TRADE: Brazil Challenges Two Superpowers at WTO

By Gustavo Capdevila Reprint | | Print |

Gustavo Capdevila

GENEVA, Feb 2 2001 (IPS) - Brazil launched a legal battle at the World Trade Organisation (WTO) Thursday against the United States and Canada, two of the world’s major trade powers, in defence of its industries and employment in the pharmaceutical and aeronautics sectors.

The disputes involve the aeronautics corporation Embraer, which in recent years has been rivalling Canada’s Bombardier for market dominance in mid-sized jets, and pharmaceutical laboratories in Brazil.

In the lawsuit filed by the United States about the lack of compliance of Brazilian legislation on pharmaceutical patents to WTO standards, the Brazilian government counterattacked by questioning the validity of the US Patent Code.

Celso Amorim, head of the Brazilian delegation to the WTO, commented that for the first time a developing country is requesting a consultation at the WTO for an industrialised nation on a matter related to the TRIPS (Trade Related Aspect of Intellectual property Rights) accord.

The WTO’s Dispute Settlement Body for the second time considered the US request to create a special panel to evaluate Brazil’s intellectual property law. Upon the second request, a special panel is automatically established.

Amorim defended the compatibility of his country’s legislation with the TRIPS agreement. What the United States is seeking is an interpretation of TRIPS that goes beyond the letter and the spirit of the accord, said the Brazilian ambassador.

Once it obtains that interpretation, it will assert that the Brazilian law is incompatible, he added.

At the same time, the Brazilian negotiators requested a consultation, the step prior to establishing a special panel, in order to discuss some provisions of US patent law.

In particular, articles 204 and 209 of the US Patent Code merit some questioning, stated Amorim.

Surely those provisions would be incompatible according to the US delegates’ interpretation of the TRIPS accord, he said.

The US mission before the WTO indicated that it was “obviously a reaction by Brazil to the panel that was established earlier in this meeting regarding Brazil’s local manufacturing requirements.”

“We are confident that our patent law is consistent with our WTO obligations, and we will be happy to consult with Brazil on this matter,” responded a US spokesman.

Meanwhile, the struggle for the global market of mid-range passenger jets, involving Brasilia and Ottawa for the last five years, has been bogged down by their different interpretations of WTO norms.

President of the WTO Dispute Settlement Body (DSB), Stuart Harbison of Hong Kong, ruled that the Brazilian-Canadian case would be taken up at the next meeting, March 6.

At both stages of the DSB proceedings, the panel and the Appellate Review, Canada won rulings against the Brazilian system for financing exports of aircraft manufactured by Embraer, a mixed enterprise privatised in 1994.

The WTO ruling authorised Canada to implement trade retaliation measures against Brazil for a total of 233 million dollars annually, for six years.

The DSB must make a decision on the legality of Brazil’s new system for financing Embraer’s exports, which Canada claims is still non-compliant with global trade rules.

Brazil objected Thursday and requested WTO intervention to determine if the financing Canada grants Bombardier, through sales to the US-based airline Air Wisconsin, is in compliance with multilateral standards.

The Bombardier company dominated 65 percent of the 50-seat jet aircraft market in 1998, but its portion has now been reduced to 43 percent.

Embraer, meanwhile, continues its growth of recent decades with an expansion of its market claim from 35 to 57 percent.

Federico Cuello, chief of the Dominican Republic’s negotiators, commented that the Bombardier case is a clear example of “how the WTO rules are not neutral.” There is an imbalance inherent in the way they have been adopted, he said.

Wealthy countries can continue subsidising industry without any limitation because the rules are designed to protect the type of subsidies they provide.

Such support is manifest through financing for research and development and in backing the measures adapted to the schemes of the Organisation of Economic Cooperation and Development (OECD), the intellectual centre of the wealthy countries, stated Cuello.

In contrast, developing countries like Brazil do not have access to that sort of mechanism because they do not respond to their policies.