Leading nations question legitimacy of Brazil’s measures to protect manufacturing
The European Union, United States and Japan presented a formal complaint before the World Trade Organization questioning the legitimacy of some measures adopted by Brazil to protect domestic manufacturing, particularly in the auto industry.
The main complaint came from the EU which said it was “increasingly concerned” with the measures Brazil is implementing to protect and stimulate domestic production.
Among the measures questioned and which were adopted presumably to address the effects of the global economic crisis, is the reduction of the tax on manufactured goods, IPI which benefits those corporations whose production contains a certain percentage of locally manufactured input.
The fiscal benefit was prorogued twice this year and will extend until next 31 December, and thus the EU said before the WTO that such measures “favour domestic manufacturers” and expressed fears that similar ones could “be replicated in other sectors of the Brazilian economy”.
Japan on its side argued that Brazil’s decisions designed “to protect domestic manufacturing” are ‘inconsistent’ with WTO rules.
Other countries that joined the complaint on the reduction of the IPI tax include Australia, Korea, Canada, US, Taiwan, China and Hong Kong.
This is not the first time that WTO member countries protest measures adopted by the administration of President Dilma Rousseff to shield its domestic market and manufacturing. On several occasions in defence of this policy Brazil has argued that such measures are implemented to stimulate economic growth and do not contradict WTO rules.
Brazil is the seventh world manufacturer of cars and the fourth market with a sustained growth during the last ten years.