I OVERVIEW OF TRADE REMEDIES
According to the World Bank, Brazil was the ninth largest economy in 2019, with a gross domestic product of 1.839 millions of dollars.2 The country has also been a World Trade Organization (WTO) Member since 1995, adopting all its multilateral agreements, including those on trade remedies. In 2019, the country's trade balance had a surplus of US$46 billion, the lowest performance since 2015.3
The election of right-wing politician Jair Bolsonaro as President in late 2018 brought about significant changes in Brazilian trade policy. More recently, the covid-19 pandemic has also presented challenges and demanded changes to adapt to the new reality.
Mr Bolsonaro was elected on a platform of promoting free trade and increasing Brazil's presence in the global economy and value chains. This agenda has been pushed through mainly by the Ministry of the Economy (resulting from the merger of three ministries and concentrating prerogatives on economic, commercial and industrial public policy), which has been staffed with pro-free trade officials at senior levels.
In view of this, the government has repeatedly announced its intentions (and has taken concrete action) to open up the Brazilian economy on different fronts, including the rationalisation and streamlining of Brazil's use of trade remedy mechanisms such as anti-dumping and countervailing measures. This tendency, however, seems to be in the opposite direction to what has been observed in other important trade partners, such as the United States, the European Union and China.
The Subsecretariat of Trade Defence and Public Interest (SDCOM) of the Ministry of Economy is responsible for conducting investigations regarding trade remedies in Brazil. It issues an annual report on the activities, indicating, for example, the number of proceedings initiated and concluded, as well as the number of measures applied, suspended or extended. In its latest annual report, relative to 2019,4 the SDCOM reported that 54 petitions were filed to request the opening of 53 anti-dumping investigations and one subsidies investigation. Of the 53 anti-dumping investigations, 28 were initiated. Six were not initiated and those petitions were rejected. Seventeen of the petitions were still under analysis by the end of the year, and two of them were withdrawn.
The annual report also includes information on the proceedings against Brazilian exporters, indicating that, in 2019, there were eight anti-dumping and subsidies investigations (mainly in Canada and Costa Rica) and eight safeguards investigations in progress.5
The SDCOM has expressed its commitment to increasing transparency, adopting several measures to give publicity to the rationale behind the decisions, for example by drafting one-page summaries for each final determination. The government body also issued three guidelines between January 2019 and June 2020:6 anti-dumping investigations, public interest in trade defence proceedings, and support to the Brazilian exporter investigated in foreign trade defence proceedings.
Two decisions in anti-dumping cases in the past year were in respect of (1) ethanolamines7 and (2) low carbon and low alloy products (heavy plates).8 In these two cases, the SDCOM determined the extension of anti-dumping duties. However, the SDCOM also suspended application of the duties based on Article 109 of Decree No. 8,058/2013 because of doubts about the future evolution of the imports. These cases have been highlighted because they also demonstrate the government's intention to reduce the use of the trade defence mechanisms, as it is not typical to use Article 109 to justify the suspension of anti-dumping measures.
II LEGAL FRAMEWORK
The SDCOM is part of the Secretariat of Foreign Trade (SECEX), of the Special Secretariat of Foreign Trade and International Affairs (SECINT) and of the Ministry of Economy. It is responsible for conducting investigations regarding trade remedies in Brazil. After concluding the investigation process, the SDCOM issues its final determination, recommending (or not) the application of trade remedies to the SECINT.
If the SDCOM recommends the application of trade remedies by the Executive Committee of the Foreign Trade Chamber (GECEX), the GECEX is the authority responsible for a decision to impose trade remedies. However, if the recommendation is not to apply trade remedies (negative decision), the final decision is handed down by the SECEX.
