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 The European Union is Brazil's biggest trading partner — accounting
for a fifth of its total exports. Brazil would be a major
beneficiary of a far-reaching trade accord the EU is negotiating
with Mercosur, a group of Latin American countries.
But after 10 rounds of talks and several meetings in Geneva, home to
the WTO, the two sides have failed to resolve a long-running row
over Brazilian import taxes that Europe says are unfair and break
global trade rules.
"The protection of Brazil's domestic industry comes at the expense
of Europe's imported goods and that is unacceptable," said an EU
official close to the discussions. "We have had many bilateral
meetings but Brazil has taken no concrete steps."
EU car exports to Brazil fell by more than 11 percent this year
partly because of the taxes, according to an influential German
lawmaker in the European Parliament, Daniel Caspary. He called the
taxes "discriminatory and protectionist."
Brazilian Foreign Minister Luiz Alberto Figueiredo told reporters
that levying the taxes was within the country's rights. "We have
solid arguments to show that we are complying with international
trade rules," he said in Brasilia.
The European Commission, which handles trade issues for the EU's 28
members, and the Brazilian government now have 60 days to try to end
the dispute or face a legal process that could allow Brussels to
impose sanctions, although that is years off.
MERCOSUR TALKS
Brazil's 30 percent tax on imported motor vehicles, as well as
import levies on goods ranging from computers to smartphones and
semiconductors, have also angered Japan, the United States and other
big trading nations, which could join the dispute.
Brazil has sought to build up a local car industry, offering tax
breaks for carmakers that increase domestic investments.
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That has prompted European car manufacturers, including BMW <BMWG.DE>,
Volkswagen <VOWG_p.DE> and British luxury car builder Jaguar Land
Rover, a unit of India's Tata Motors <TAMO.NS>, to focus on building
car plants in Brazil to get around taxes on imported vehicles.
But EU officials say there is no link between the WTO case and
Europe's efforts to wrap up lengthy talks early next year with
Mercosur, which brings together Brazil, Argentina, Uruguay, Paraguay
and Venezuela.
A free-trade pact between Europe and Mercosur would encompass 750
million people and $130 billion in annual trade.
If all goes to plan, that would see Brazil signing its first major
free-trade agreement next year and gaining duty-free access to the
EU's market of 500 million consumers.
Without a deal, Brazil will lose its favorable access to the
European Union next year because it is no longer considered a poor
developing nation but an upper-middle income one.
Brazil, which exports goods from chemicals to coffee, is already the
fifth largest foreign investor in Europe and wants greater access to
EU markets for its agricultural exports, especially beef.
(Additional reporting by Alonso Soto
in Brasilia; editing by Mark Trevelyan)
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