[Ip-health] Bridges Weekly: Brazil Set to Announce List of US Goods for Sanctions, Takes First Step to Cross-Retaliate

Thu Feb 18 02:16:01 2010

http://ictsd.org/i/news/bridgesweekly/70745/

<SNIP>

On 11 February Brazil=E2=80=99s president, Luiz In=C3=A1cio Lula da Silva,
approved legislation that allows the suspension and limitation of the
IP rights of citizens or companies domiciled in countries that violate
WTO rules. The legislation, which effectively enables cross-
retaliation, comprised the following measures: (a) suspension and
limitation of IP rights; (b) alteration of the rules and procedures
that secure IP protection, mainly provided by the Brazilian Patent
Office and the Ministry of Agricultural for plant variety; (c)
alteration of the measures to apply IP rights; (d) temporary
prohibition of royalty remittances from licensing and technology
transfer and (e) additional tax application to remuneration of IP
owners.

However, additional administrative action is still needed before
Brazil can be in a position to effectively implement the cross-
retaliation.

If Brazil follows through with the duties on IP rights and services,
many believe that the measures would target the economically and
politically strong US pharmaceutical industry. By suspending or
breaching the IP rights of pharmaceutical companies, Brazil would be
able to seize royalty payments or even produce cheaper generic
versions of the targeted drugs. Jose Gomes Temporao, Health Minister
of Brazil, has compiled a =E2=80=9Clist of medicines=E2=80=9D that could fa=
ce
retaliation. However, he cautioned that =E2=80=9Ca decision must be made,
slowly, by the entire government.=E2=80=9D

The threat of cross-retaliation is not new to international trade
disputes. Cross-retaliation has been authorised twice before: once
between Ecuador and the EU and again between Antigua and the United
States. However, the Brazilian cotton case may be the first time that
cross-retaliation will be put into action.

---------------------

Bridges Weekly Trade News Digest =E2=80=A2 Volume 14 =E2=80=A2 Number 6 =E2=
=80=A2 17th
February 2010
Brazil Set to Announce List of US Goods for Sanctions, Takes First
Step to Cross-Retaliate

Brazil has announced that on 1 March it will release a substantive
list of retaliatory duties to be imposed on US goods. The retaliation
results from a dispute between the United States and Brazil over the
subsidies that the US provides its cotton farmers.

A WTO panel ruled in August that Brazil should be allowed to impose
retaliatory duties on US$830 million worth of trade with the United
States. That ruling came on the heels of a 2008 Appellate Body
decision that concluded that US cotton subsidies contravene WTO rules.
But the subsidies remain in place, thanks in large part to the US
agriculture lobby, which wields significant influence on Capitol Hill.

=E2=80=9CWhat Brazil is doing is to take all the internal steps necessary t=
o
apply these sanctions,=E2=80=9D said Brazilian Foreign Minister Celso Amori=
m.
=E2=80=9CWe prefer a non-contentious path but we cannot bow down just becau=
se
another country is stronger. The idea is not to retaliate but we need
a specific policy proposal,=E2=80=9D added Amorim.

Of the US$830 million worth of trade that Brazil can sanction, US$560
million will be detailed in the list of goods to be released in March.
The other US$270 million will be applied in the form of =E2=80=98cross-
retaliation measures=E2=80=99, which would target services as well as
intellectual property rights (IPRs).

Leading US trade associations are calling on the White House to
intensify efforts to reach a negotiated solution. In separate letters
to the administration and Congress, dated 28 January and 4 February
respectively, these groups urged engagement with the Brazilian
government and for the US to =E2=80=9Cact swiftly to present alternatives=
=E2=80=9D
in order to avoid retaliation.

Brazil=E2=80=99s leading industrial sectors have also favoured a negotiated
compromise and have expressed concerns that they might lose their
American suppliers and be forced to import at a higher price from
other nations, given that the United States is the largest source of
Brazil=E2=80=99s imports.

Cross-retaliation, which is allowed under WTO rules, can be a powerful
retaliatory tool. By restricting or suspending IPRs, a relatively
small country can inflict economic damage upon a larger country
without making its consumers suffer from higher prices. In a recent
ICTSD publication, Professor Frederick Abbott of Florida State
University College of Law addressed the multiple complex practical and
legal questions raised in the context of designing and implementing a
cross-retaliation programme.

On 11 February Brazil=E2=80=99s president, Luiz In=C3=A1cio Lula da Silva,
approved legislation that allows the suspension and limitation of the
IP rights of citizens or companies domiciled in countries that violate
WTO rules. The legislation, which effectively enables cross-
retaliation, comprised the following measures: (a) suspension and
limitation of IP rights; (b) alteration of the rules and procedures
that secure IP protection, mainly provided by the Brazilian Patent
Office and the Ministry of Agricultural for plant variety; (c)
alteration of the measures to apply IP rights; (d) temporary
prohibition of royalty remittances from licensing and technology
transfer and (e) additional tax application to remuneration of IP
owners.

However, additional administrative action is still needed before
Brazil can be in a position to effectively implement the cross-
retaliation.

If Brazil follows through with the duties on IP rights and services,
many believe that the measures would target the economically and
politically strong US pharmaceutical industry. By suspending or
breaching the IP rights of pharmaceutical companies, Brazil would be
able to seize royalty payments or even produce cheaper generic
versions of the targeted drugs. Jose Gomes Temporao, Health Minister
of Brazil, has compiled a =E2=80=9Clist of medicines=E2=80=9D that could fa=
ce
retaliation. However, he cautioned that =E2=80=9Ca decision must be made,
slowly, by the entire government.=E2=80=9D

The threat of cross-retaliation is not new to international trade
disputes. Cross-retaliation has been authorised twice before: once
between Ecuador and the EU and again between Antigua and the United
States. However, the Brazilian cotton case may be the first time that
cross-retaliation will be put into action.

Brazilian officials claim that the United States seems unwilling to
address Brazilian grievances at the heart of the dispute, despite
public statements by US Trade Representative Ron Kirk that he is
interested in avoiding Brazilian retaliation.

ICTSD reporting; =E2=80=9CWTO Panel Allows Brazil to Cross-Retaliate on IP,
Services in US Cotton Row,=E2=80=9D ICTSD, 9 September 2009. =E2=80=9CBrazi=
l to
Announce Trade Sanctions List Against U.S. March 1=E2=80=B3 MARKET NEWS
INTERNATIONAL, 10 February 2010.  =E2=80=9CLula Sets Law for Brazil to
Retaliate on U.S. Patents,=E2=80=9D BLOOMBERG, 11 February 2010.

------------------------------------------------------------

Thiru Balasubramaniam
Geneva Representative
Knowledge Ecology International (KEI)
thiru@keionline.org

Tel: +41 22 791 6727
Mobile: +41 76 508 0997