Brazilian legislation on trade remedies comprises the following laws and statutes:
a Decree No. 1,355/1994 enacts the Final Act that incorporates the results of the Uruguay Round of the Multilateral Trade Negotiations of the General Agreement on Tariffs and Trade (GATT) 1994;9
b Law No. 9,019/1995 regulates the application of the measures specified in the Agreement on Implementation of Article VI of GATT 1994 (Anti-Dumping Agreement) and in the Agreement on Subsidies and Countervailing Measures;
c Decree No. 1,488/1995 regulates the administrative proceeding concerning the application of safeguards;
d Decree No. 1,751/1995 regulates the administrative proceeding concerning the application of countervailing measures;
e SECEX Ordinance No. 21/2010 regulates anti-circumvention proceedings applicable to anti-dumping measures;
f Decree No. 8,058/2013 regulates the administrative proceeding concerning the application of anti-dumping duties;10
g Decree No. 10,044/2019 regulates the Brazilian Chamber of Foreign Trade;
h SECEX Ordinance No.13/2020 regulates administrative proceedings relative to public interest analysis with the objective of potentially suspending or altering anti-dumping duties and countervailing measures for public interest reasons; and
i SECEX Ordinance No. 21/2020: in response to the covid-19 pandemic, this changes the notification method, regulating communications with interested parties in trade remedies proceedings, which shall be made electronically.
The Ministry of Economy (which incorporates the former http://www.mdic.gov.br/comercio-exterior/defesa-comercial/856-legislacao-defesa-comercial">Ministry of Industry, Foreign Trade and Services) website provides further details of all the above-mentioned legislation.
The trade defence authorities in Brazil often praise the fact that the country is one of the few that have not been challenged in the WTO, even though it is ranked as one of the top imposers of anti-dumping measures, for example.11 This is an indication of the compatibility between the Anti-dumping Agreement and domestic legislation.
In accordance with WTO general provisions on trade remedies, to initiate a case in Brazil, the domestic industry must present a written and formal request before the SDCOM. A domestic producer will only be considered a 'domestic industry' if it is responsible for at least 25 per cent of the total production of the similar product and, once consulted by the SDCOM, the domestic producers of the similar product that expressed their support for the claim represent at least 50 per cent of total production in Brazil.
To trigger the initiation of an investigation, the domestic industry must demonstrate, through supporting evidence, the existence of:
a subsidised or dumped imports;
b alleged injury to the domestic industry; and
c a causal link between the subsidised or dumped imports and the injury suffered by the domestic industry during the period of investigation.
As regards the application of safeguards, according to Decree No. 1,488/1995, the authorities will consider:
a the volume and rate of increase of imports (in both absolute and relative terms);
b the share of the national market captured by imports;
c the prices of imports, and especially whether those imports were underpriced in comparison to the similar product produced in Brazil;
d the consequent impact of the imports on the domestic industry, including analysis of relevant economic factors (e.g., production level, inventories or sales); and
e the impact of other factors not related to the analysed imports on the domestic industry.
In exceptional circumstances, SECEX may initiate an investigation ex officio, provided that it disposes of significant evidence regarding the existence of the requirements that justify opening the proceeding.
With regard to anti-dumping investigations, Decree No. 8,058/2013 states that the authorities shall examine the petition within 15 days of being filed. Within five days, the SDCOM may request the presentation of additional information, which shall be examined within 10 days. If the SDCOM considers that no further information is required, the decision on whether to initiate the investigation shall be published within 15 days.
Once the SDCOM decides to initiate an investigation, a public notice from SECEX is published in Brazil's Official Gazette with a summary of all the relevant information of the proceeding, including a list of the known interested parties. All known interested parties involved in the proceeding (including foreign governments, foreign exporters and producers, importers and domestic producers) will receive an official letter informing them that an investigation has been initiated.
The interested parties (except foreign governments) will receive a questionnaire asking them to submit relevant information about the product, the market and internal economic indicators (e.g., sales and costs) to the SDCOM. The time limit to respond to the questionnaire is 30 days from acknowledgement of the issuance of the questionnaire (presumed to be on the next business day after the issuance of the questionnaire), which can be extended by an additional 30 days (in anti-dumping investigations). During the course of the administrative proceeding, the SDCOM may also request additional information or clarifications. The interested parties can represent themselves or delegate to legal representatives with adequate powers of representation.
