WTO panel rules that certain Brazil high-tech goods' programs violate trade rules

A number of Brazil's programs to promote domestic production of its high-tech goods and automobiles contain provisions that violate WTO rules, a World Trade Organization dispute panel said Wednesday.

The parties have 30 days to appeal the decision and Brazil must act in terms of the panel ruling within 90 days. "Otherwise, Brazil will be expected to remove its illegal tax program without delay," said the EU trade mission in a statement after the panel announced its decision.

The complaints concern a wide range of industrial stimulus programs that Japan and the European Union complained about as unfair competition.

The WTO panel said the unfair measures include tax breaks, regulatory discrimination, and local content requirements that are inconsistent with the General Agreement on Tariffs and Trade (GATT), the WTO's Agreement on Trade-Related Investment Measure (TRIMs Agreement).

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They also include the Agreement on Subsidies and Countervailing Measures (SCM Agreement).

A further two additional programs were found to provide illegal export subsidies in violation of the SCM Agreement.

In December 2013, the EU and then in July 2015 Japan initiated WTO dispute proceedings against Brazil, targeting seven that include more than 90 legal instruments under those programs which they charged were inconsistent with WTO rules.

Panels were established in December 2014 for the EU and in September 2015 for Japan. Both panels were staffed by the same three panelists and the chair of the panels later informed WTO members that the two disputes would follow a harmonized procedure.

The EU trade mission statement described the dispute as one of most comprehensive disputes ever launched by the EU as it noted that the dispute panel found that numerous Brazilian tax programs are illegal under WTO rules.

The ruling states that the program discriminate against EU automotive, ICT and electronic products and grant prohibited import and export subsidies to Brazilian companies.

The dispute also covered fiscal incentives contingent on Brazilian firms meeting certain export performance requirements.

The EU said Brazil is an important trade partner for the European Union.

Since mid-2012, the EU has enjoyed a trade surplus with Brazil, which can be linked to the decrease in world commodity prices.

EU exports to Brazil reached their peak in 2013 but have recently declined due to the economic slowdown in Brazil, the weakening of the real, and the Brazilians' increasing use of restrictive trade policies.

The value of exports of goods to Brazil in 2013 was close to 40 billion euros (48 million U.S. dollars).

In 2016, the value of exports was close to 31 billion euros (37 billion U.S. dollars).

The EU said transport equipment, machinery and appliances constitute the bulk of EU exports to Brazil. However, the EU said the discriminatory taxes and other barriers undermine trade prospects.

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USTR to determine whether to investigate China's trade practices

President Donald Trump is doing it again! This time is about trade between China and the United States. Will he break WTO’s trade rules?

The U.S. administration said on Saturday that President Donald Trump will direct on Monday the U.S. trade representative (USTR) to determine whether to investigate China's trade practices, triggering concerns that Washington may take unilateral moves harming China-U.S. trade and economic ties.

The USTR Robert Lighthizer would consider whether to probe China's trade practices under Section 301 of the Trade Act, senior administration officials said, but they declined to say when the USTR's decision would be made.

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If Lighthizer decides to go ahead with an investigation, the United States would first consult with China and the investigation process could take as long as a year, officials said.

The Section 301, which was passed in 1974 and heavily used in 1980s and early 1990s, would allow the U.S. president to unilaterally impose tariffs or other trade restrictions against foreign countries. But the United States has rarely used that obsolete trade law since the World Trade Organization (WTO) came into effect in 1995.

"It became no longer necessary really for the United States that they have to use that law, because now we have an effective dispute settlement system under the WTO," Chad Bown, a senior fellow at the Washington D.C.-based Peterson Institute for International Economics, told Xinhua, adding that the legal timeline of the process under Section 301 doesn't work well with the rules of the WTO.

"A decision to trigger Section 301 today is problematic because it would provide additional fuel to the already simmering argument that the Trump administration is undoing the American commitment to rules-based trade and decades of work to establish international cooperation," argued Bown, who worked as a senior economist for international trade and investment in the White House Council of Economic Advisers and the World Bank.

Michael Froman, former USTR under the Obama administration, has also warned that the United State could face retaliation if the country moves away from resolving trade disputes through the WTO and instead starts taking unilateral actions.

"It will just lead other countries to retaliate against us or perhaps even worse, imitate us, and take actions on their own without regard to international obligations," he said.

The Chinese Ministry of Commerce has stressed the importance of China-U.S. trade ties and urged U.S. authorities to abide by WTO rules in its trade measures.

As we know, any trade measures taken by WTO members must conform to WTO rules. China's trade with the United States has always maintained the basic principle of win-win cooperation, and the two parties will resolve differences through dialogues and consultations. 

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What Benefits U.S. Consumers A Lot?

Since China's accession to the WTO, not only China but also the world can feel the changes brought by the world economy.

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U.S. families benefitted greatly from China's WTO entry in 2001, as prices of manufactured goods like shirts, electronic devices and pet foods fell by 7.6 percent between 2000 and 2006, a recent research paper from a leading U.S. economic research organization showed.

"The impact of China's enormous growth on the rest of the world is an increasingly active area of study," four economists from the United States, China and Australia said in a National Bureau of Economic Research (NBER) working paper released in late June.

The paper found people largely neglected the potential gains of consumers in developed nations through cheaper imported goods.

Their research showed that China's World Trade Organization (WTO) entry drove down the price index of manufactured goods in the United States by 7.6 percent, averaging around 1 percent annually between 2000 and 2006.

Moreover, they found the major reason for lower goods prices in the United States was mainly related to lower tariffs China imposed on imported inputs in the aftermath of its WTO entry, which led to higher productivity and lower export costs.

So, how about to join a great trade party in China to get more business opportunities?

Now, we sincerely invite you to join GTCC (Global Trade & Credit Conference) with eGTCP.com.

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