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TWN
Info Service on WTO and Trade Issues (Aug25/08) WTO:
Brazil initiates dispute against Trump's reciprocal tariff scheme Geneva, 12 Aug (D. Ravi Kanth) -- Brazil has initiated a major trade dispute at the World Trade Organization over the "US Fair and Reciprocal Plan (FRP)", which imposed a 10% duty on all Brazilian products, as well as over an additional 40% duty on certain products of Brazilian origin, said people familiar with the development. As an initial step, Brazil has requested consultations with the United States. The request was circulated to WTO members on 11 August. Brazil is the third country, after China and Canada, that has initiated a trade dispute against the US at the WTO. In its communication (WT/DS640/1) to the Dispute Settlement Body (DSB), Brazil requested the US to enter into consultations under Article 4 of the Dispute Settlement Understanding (DSU) to address several issues raised by Brasilia over the alleged illegality of the FRP. Under Article 4 of the DSU, the US is required to enter into consultations within a period of no more than 30 days after the date of receipt of the request for consultations. If the two sides fail to reach an amicable agreement, Brazil can then request for the establishment of a dispute panel to examine the US measures raised in the dispute. To recall, Brazil was the first country to win a trade dispute against the US at the WTO concerning the billions of dollars of subsidies allegedly provided by the US to its upland cotton producers. However, its former trade envoy, Ambassador Roberto Azevedo, settled for an allegedly inadequate compromise with the former US Trade Representative, Ambassador Michael Froman, in 2010. It is public knowledge that following that compromise, the US supported Ambassador Azevedo's candidacy for the post of WTO Director-General. Interestingly, Azevedo left halfway through his second term to join PepsiCo Inc. Brazil, South America's largest country, has been subjected to a total tariff of 50% by the Trump administration - a 10% tariff under the FRP plus a 40% tariff on account of President Trump's extraneous political considerations that have nothing to do with trade per se, said people familiar with the dispute. At a time when the US Trade Representative (USTR), Ambassador Jamieson Greer, seemingly derided the WTO's dispute settlement system in his New York Times op-ed on 7 August, while unveiling a new unilateral enforcement mechanism that will operate from the White House, it is rather significant that Brazil has chosen to opt for the multilateral dispute settlement mechanism to resolve the trade dispute, said a legal analyst, who asked not to be quoted. BRAZIL'S COMPLAINT In its four-page complaint, Brazil said its request for consultations "concerns the US Fair and Reciprocal Plan ("FRP"), in furtherance of which the United States announced, on 2 April 2025, so-called "reciprocal" tariffs on goods originating in Brazil and other countries. It also concerns additional tariffs announced by the United States on 9 and 30 July 2025 on certain products of Brazilian origin, as well as any further tariff measures." Commenting on the FRP that was announced by President Trump on 13 February 2025, Brazil said that the Presidential Memorandum announced that, under the Fair and Reciprocal Plan, the US would counter so-called "non-reciprocal trading arrangements with trading partners by determining the equivalent of a reciprocal tariff with respect to each foreign trading partner." Brazil said the Presidential Memorandum defines non-reciprocal trade relationships as including any: * tariffs imposed on US products; * unfair, discriminatory, or extraterritorial taxes imposed on US businesses, workers, and consumers, including a value-added tax; * costs to US businesses, workers, and consumers arising from non-tariff barriers or measures and unfair or harmful acts, policies, or practices, including subsidies, burdensome regulatory requirements on US businesses operating in other countries; * policies, and practices that cause exchange rates to deviate from their market value, to the detriment of Americans; wage suppression; and other mercantilist policies that make US businesses and workers less competitive; and * any other practice that, in the judgment of the United States Trade Representative ("USTR"), in consultation with the Secretary of the Treasury, the Secretary of Commerce, and the Senior Counsellor to the President for Trade and Manufacturing, imposes any unfair limitation on market access or any structural impediment to fair competition with the market economy of the United States. According to Brazil, the Presidential Memorandum "further instructed named US officials, including the Secretary of Commerce and the USTR, to initiate, under their respective legal authorities, all necessary actions to investigate the harm to the United States from any non-reciprocal trading arrangements adopted by US trading partners and, upon completion of such necessary actions, to submit a report to the President detailing proposed remedies in pursuit of reciprocal trade relations with each trading partner." Subsequently, on 9 April 2025, "the US President issued Executive Order 14266 temporarily suspending for 90 days the application of additional country-specific ad valorem duties for countries specified in Annex I to Executive Order 14257," except concerning China. That suspension, contained in Executive Order 14316, was further extended till 1 August 2025. Brazil said that it was served with a letter from President Trump on 9 July 2025, "informing that from 1 August 2025 the United States would impose import duties of 50% on all products from Brazil." Brazil said that President Trump's letter "provides a rationale for this decision which appears to be entirely unrelated to the economic relations between Brazil and the United States or to the subject matter of the covered agreements." President Trump's letter, "among the purported concerns", mentioned "the trial of former President Jair Bolsonaro before Brazil's Federal Supreme Court, and alleged "attacks" on free elections and free speech rights of Americans, as exemplified by Brazil's Federal Supreme Court orders against US social media companies." Brazil said the letter from President Trump also "incorrectly states that purported "trade deficits" with