In respect of anti-dumping investigations, the deadline for the parties to submit new information and evidence (the evidentiary stage) to the case files is 120 days from the date of publication of the preliminary determination by the SDCOM. After that, the parties will have the opportunity to submit their arguments based only on information already available in the case records. Brazilian regulations state that the SDCOM must finish the investigation within 10 months of its initiation, although it allows this time limit to be extended to 18 months, in line with WTO rules. Nevertheless, the final decision on the imposition of commercial remedies lies with the GECEX, after receiving the SDCOM's recommendation.
III TREATY FRAMEWORK
Brazil is a Member State of the Latin American Association of Integration (ALADI) and of the Southern Common Market (Mercosur), which are treaties signed by, respectively, Latin and South American countries, with the aim of promoting economic and social development, harmony and balance throughout the regions.
Historically, the Brazilian government has adopted a defensive stance in multilateral trade negotiations, focusing on regional approaches. In recent years, however, this has begun to change.
As mentioned in Section I, the election of right-wing politician Jair Bolsonaro as President in late 2018 brought significant changes to Brazilian trade policy. In the Bolsonaro government, there have been several announcements regarding the intention to open up the Brazilian economy on different fronts. To achieve this, the government plans to systematically reduce tariffs, particularly for capital equipment, technology and telecommunications products, and promote microeconomic reforms to enhance firms' competitiveness and attract foreign investment.
Although Brazil continues to be an active participant in multilateral discussions, and in the WTO in particular, the government has expressed and intensified its intention to prioritise bilateral trade discussions over multilateral agreements.
Certainly, the most significant development in terms of trade negotiations has been the signing – after almost 20 years of negotiations – of the European Union-Mercosur trade agreement on 28 June 2019, which the parties described as an 'ambitious, balanced and comprehensive trade agreement'. Together, these two economic blocs represent approximately 25 per cent of the world's gross domestic product and a market of 780 million people.
The European Union-Mercosur agreement has multiple chapters spanning customs facilitation, trade barriers, sanitary and phytosanitary measures, government procurement, intellectual property, trade and sustainable development, trade in services, dispute settlement, among other things. The agreement is currently in the process of ratification by the different countries concerned. However, this procedure has met considerable resistance from various Member States.
Since last year, France has been very vocal that it will not sign the European Union-Mercosur agreement under the current terms. Environmental and climate issues – especially the non-effective implementation of the Paris Agreement on Climate Change – have been the main cause of complaint by the French government, especially against Brazil. Austria and the Netherlands also demonstrated their positions against the ratification of the agreement on the grounds that (1) there are no effective environmental commitments in the agreement and (2) the agricultural practices in Mercosur countries have lower standards than those in Europe.
The future of the European Union-Mercosur agreement remains uncertain, although it is expected that the governments of the Member States will work cooperatively and flexibly to overcome the differences and ensure that the agreement enters into force.
In the same context, Mercosur and the European Free Trade Association (EFTA, comprising Iceland, Liechtenstein, Norway and Switzerland) have successfully concluded the exploratory dialogue and preliminary negotiations for a free trade agreement (FTA). This agreement would provide a solid basis for the process of increasing the participation of South American countries in the world economy.
With both agreements in place, Mercosur would enjoy preferential access to almost the whole continent of Europe.
As part of a very ambitious trade agenda widely stimulated by the Brazilian government, Mercosur has also been actively working to conclude trade agreements with Canada, South Korea and Singapore. The bloc aims to enter into comprehensive trade agreements with these countries, covering market access on goods, services, government procurement, non-tariff barriers, intellectual property rights and other strategic matters. According to official information, the negotiations are at a very advanced stage.
