Brussels, 20/11/2014 (Agence Europe) - During a meeting of the dispute settlement body (DSB) at the WTO on Tuesday 18 November, Brazil rejected the EU's request of 31 October for a panel to examine the tax scheme that Brazil applies to the automobile, information and communication technology (ICT), and other sectors (DS472).
The EU criticises Brazil for exonerating its national producers from part of the high taxes imposed on several of Brazil's industrial sectors - such as automobiles, ICT and machinery - by way of selective exemptions or reductions. In the EU's view, these advantages lead to a higher tax burden for imported products and create incentives to source locally in Brazil. This practice is discriminatory and favours import substitution.
The EU is also targeting tax exemption schemes for Brazilian companies that respond to certain export objectives, contrary to the prohibition on export-contingent subsidies.
In addition, the EU is concerned about Brazil's introduction of measures aiming to cover economic sectors of major importance for EU trade, like the automobile sector.
Brazil told the DSB on Tuesday that the Brazilian measures were compatible with the country's multilateral obligations, and stated that its programmes aimed to promote a change of model in productivity and technological performance, and to foster innovation and workforce capacity. In Brazil's view, the programmes have directly benefitted national and foreign investments in a non-discriminatory way. They were not discriminatory on the basis of origin, nor were they contingent upon the use of domestic inputs or finished goods benefitting from these programmes.
While it can block the first request for a WTO panel to bet set up, a member country that is targeted by a complaint cannot, however, oppose the second. (EH)