TRADE: Brazil Claims EU Imposes Unfair Coffee Tariffs

By Mario Osava Reprint | | Print |

Mario Osava

RIO DE JANEIRO, Aug 3 1999 (IPS) - Brazil is to request a World Trade Organisation (WTO) hearing on what it says are the European Union’s (EU) discriminatory trade policies against its instant coffee exports.

This threat was originally announced in January 1998. But international trade experts are just now putting the final touches on studies which Brazil will use for the case, according to the Brazilian Instant Coffee Industry Association (ABICS).

The industry organisation predicts Brazil’s government will formalise its complaint before the WTO in September or October.

The “intolerable discrimination” practiced by the EU is its 10.5 percent tariff imposed on Brazilian instant coffee, while it grants complete exemption for the product coming from the Andean countries, said Sergio Sotelino, acting president of ABICS.

This difference in treatment arose from the “drug regimen,” an agreement signed by the EU and the Andean nations in 1990 to promote the fight against drug-trafficking.

But Sotelino argued that reports from anti-drug officials in the United States say that total coca cultivation in the Andean countries more than doubled between 1992 and 1997, increasing from 37,700 to 79,000 hectares, demonstrating the agreement’s ineffectiveness.

The EU-Andean agreement has taken its toll on the Brazilian industry. The nation’s instant coffee exports to the EU fell 36.5 percent between 1991 and 1998 – a decline equivalent to 255,300 bags of coffee (60 kg each), while Brazil’s overall imports from the European bloc grew 38 percent, according to ABICS.

For the same 1991-1998 period, the International Coffee Organisation reported a 79.2 percent growth in instant coffee exports from Colombia and Ecuador to the EU, for a total of 419,300 bags.

Instant coffee has one of the most variable tariffs worldwide. The EU charges India and Mexico lower tariffs than it charges Brazil. In Canada, Brazilian instant coffee also faces trade barriers that are not applied to Andean or Mexican coffee.

With access to those wealthy markets blocked, Brazilian exporters looked for an alternative in eastern Europe, but the effects of last year’s Russian financial crisis closed that door as well.

Brazil was able to expand its overall export volume by five percent in the first half of this year, but export earnings fell 22 percent (for a total of just 104.7 million dollars), due to low international prices.

Export volume grew due to increased demand in the United States and a strong recovery of sales to Japan, which compensated the 24 percent decline in exports to the EU, and 64 percent drop in exports to eastern Europe.

Though less important compared to soya, whole-bean coffee and other Brazilian agro-industrial products, instant coffee has taken an important seat in trade relations between Brazil and the EU at a time when the government is hoping for closer relations, which also involve the Southern Common Market.

There is a tendency in Europe to favour imports of raw materials, to the detriment of products with greater added value, complain Brazilian industry representatives and diplomats.

Regarding soya, for example, the EU exempts tariffs on soybean imports, but taxes derivatives such as soybean oil and bran, said Jose Alfredo Graza Lima, under-secretary of Economy, Integration and Foreign Trade of the Ministry of Foreign Affairs.

But instant coffee is the Brazilian product that most effectively opens the door for questioning of the EU policy that treats each exporter of the product differently.

WTO regulations authorise any country to grant trade preferences, “but without creating discrimination by applying such benefit,” argued Sotelino.