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U.S. Statement on the Trade Policy Review of Brazil
June 25, 2013

Statement delivered by David Shark,
Deputy U.S. Permanent Representative to the WTO

June 24, 2013

Thank you, Chair.  The United States warmly welcomes the delegation of Brazil, led by Ambassador Paulo Estivallet de Mesquita.  We would like to recognize the excellent work of the Secretariat and the Government of Brazil in compiling the reports before us.  The reports thoroughly detail Brazil’s key trade policy objectives since the government’s last review in 2009, and they give us a more complete picture of Brazilian policies affecting trade.  I would also like to take this opportunity to thank the discussant, Ambassador Choi Seokyoung (Republic of Korea), for sharing his thoughts with us in the context of Brazil’s TPR.

The United States has always viewed Brazil as an important and valued trading partner.  As the two largest economies and democracies in the Western Hemisphere, the United States and Brazil share ties that have expanded over the years with increased trade, capital flows, cross-border investment, and a wide range of educational, health, scientific and other joint activities.

Brazil is a major force in the global economy.  Growing trade, significant oil discoveries, financial stability, low inflation, rising investment, and a booming middle class are some of the factors that have contributed to Brazil’s rise as a prosperous and influential country on the world stage.  During the period under review, Brazil enjoyed strong economic performance with real GDP growth averaging 3.6 percent per year.  Sustained economic growth over the past decade has allowed Brazil to lift millions of people out of poverty and into the middle class and reduce income inequality.

Focusing for a moment on our bilateral trade relationship, as the world’s seventh largest economy and the United States’ eighth largest trading partner, Brazil has become a vital market for U.S. companies.  Two-way U.S. goods and services trade with Brazil totaled $103 billion in 2011.  Overall, U.S. goods imports from Brazil are up 269 percent over the last 18 years (following the Uruguay Round).   The picture is also encouraging for U.S.-Brazil services trade.  In 2011, U.S. exports of private commercial services to Brazil were $21.7 billion, while Brazil’s supply of private commercial services to the United States was $6.9 billion in 2011, up 256 percent from 2000 levels.  U.S. foreign direct investment (FDI) in Brazil (stock) was $71.1 billion in 2011, up 10.8 percent from 2010 levels.  Brazilian FDI in the United States (stock) was $5 billion in 2011, up a dramatic 266 percent from 2010 levels.

The strong economic growth experienced in Brazil during most of the review period slowed in 2011 and 2012, due in part to the global economic slowdown and in part to structural problems in the Brazilian economy.  Despite the difficult global economic context, we believe that Brazil would benefit from continuing its efforts to give additional momentum to liberalized trade and investment policies, including by lowering tariffs and eliminating pervasive local content requirements.  The structural bottlenecks – which include a very high tax burden, a complex and inefficient regulatory regime, inadequate infrastructure, limited access to credit, and a rigid labor market – threaten Brazil’s competitiveness and future growth prospects.  Reflecting these challenges, the World Bank ranked Brazil 130th out of 185 countries for ease of doing business in 2013.

In our view, there are some specific areas where Brazil could take action to improve its trade and investment regime for the purpose of creating additional growth and development opportunities.  In addition to the issues addressed in our questions, today I would like to briefly call attention to Brazil’s high tariff structure, its increased reliance on local content requirements, and shortcomings in some areas of IPR protection and enforcement.

While Brazil’s MFN applied tariff rate averaged 11.2 percent in 2012, its average bound tariff rate is significantly higher at 31.4 percent, with the maximum bound rates for industrial and agricultural goods set at 35 percent and 55 percent, respectively.  Because of the large disparities between bound and applied rates, U.S. exporters face significant uncertainty in the Brazilian market.  This uncertainty is amplified by the frequent changes in tariffs made by the Brazilian government to protect domestic industries from import competition.  For example, in October 2012, Brazil increased tariffs to a maximum of 35 percent on 100 industrial products pursuant to a December 2011 MERCOSUR ministerial decision.  These tariff increases affected approximately $1 billion in U.S. exports in 2012.  Brazil is further considering increasing tariffs on an additional 100 products pursuant to a second MERCOSUR ministerial decision taken in June 2012.  These tariff hikes could adversely affect Brazil’s competitiveness.  We note that Brazil has also decreased tariffs on a large number of products in 2013.  While we welcome these trade liberalizing steps, it is important to underscore that frequent and temporary changes in tariffs, whether up or down, create an unpredictable business environment for importers and exporters, and have a chilling effect on investment.

We want to acknowledge the important and continued progress that Brazil has made in enhancing the effectiveness of intellectual property rights enforcement.  However, shortcomings in some areas of IPR protection and enforcement continue to act as obstacles to U.S. exports and investment.  The United States is particularly concerned about recent regulations that give Brazil’s sanitary regulatory agency, ANVISA, the authority to provide “prior consent” to pharmaceutical patent applications.  ANVISA’s review is in addition to the normal patent review conducted by Brazil’s patent office (INPI).

We call upon Brazil to assume additional responsibilities commensurate with its prominent position in the global economy.  In that regard, we encourage Brazil to continue to work with us and other Members to produce a doable package of results for the WTO’s 9th Ministerial in Bali in December, including a binding agreement on Trade Facilitation.  We would also like to see Brazil accede to the WTO Agreement on Government Procurement, which would provide Brazilian companies access to lucrative procurement markets in the United States and other GPA member countries, while opening up Brazil’s government procurement market to foreign participation.  And we urge Brazil to consider joining the negotiations to expand the product coverage of the Information Technology Agreement.

The United States would like to remind Brazil of the importance of ensuring that the global trading order remains open.  We were troubled to learn that the International Chamber of Commerce recently released its Open Market Index 2013, which ranks Brazil as the G20’s most closed economy.  In a ranking of the 75 largest economies, Brazil occupies the 68th position.  I would like to express my government’s hope and expectation that, going forward, Brazil will continue to pursue further reforms and open markets that enable it to reap the benefits of expanding trade and global economic opportunity.  In addition, we welcome further cooperation on trade matters with our Brazilian colleagues both here at the WTO and in the context of our growing bilateral relationship.

Finally, in closing, on behalf of the United States, I would like to take this opportunity to recognize Ambassador Roberto Azevêdo, the next Director General of the WTO.  It has been a privilege to work with Ambassador Azevêdo in his capacity as Brazil’s Ambassador to the WTO, and we look forward to working with him in his new role as Director General of this important institution.  Thank you.