Acting on a bilateral basis, the Brazilian government is seeking a general alignment with the US government on trade and other policy areas. One example of such a shift has been Brazil's agreement to forego its Least Developed Country status under the WTO framework in exchange for US support of Brazil's accession to the Organisation for Economic Co-operation and Development (OECD). In fact, Brazil formally requested its accession to the OECD in May 2017. The country is one of the largest and most engaged non-OECD members, having adopted more than 54 OECD instruments. This is seen as a major part of Brazil's trade policy.
In the same vein, Brazil and the United States have initiated talks to establish an ambitious economic and trade agenda with a view to concluding an agreement in 2020 on trade rules and transparency, including trade facilitation, good regulatory practices and digital trade. These negotiations are being pursued by the government as a matter of priority, and it is likely that there will be developments during 2021.
However, Brazil is facing a wait-and-see moment within Mercosur. Since Mercosur has been under the purview of ALADI, Brazil has been involved in several trade agreements with ALADI Members. Mercosur has FTAs in force with Bolivia (ACE No. 36/1997), Chile (Economic Complementation Agreement (ACE No. 35/1996), Colombia, Ecuador and Venezuela (ACE Nos. 59/2005, 69/2014 and 72/2017), Cuba (ACE No. 62/2007), Egypt (FTA, 2017), India (Preferential Trade Agreement (ACP, 2009), Israel (FTA, 2010), Mexico (ACE Nos. 54/2002 and 55/2002), Peru (ACE No. 58/2005), and South Africa, Namibia, Botswana, Lesotho and Swaziland (ACP, 2016).
Despite these accomplishments, the change in government in Argentina has created doubts about whether the group of countries will continue negotiating as a block. President Alberto Fernández has stated that Argentina will not pursue any negotiations for the moment under the purview of the Mercosur, although it will honour those that have already been concluded (such as the European Union-Mercosur agreement).
Brazil has also engaged in negotiating and adopting other types of international agreements, especially in respect of investment facilitation. Deviating from a traditional bilateral investment agreement, Brazil has entered into agreements on cooperation and facilitation of investments with Angola, Chile, Colombia, Ethiopia, Guyana, India, Malawi, Mercosur (Argentina, Paraguay and Uruguay), Mexico, Mozambique, Peru and Suriname.
Finally, the government has announced its accession to the WTO's Agreement on Government Procurement, with the aim of providing foreign companies the same footing in terms of competition in government procurement. This has been described by the government as a means to foster competition, and to avoid cartelisation and corruption within government public bids.
IV RECENT CHANGES TO THE REGIME
Decree No. 10,044/2019 of 7 October 2019 restructured the Foreign Trade Chamber (Camex), the body responsible within the federal government for decision-making on trade matters at the international level. The Decree has brought significant changes in the structure and division of competences of Camex, re-establishing some of the powers that had previously been transferred to other government bodies. Camex's roles had been considerably reduced in a previous restructuring, also in 2019, which transferred much of the Chamber's competences to the Special Secretariat for Foreign Trade and Affairs (SECINT) of the Ministry of Economy.
Under the new regulation, the Commercial Strategy Council replaced the Ministers' Council, the highest decision-making body chaired by the President of the Republic and composed of Ministers of State. The Ministers' Council reserved competence on strategic topics relating to the commercial and customs policy guidelines of Brazil. The GECEX continues as the executive branch of Camex and has important competences, such as setting trade defence measures (anti-dumping compensatory measures) and safeguards, and establishing import duty rates. GECEX is composed of the Minister of Economy and nine other members of different ministries and areas within the federal government.
V SIGNIFICANT LEGAL AND PRACTICAL DEVELOPMENTS
In respect of trade defence matters, as a result of the efforts to increase transparency in 2019, the SDCOM initiated public consultations in April 2020 on four new Ordinances. The aim of these is to regulate:
a the suspension of anti-dumping measures when there is significant doubt about the evolution of the imports under investigation;
b the determination of the probable export price in cases where the volumes of imports were not significant;
c the reduction of anti-dumping duties in review proceedings; and
d the pre-filling proceedings for anti-dumping pleadings, in which the domestic industry presents a potential pleading before making its formal request.
