Honorio Kume

Guida Piani

In the late 1980s, the import-substitution industrialization process together with recurrent exchange rate crises led Brazil to implement an import policy whereby only those goods without a like product or those necessary to satisfy an unexpected spike in demand were allowed in. This policy consisted of high customs tariffs, discretionary controls (such as a list of forbidden items and an annual maximum limit for foreign purchases by enterprise), and special tax schemes whereby a substantial portion of imported goods was subject to tariff rebates or outright exemption.

From 1988 onwards, an import policy was adopted with the goal of fostering a more efficient allocation of resources through foreign competition. To minimize any potential political pressure, Brazil introduced in 1987, prior to the implementation of this new policy, a law that put into force agreements on antidumping, subsidies and countervailing duties, thus developing a new protection mechanism for domestic industries.

Therefore, jointly with a gradual import liberalization process, Brazil started to implement trade defense instruments for providing temporary relief to certain sectors when impacted by foreign competition. An efficient and judicious management of these mechanisms was essential not only to support any activity affected by unfair trade practices, but also to ensure the continuity of the trade liberalization program. In sum, the government was faced with the challenge of implementing a system to protect its national interests that might also be compatible with the political support needed to enhance the openness of the Brazilian economy (Finger, 1998).

The enforcement of antidumping mechanisms is subject to the rules set in the Agreement on Implementation of Article VI of the General Agreement on Tariffs and Trade 1994 of the World Trade Organization (WTO). The rules require proof of the dumping practice, determination of injury on the production of domestic like products, and establishment of a causal relationship between the dumped imports and the injury to the domestic industry.

The use of safeguard measures, as specified in Article XIX of the GATT (Emergency Action on Imports of Particular Goods), involves stricter requirements to prove injury (serious injury) as well as a commitment of the domestic industry to improve its competitiveness.

Notwithstanding the technical and objective language of the WTO Agreements, any assessment regarding the previously-mentioned requirements opens up the path for a high degree of subjectivity, turning the antidumping and safeguard mechanisms into such a strong protection instrument that it may even contradict trade liberalization.

The purpose of this paper is to assess the Brazilian experience with the use of antidumping and safeguard mechanisms in a context of trade liberalization and macroeconomic stability programs. This paper is made up of an introduction and three sections. Section 2 reviews the main changes introduced into the import policy of Brazil between 1988 and 2003, divided into four different stages. Section 3 presents a description of the legal system and of the institutional and administrative agencies concerned with the enforcement of antidumping and safeguard mechanisms in Brazil from 1987 until 2003. It also describes the evolution of the claims filed during this period and evaluates their main results vis-à-vis the import liberalization target. Section 4 summarizes, in the light of the Brazilian experience, the main conclusions and policy recommendations.