Brazil seeks solution to WTO disputes

Since December 2019, the WTO Appellate Body has been stalled because it does not have the minimum number of members to hear the cases. According to the Itamaraty, “the impasse affects concrete Brazilian interests”.

Inactive, the body works as an alternative for countries that lost trade disputes with Brazil to postpone the consequences of the conviction, in a strategy that became known as “appeal in the void”.

It works like this: when a country alleges that another nation is adopting protectionist practices or making it difficult for foreigners to access its own market, the controversy can reach the WTO. A panel of experts reviews the dispute and renders a verdict. If the decision is favorable to the country that started the process, it can apply some sanctions, such as establishing import quotas or surcharges to repair the damage caused by the other country.

But as there is the possibility that the losing nation will appeal to the Appellate Body – stopped, for the moment –, Brazil claims that this has served as a crutch for its enemies in the WTO to postpone trade sanctions.

Luciana Morilas, professor of commercial law and international law at the University of São Paulo (USP), says that, in general, the disputes involve the questioning of developing countries about the subsidies given by rich nations to their productive sectors.

“The paralysis of this body generates damage, because normally it is the developing countries that make this type of appeal and that will not have their demands judged by the body. We end up being harmed by this. We as a country and, mainly, the producers who place their goods on the international market.”

Senator Esperidião Amin (PP-SC) explains that the Brazilian productive sector loses with the weakening of the Dispute Settlement System. “The greatest example of how this harms us is the fact that we beat the United States on the cotton issue. They only paid at the last minute, if I’m not mistaken, US$ 150 million, in a symbolically important agreement, but very small in terms of its value for the subsidy that, abusively and continuously, they gave, harming not only Brazil, but all who were our litisconsorts.”

The United States Trade Representative, Ambassador Katherine Tai, was in Brazil and met with the Vice President of the Republic and Minister of Development, Industry, Commerce and Services, Geraldo Alckmin, and with Mauro Vieira, Minister of Foreign Affairs.

One of the issues dealt with was the inactivity of the WTO Appellate Body. Brazil said that the system for resolving disputes within the organization is important and that the stoppage undermines the effectiveness of the multilateral trading system.

In the report, Itamaraty said that Brazil has acted with a sense of “urgency and pragmatism” in the discussions taking place in Geneva, Switzerland, to reform the Dispute Settlement System. The objective is to seek a balanced solution that allows the impasse to be resolved.

The United States is seen as fundamental to resolve the body’s ineffectiveness, since the North Americans are appointed as “responsible” for barring new appointments to the Appellate Body, preventing it from working again, details Morilas.

“The body is composed of judges and these judges are nominated by the states that are part of the WTO. the United States, mainly before China. So, he has been vetoing the names, which has not changed, as far as I know, in the Biden government, for the composition of the body. With that, he is without components and he cannot judge.”

Esperidião Amin says that Brazil should look for other ways to resolve the impasse and even consider taking the issue to the United Nations (UN). “​​I find it regrettable that – it is still an administrative court of the WTO – it is devalued by the action and influence of the action of a country that claims to be a defender of free trade. I think this should be denounced in several instances, including the UN.”

The blackout in the body that should judge appeals at the WTO led the National Congress to approve a law that authorizes the Brazilian Chamber of Foreign Trade (Camex) to apply unilateral trade sanctions to countries against which Brazil has a dispute pending appeal judgment .

The norm allows Brazil to put into practice the victories obtained in the WTO, but which are stalled because of the non-functioning of the Appellate Body. Law 14.353/2022 is valid until the body is back up and running.

Morilas claims that while the body is not functioning again, disputes accumulate and generate insecurity in international trade. “You let the countries do as they want, like Brazil, which created this law that authorizes the imposition of retaliation. controversies,” he explains.

Law that authorizes Brazil to apply sanctions against defeated countries at the WTO could repair losses in the productive sector, evaluates an expert

FOREIGN TRADE: Enacted MP authorizing Brazil to apply retaliation