TRADE: Brazil Protests ‘Masked’ US Protectionism

By Mario Osava Reprint | | Print |

Mario Osava

RIO DE JANEIRO, Dec 13 1999 (IPS) - The abuse of anti-dumping mechanisms, especially by the United States, is one form of protectionism, which must be reviewed in future trade negotiations, the Brazilian government and business community complain.

The dismal flop of the third ministerial conference of the World Trade Organisation (WTO) two weeks ago in the US city of Seattle, Washington frustrated Brazil’s aim to demand an “in- depth review” of the question of dumping, or exporting products at prices deemed artificially low.

WTO rules have become a sort of “disguised protectionism,” as applied against supposed practices of dumping, said Brazilian Foreign Minister Luiz Felipe Lampreia.

Japan and the European Union also called for modifications of the WTO’s rules against dumping, due to what they considered US abuses committed in defence of outdated, uncompetitive industries, like iron and steel works.

The European proposal, for example, stated that a country should have to wait at least one year before undertaking a new investigation of an exporter of a certain product. Under the current rules, which lack such limits, cases tend to mushroom, and end up acting as a permanent barrier to more competitive imports.

An anti-dumping suit is a dangerous weapon, according to the Brazilian business community, because it begins to affect exports from the very moment an inquiry is requested, regardless of whether the allegations of dumping are well-founded. Importers refrain from purchasing or cancel contracts for suspect products, for fear of possible future tariff hikes.

The dozens of suits brought by the United States against Brazil’s steelworks, as well as against those of Argentina, have been selective, targetting finished products with the greatest amount of added-value.

Thus Brazil’s sheet steel, which accounted for 57 percent of the industry’s exports in 1993, represent just 34 percent this year, according to Antonio José Polanczyk, president of the Brazilian Institute of Steel and Iron Works (IBS).

The sector’s export revenues are projected at 2.4 billion dollars this year, 14.3 percent down from last year’s total, said Polanczyk. Trade barriers have contributed to that decline, along with the slump in international prices and the crash of Brazil’s local currency, the real, since January.

Anti-dumping measures form part of a series of restrictions slapped by the United States against Brazil’s most competitive products, including orange juice, sugar, ethanol and footwear, as well as steel.

Brazil’s losses in export revenues go a long way towards explaining the turn-around of the trade balance between the giants of North and South America. Up to 1993, Brazil enjoyed a trade surplus with the United States, which had turned into a deficit of 4.43 billion dollars by 1997.

Since 1993, Brazilian steel and iron products of high added- value, such as bars of stainless steel and seamless pipes, have been charged anti-dumping duties of 19.4 to 104.7 percent, reports the National Confederation of Industry.

But the Brazilian government of Fernando Henrique Cardoso maintains that the allegations of dumping practices are unfounded and based on misguided criteria. For example, the United States considers past investment by the Brazilian State in steelworks, which were privatised over three years ago, as subsidies.

To stem the flood of anti-dumping complaints, the Brazilian government and business community negotiated agreements limiting exports, such as a maximum annual quota of 295,000 tonnes up to 2004 for carbonised steel coils, with a minimum disembarcation price of 327 dollars a ton.

A similar agreement was reached last week with Argentina, involving heat-laminated steel from Brazil’s three big steelworks, aimed at eliminating a provisional tariff in effect since April.

The National Steel and Iron Works Company, Cosipa and Usiminas agreed to export quotas to be increased from 38,000 to 39,000 tonnes over the space of five years, and minimum prices to gradually be increased from 325 to 365 dollars.

But the deals signify a renunciation by Brazilian business and do not eliminate new threats, like those hanging over cold- laminated steel in Argentina, under investigation for supposed dumping practices.

In the face of the barriers against goods of higher added- value, Brazil’s exports of semi-finished products, of lower value per unit, rose by 15.6 percent this year – a trend that failed to stem losses in export revenues however, Polanczyk pointed out.

Brazil, which for decades protected its market with high tariffs or by totally banning imports of thousands of products, has scant experience in dealing with anti-dumping suits, the Foreign Ministry admits.

But the country has begun to file its own complaints against dumping practices, while demanding a review of WTO rules, bringing action against exports of powdered milk from several countries, and stainless steel pipes from South Korea and Taiwan.