Tensions rising over EU-Brazil commerce

Date: 17/07/1997

TRADE friction between Brazil and the EU has heightened with the former angry at European barriers to its agricultural exports and the latter attacking what it sees as discrimination against its industrial goods.

Brazil is now considering stepping up the pressure with a demand for a World Trade Organisation (WTO) panel to investigate EU duties against its exports of raw and finished sisal, a product used in textile-making.

At the same time, the Union is trying to win extra concessions from Brazil over reduced-duty imports of European cars and investigating what it sees as discrimination against Union steelmakers.

The spreading trade tiffs largely stem from the tension surrounding Brazil's rapid opening up of its market during the last three years, with the rush of foreign exporters and investors still coming up against some barriers and Brasilia taking steps to redress its worsening balance of payments.

Negotiations between the two sides are continuing over Brazil's decision to introduce a new regime allowing duty-free imports of foreign cars produced by companies which have manufacturing operations in the country.

Other companies from Japan, Korea and the Union have been offered a share each of duty-reduced car imports.

The EU dislikes the principle of incentives for local manufacturing and believes it has been given a raw deal on its quota of duty-reduced cars. It was originally offered only around 20&percent; of the total quota, with the rest going to Japan and Korea, although there are signs that Brazil is now willing to increase Europe's share of the total to around 25&percent;.

Meanwhile, the European Commission is also investigating Brazil's move to ban foreign exporters from offering long-term credit after a complaint by European steel lobby Eurofer.

Brazil argues that the credit terms being offered by foreign firms, with payment sometimes deferred for up to 180 days, have left its local producers at a disadvantage since they are unable to match them.

Having started with steel, it has since widened its demand for payments for imports to be made within 30 days to all products.

In addition, Brazil is looking to inject some urgency into its long-running complaint that it has been short-changed by the EU over duties on sisal by calling a WTO trade panel.

Brasilia says that it abolished local taxes on exports of raw and finished sisal on the understanding that the Union would cut its import duties. Instead, they were increased.