On 28 May 2020, the International Trade Committee of the Brazilian Institute of Studies on Competition, Consumption and International Trade (IBRAC) held a conversation with the SDCOM's Substitute Secretary, Fábio Pucci. Among other topics, the delegates discussed the public consultations on trade defence. In addition, on 3 June 2020, the Mixed Parliamentary Front for International Trade and Investment (FrenCOMEX), coordinated by Federal Deputy Evair Vieira de Melo, organised a webinar titled 'Reform of Brazil's Trade Defence System: Public Consultations in Progress on Anti-dumping'. Several professionals in the public and private sectors attended the event, among them the aforementionedFábio Pucci and Felipe Augusto Machado from the SDCOM.
At these events, the commercial defence authorities expressed their commitment to provide greater transparency on the criteria applied in the analysis of the recurrence of dumping and the damage resulting from it in the review proceedings. In addition, the SDCOM also signalled the intention of the federal government to encourage a gradual reduction of the anti-dumping duties in force. In that regard, one of the proposals in the Ordinances is to apply a 25 per cent reduction of anti-dumping duties in the event that there were no exports from the country to which the SDCOM applies the measure or that there were only exports in unrepresentative quantities during the period under review. This development is significant in both legal and practical terms, as some of the provisions differ from domestic regulations in other WTO Member countries, such as the United States and the European Union, which also are among the WTO Members that apply trade defence measures most often.
The importance of the changes discussed in the referenced Ordinances is such that several Brazilian associations, and FrenCOMEX, requested an extension of the deadline for interested parties to present comments to the proposed legal texts.12 In response, the Economy Minister, Paulo Guedes, granted an extension of the deadline to 27 July 2020.13
As for trade negotiations, Brazil has expanded its position in the global market in recent years thanks to the extensive and vigorous efforts it has been making to promote an open trade policy. Several FTAs, investment agreements and treaties to avoid double taxation are currently being negotiated by Brazil – individually or as a Member State of ALADI or Mercosur – to ensure the widest possible participation of the country in the global economy.
However, it is important for Brazil to be aware of issues relating to the alignment of the interests of Mercosur Members in international trade negotiations. Possible divergences between the Members may lead to a rupture of the bloc, which would weaken the competitive position of the entity as a whole. Thus, it is important to seek flexibility in some rules to speed up progress in current trade negotiations.
Furthermore, in line with the measures being adopted by the federal government to facilitate international trade, it is essential to address the excessive bureaucracy in internalising trade agreements. There are currently 35 trade agreements that have already been negotiated and signed between Brazil and other countries, which are still not in force because of bureaucratic issues concerning their internalisation.
Nevertheless, it is important that the Brazilian government continues this process of promoting an open trade policy and takes this opportunity to seek greater access to innovation and technologies in global production chains. The opening of new markets will be essential for overcoming the severe effects of the economic crisis caused by the new coronavirus.
VI TRADE DISPUTES
Brazil is an active participant in the WTO's Dispute Settlement Body. To date, it has participated as complainant in 33 disputes, as respondent in 16 and as third party in 147.
The last case in which Brazil participated as respondent was DS472/DS497: Brazil – Certain Measures Concerning Taxation and Charges concerning taxation and charges in the automotive, electronics and technology industries, and other measures that potentially benefited the Brazilian industry. The Appellate Body report was circulated on 18 December 2018 and Brazil notified on 16 January 2020 that it had brought into conformity the measures relating to electronics and automotive incentives.14
As complainant, on 16 October 2018, Brazil requested consultations against China concerning the safeguard measure imposed on imported sugar, its administration of a tariff-rate quota for sugar and import licensing proceedings (DS568). At the time of writing, the panel has not yet been established.15
Finally, Brazil requested consultations on 27 February 2019 against subsidies to producers of sugar cane and sugar in India (DS579). The consultations were not fruitful and a panel was composed by the Director General on 28 October 2019.16
The current federal administration demonstrated a clear position in favour of an increase in trade liberalisation and in the presence of Brazil in global value chains. As such, it has been seeking to promote important trade partnerships and limit the application of trade defence measures. Among the examples of initiatives in this context are the formalisation of the FTA between Mercosur and the European Union on 28 June 2019, and the efforts of Brazil in negotiating the support of the United States for its membership of the OECD.
