The Brazilian government is getting ready to retaliate against the United States for the subsidies that country gave its cotton growers. The Camex, Brazil's Foreign Trade Chamber, has just published a preliminary list of 222 products that might suffer penalties.
Punishment might include increase in up to 100% in the Import Tax rate. The list of products was published in the Diário Oficial (Federal Daily Gazette) for public consideration. Brazilian businessmen will have until November 30 to present their objections in case the tariff might hurt them. 64% of the items are consumer goods and the other 34% intermediate products used for the production of goods.
The World Trade Organization (WTO) authorized Brazil to retaliate after Brazil won its case against the Americans. The WTO had decided that US cotton subsidies should have ended by September 2005. The US government help to farmer never stopped, however, and Brazil has been authorized to slap taxes worth US$ 900 million. Half of this will come in actions against American products and the other half from services.
Among the products listed are wheat, cars, contact lenses, sun glasses, hygiene and cleansing goods, oils, sardines, cherries, fabrics, cotton, alkaline batteries and even chewing gums. The list represents US$ 2,7 billion or 10.6% of the total imported by Brazil from the US in 2008 (US$ 25.808 billion).
The government prepared an inflated list knowing it will need to make cuts to please the national industry, which will complain about the inclusion of some of the products in the roll. Brazilian surtaxes on products cannot surpass US$ 450 million as per the WTO rules.
Brazil's Health Ministry wants to use the other US$ 450 million in penalties to break US's medications patents. For this, however, it would be necessary the introduction of a new legislation that would authorize this "cross retaliation."
Brazil says that US president Barack Obama did not change what had been the practice of the George W. Bush administration on this matter. Says executive secretary for Camex, Lytha Spíndola: "We are ready to retaliate starting January 2010. The ideal would be for the US to comply with the WTO determinations and get rid of the illegal subsidies, but as of yet there was no action in this direction."
If the reprisal goes through it will be the first time Brazil retaliates against a country associated to the WTO. In the past, as when Brazil and Canada fought for the aircraft market putting Brazilian Embraer against Canadian Bombardier, both countries opted for an agreement.
In the list of products chosen by Brazil to retaliate it was given preference to products with higher added value or those that have a domestic counterpart or can be easily acquired from other countries.
"We will get the businessmen's suggestions, perform a triage and establish statistical data and values. A retaliation suggestion will be sent to Camex, which, in its December meeting, will take the final decision. Regarding the issue of intellectual property, the ministers that are part of Camex will debate what to do concerning this matter also in the December encounter," concluded Spíndola.
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