the United States constitute a "major threat" to the US economy and national security, when in fact the United States has a trade surplus with Brazil." Further, Brazil said that "the US President informs that he has directed the United States Trade Representative ("USTR") to "immediately initiate a Section 301 investigations of Brazil", and requests that Brazil eliminate non-specified "tariff, non-tariff, policies and trade barriers" as a condition to resume its access to the US market." According to Brazil, on 15 July 2025, the USTR "initiated a Section 301 investigation into Brazil's alleged attacks "on American social media companies as well as other unfair trading practices that harm American companies, workers, farmers, and technology innovators". The Notice of Initiation states that "Brazil's tariff and non-tariff barriers merit a thorough investigation, and potentially, responsive action"." On 30 July 2025, the US President issued an Executive Order entitled "Addressing Threats to the United States by The Government of Brazil". According to Brazil, "this Executive Order reiterates the allegations previously set out in the President's letter to the President of Brazil dated 9 July 2025. It asserts that alleged "policies, practices, and actions of the Government of Brazil constitute an unusual and extraordinary threat ... to the national security, foreign policy, and economy of the United States" and declares a "national emergency" with respect to this alleged threat." Brasilia pointed out that "to address the so-called "national emergency", the Executive Order imposes an additional ad valorem duty of 40 percent on certain products of Brazilian origin. "As a result, imports of certain goods from Brazil are subject to 50% import duties when imported into the United States," it said. Brazil provided the underlying rationale on which the US imposed its seemingly unilateral tariffs. According to the Brazilian communication, the tariffs described above are purportedly authorized under US laws by the following legal instruments, and/or are reflected in, inter alia, the following documents: * International Emergency Economic Powers Act (50 U.S.C. 1701 et seq.) (IEEPA). * National Emergencies Act (50 U.S.C. 1601 et seq.) (NEA). * Section 604 of the Trade Act of 1974, as amended (19 U.S.C. 2483). * Section 301 of title 3, United States Code. * Section 301 of the Trade Act of 1974 (19 U.S.C. 2411). * Presidential Memorandum of 13 February 2025, "Reciprocal Trade and Tariffs", as published in the US Federal Register on 19 February 2025 (90 FR 9837). * White House Fact Sheet: President Donald J. Trump Declares National Emergency to Increase our Competitive Edge, Protect our Sovereignty, and Strengthen our National and Economic Security, 2 April 2025. * Executive Order 14257 of 2 April 2025, "Regulating Imports with a Reciprocal Tariff to Rectify Trade Practices That Contribute to Large and Persistent Annual United States Goods Trade Deficits", as published in the US Federal Register on 7 April 2025 (90 FR 15041). * Guidance on Reciprocal Tariffs, issued by the US Customs and Border Protection Cargo Systems Messaging Service on 4 April 2025, CSMS # 64649265. * Executive Order 14266 of 9 April 2025, "Modifying Reciprocal Tariff Rates to Reflect Trading Partner Retaliation and Alignment", as published in the Federal Register on 15 April 2025 (90 FR 15625). * Letter from the US President to the Brazilian President, dated 9 July 2025. * Notice of Initiation of a Section 301 Investigation, as published in the US Federal Register on 18 July 2025 (90 FR 34069), including any tariffs subsequently imposed on Brazilian-origin products purportedly based on the findings of this investigation. * Executive Order of 30 July 2025, "Addressing Threats to the United States by the Government of Brazil", as published on the White House website and subsequently in the US Federal Register. * White House Fact Sheet: President Donald J. Trump Addresses Threats to the United States from the Government of Brazil, 30 July 2025. * CSMS # 65807735 - GUIDANCE - Additional Duties on Imports from Brazil. According to Brazil, the measures at issue appear to be inconsistent with the United States' obligations under the GATT 1994. In particular, Brazil said it considers that: 1. The United States acts inconsistently with Article I:1 of the GATT 1994 because, by exempting certain US trading partners from the application of additional tariffs while imposing those additional tariffs on certain Brazilian products, the United States fails to extend immediately and unconditionally to products of Brazil an "advantage, favour, privilege or immunity" granted by the United States "[w]ith respect to customs duties and charges of any kind imposed on or in connection with" the importation of like products originating in the territory of other WTO Members. 2. The United States acts inconsistently with Article II:1(b) of the GATT 1994 by imposing ordinary customs duties in excess of the bound rates provided for in the US Schedule of Concessions annexed to the GATT 1994, and/or by failing to exempt certain Brazilian goods from other duties and charges of any kind in excess of those provided for in the US Schedule of Concessions. 3. As a consequence of its violation of Article II:1(b) of the GATT 1994, the United States acts inconsistently with Article II:1(a) of the GATT 1994 as the measures at issue fail to accord to the commerce of Brazil treatment no less favourable than that provided for in the US Schedule of Concessions annexed to the GATT 1994. 4. The United States acts inconsistently with Article 23.1 of the DSU, by seeking redress of purported violations of obligations or other nullification or impairment of benefits under the covered agreements through tariff measures, rather than with recourse to the rules and procedures of the DSU. 5. The United States acts inconsistently with Article 23.2(a) of the DSU by making a determination that a violation has occurred, that benefits have been nullified or impaired or the attainment of objectives under the covered agreements have been impeded without recourse to dispute settlement under the DSU. Brazil argued that the measures at issue also "nullify or impair, within the meaning of Article XXIII:1 of the GATT 1994, benefits accruing to Brazil under that Agreement." +
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