Trade Remedies in the Era of FTA: The Brazilian experience in

1. 2006 Seoul Forum on Trade Remedies Seminar Trade Remedies in the Era of FTA: The Brazilian experience in Ministry of Development, Industry and Foreign Trade

2. MERCOSUR: A short overview

3. MERCOSUR: A short overview • In 1991, Argentina, Brazil, Paraguay and Uruguay signed the Treaty of Assuncion, creating the Common Market of the South – MERCOSUR: • Article 1 : “Member States hereby decide to constitute a Common Market, which shall be established on 31 of December of 1994 and shall be named MERCOSUR.”

4. 1. MERCOSUR: A short overview • In the same Treaty of Assunción, Annex III - known as “The Brasilia Protocol” - established the basis for the settlement of disputes over regional law by an Ad Hoc Tribunal; • In December 1994, the Ouro Preto Protocol set down MERCOSUR´s institutional framework (Secretariat in Montevideo) and recognized its legal existence under international law. a

5. On January 1st, 1995, MERCOSUR designated itself as a customs union by establishing a common external tariff (CET) covering 85 percent of traded goods. • MERCOSUR is gradually phasing in coverage of the CET; 1. MERCOSUR: A short overview a

6. 1. MERCOSUR: A short overview • 2002 - Olivos Protocol: in force since February 2004, improves the dispute settlement mechanism creating a Permanent Review Court, located in Assunción. • At the present moment, Brazil still has 100 items on its exception list of the CET. This number will be reduced to 50 by the end of 2006

7. 2. MERCOSUR Trade Remedies System

8. 2. MERCOSUR Trade Remedies System • Present Practices: • Since 1994, the use of safeguards among the member states is prohibited; • Decision nº 17/96 contains the “Regulation Regarding the Application of Safeguard Measures to Imports from Non-Members of the MERCOSUR”, but it is not yet in force; • Normal application (WTO Legislation) of other trade remedies (anti-dumping and countervailing measures) among Members;

9. 2. MERCOSUR Trade Remedies System • Present Practices: • The conduction of investigations and the application of trade remedies follows national legislations, and each Member has its own investigating and decision making authorities; • Decision n° 22/02 disciplines the application of anti-dumping and countervailing measures among Members, but it is not yet in force.

10. 2. MERCOSUR Trade Remedies System • Decision n° 22/02 disciplines • Obligatory notification of the exporting country; • Authorities have to offer consultations to the exporting country Government before initiation; • Obligatory sending of the non-confidential application before the initiation of the investigation; • Duties can be applied to the exports from a MERCOSUR partner for a maximum period of 3 years;

11. 3. MERCOSUR Negotiations on Trade Remedies Disciplines • Definitive Measures applied by Brazil since 1991

12. 3. MERCOSUR Negotiations on Trade Remedies Disciplines • Definitive Measures applied against Brazil since 1991

13. 3. MERCOSUR Negotiations on Trade Remedies disciplines

14. 3. MERCOSUR Negotiations on Trade Remedies Disciplines • Main Objectives: • Common Regulation for anti-dumping and countervailing disciplines to be applied to external bloc trade; • Creation of Intergovernmental Trade Remedies authorities; • Elimination of anti-dumping and countervailing measures on internal bloc trade.

15. 3. MERCOSUR Negotiations on Trade Remedies Disciplines • Main Obstacles: • Existence of sectors not yet covered by the FTA and the CET; • Inexistence of a MERCOSUR Intergovernmental Authority on Trade Remedies; • Difficulties of less competitive members.

16. 4. Illustrative Cases

17. 4. Illustrative Cases Simultaneous force of MERCOSUR Regulation: Argentina - Definitive anti-dumping Measures on Poultry from Brazil (IV MERCOSUR AWARD, WT/DS241/R)

18. 4. Illustrative Cases • In July 2000, Argentina imposed definitive anti-dumping measures on exports of poultry from Brazil for a period of three years, violating several provisions of the ADA. • In August 2000, Brazil requested the initiation of direct negotiations with Argentina, under Protocol of Brasilia. • Argentina refused to engage on negotiations pointing out that anti-dumping measures among MERCOSUR Member States were to be conducted according to national legislation, that is not on the scope of the PB.

19. 4. Illustrative Cases • Although there were MERCOSUL Decisions ruling on the application of anti-dumping measures among Member States, none of them fulfilled the conditions of incorporation into the domestic law and notification to MERCOSUR Secretariat to enter in force. • Therefore, in May 2001, MERCOSUR Ad Hoc Tribunal made its IV Award pronouncing that there were no specific rules on MERCOSUR regarding the investigating proceedings and the application of anti-dumping measures between Member States to which the Protocol of Brasilia would apply.

20. 4. Illustrative Cases • Nevertheless, the Tribunal considered that the anti-dumping measures imposed by Argentina where not inconsistent with Mercosur prohibition of restrictions of any kind to trade among Member States. • On February 2002, Brazil requested a Panel in WTO - DSB. • On May 2003, the Panel Report rejected Argentina's request that the Panel refrain from ruling on the claims raised by Brazil in light of the MERCOSUR tribunal ruling on the matter, as well as declined Argentina's alternative request that the Panel consider itself "bound" by the Tribunal's ruling.

21. 4. Illustrative Cases MERCOSUR and Parallelism: Argentina – Footwear Safeguards (WT/DSU/121/AB/R)

22. 4. Illustrative Cases • In 1997, Argentina imposed provisional and definitive safeguards on footwear imports. • Although imports originated in MERCOSUR were included on the examination of increased imports, MERCOSUR countries were excluded from the imposition of the measure at issue. • On June 1998, the EC challenged Argentina's safeguard measure under GATT Article XIX and the Safeguard Agreement

23. 4. Illustrative Cases • On December 1999, the Appellate Body Report, although by different reasoning, upheld Panel's ultimate conclusion that Argentina's safeguard was inconsistent with Safeguards Agreement Article 2. • This decision inaugurated the concept of Parallelism, according to which a safeguard measure must be applied to all sources from which imports were considered in the underlying investigation.

24. 4. Illustrative Cases • In all cases, Brazilian safeguard measures were imposed without considering MERCOSUR imports on the analysis of increased imports. Consequently, MERCOSUR partners are excluded from the measures imposed. • In some cases, the existence of significant volume of imports from MERCOSUR members may even hamper the imposition of safeguards, as this fact compromises the causal link between increased imports considered and serious prejudice to domestic industry.

25. Thank you very much for your attention.

26. 2006 Seoul Forum on Trade Remedies Seminar Trade Remedies in the Era of FTA: The Brazilian experience in Ministry of Development, Industry and Foreign Trade