success of our endeavour and transformed in dead letter", Ricupero warned.

The standstill was a multilateral, collective commitment assumed by all participants at Punta del Este, and had to be monitored and guaranteed in a multilateral way.

Ricupero reminded the participants that the authors of the unilateral U.S. actions had never attempted to justify it "on any ground other than that of a national law".

"This...should give little comfort to those who hope that the new trade law (the omnibus trade and competitiveness act of 1988) may never be put into practice".

Unilateralism per se constituted a threat to the multilateral trading system and Brazil was not only concerned with the damage to its rights and interests but also with the issue of unilateralism and respect for the standstill commitment.

"Without full and effective respect for this commitment, the current multilateral trade negotiations will lack credibility".

"It appears pointless to expect that unilateral restrictions could be cured by more unilateralism, in a sort of trade homeopathy", Ricupero declared.

"The challenge to the standstill commitment has to be met by the multilateral body set up for this purpose ... that is a responsibility we all have to face, not with respect to Brazil and the present problem, but in relation to the future of the Uruguay round and of the multilateral trading system".

Ms. Miller said that President Reagan had to react this way in order to protect the interests of U.S. pharmaceutical and chemical companies who had been suffering losses.

She hoped that the restrictions could be lifted in the near future, as soon as Brazil responded to U.S. concerns.

Brazilís policy was detrimental to trade in pharmaceuticals and was almost unique in failing to provide patent protection for pharmaceuticals, and the only other country with a similar policy was Malawi, she claimed.

Ms .miller's claim however has been contradicted in a document circulated to the Uruguay round negotiating group on Trade-Related Intellectual Property Rights (TRIPS).

The document by WIPO has listed 49 countries as excluding pharmaceutical products from patent protection.

Apart from third world countries, the list includes Australia and New Zealand (where patent can be refused where a product is a mere mixture of known ingredients), Canada (unless the process is also protected), Czechoslovakia, Finland, GDR, Greece, Hungary, Iceland, Norway, Poland, Portugal, Soviet Union, Spain, and Turkey.

In ten countries pharmaceutical processes are excluded from patent protection.

These ten are: Brazil, Colombia (unless the process is exploited in Colombia), Malawi, Mexico, South Korea, and Turkey.

In Australia, New Zealand, Zambia and Zimbabwe, patent can be refused where the process produces a mere mixture of known ingredients.

A recent UNCTAD report had also brought out that from 1877 till 1967, in west Germany the patenting of inventions of new chemicals and pharmaceutical substances were prohibited, and similar restrictions had prevailed in Switzerland till 1978 and in Italy till 1979.