The covid-19 pandemic, however, brings uncertainty to how these goals will unfold as the major economies tend to close their economies and disseminate a more nationalist discourse. For now, there has been a clear shift in the government's priorities in Brazil, with most of the measures directed at combating the effects of the pandemic through the granting of emergency funds to the population and tariff reductions on the products needed for combating the virus, among other things.
Finally, the outcome of the public consultations on the new trade defence Ordinances will also be relevant as, if approved, they will bring significant changes to the system, such as making it easier for importers and exporters to obtain a reduction of the anti-dumping margin in review proceedings.
1 Mauro Berenholc and Renê Medrado are partners at Pinheiro Neto Advogados.
3 See https://agenciabrasil.ebc.com.br/economia/noticia/2020-01/balanca-comercial-fecha-2019-com-superavit-de-46bilhoes">https://agenciabrasil.ebc.com.br/economia/noticia/2020-01/balanca-comercial-fecha-2019-com-
4 See http://www.mdic.gov.br/images/REPOSITORIO/secex/decom/Relat%C3%B3rios_DECOM/Relatorio_Sdcom_2019.pdf">http://www.mdic.gov.br/images/REPOSITORIO/secex/decom/Relat%C3%B3rios_DECOM/Relatorio_Sdcom_2019.pdf.
6 See http://www.mdic.gov.br/index.php/comercio-exterior/defesa-comercial/123-assuntos/categ-comercio-exterior/defesa-comercial-e-interesse-publico/4046-guias">www.mdic.gov.br/index.php/comercio-exterior/defesa-comercial/123-assuntos/categ-comercio-exterior/defesa-comercial-e-interesse-publico/4046-guias.
7 Camex Resolution 07/2019, available at http://www.mdic.gov.br/index.php/comercio-exterior/defesa-comercial/147-assuntos/categ-comercio-exterior/defesa-comercial-e-interesse-publico/defesa-comercial-2/medidas-em-vigor">www.mdic.gov.br/index.php/comercio-exterior/defesa-comercial/
8 SECINT Ordinance No. 4.434/2019, at http://www.mdic.gov.br/index.php/comercio-exterior/defesa-comercial/147-assuntos/categ-comercio-exterior/defesa-comercial-e-interesse-publico/defesa-comercial-2/medidas-em-vigor">http://www.mdic.gov.br/index.php/comercio-exterior/defesa-comercial/147-assuntos/categ-comercio-exterior/defesa-comercial-e-interesse-publico/defesa-comercial-2/medidas-em-vigor.
10 See https://docs.wto.org/dol2fe/Pages/FE_Search/FE_S_S009-DP.aspx?language=E&CatalogueIdList=
12 See https://portaljornaldonorte.com.br/frencomex-comemora-prorrogacao-do-prazo-para-as-colaboracoes-da-consulta-publica/">https://portaljornaldonorte.com.br/frencomex-comemora-prorrogacao-do-prazo-para-as-colaboracoes-
13 See https://www.gov.br/produtividade-e-comercio-exterior/pt-br/assuntos/comercio-exterior/defesa-comercial-e-interesse-publico/defesa-comercial/consultas-publicas-1/consultas-publicas-abertas">https://www.gov.br/produtividade-e-comercio-exterior/pt-br/assuntos/comercio-exterior/defesa-comercial-e-interesse-publico/defesa-comercial/consultas-publicas-1/consultas-publicas-abertas.