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Cablegate: Gob Extends Sole Antidumping Measure Against

This record is a partial extract of the original cable. The full text of the original cable is not available.

UNCLAS BRASILIA 000465

SIPDIS

STATE FOR WHA/BSC AND EB/TPP
USDA FOR U/S JB PENN AND FAS ADMINSTRATOR TERPSTRA
USDOC FOR 4332/ITA/MAC/WH/OLAC/WBASTIAN/JANDERSEN/DMCDO UGALL
NSC FOR MIKE DEMPSEY
TREASURY FOR SSEGAL
PASS USTR FOR SCRONIN
SEOUL FOR AG COUNSELOR PETTRIE

E.O. 12958: N/A
TAGS: ETRD PGOV ECON BR
SUBJECT: GOB EXTENDS SOLE ANTIDUMPING MEASURE AGAINST
ARGENTINA

REF: BRASILIA 365

1. After holding discussions with Argentine officials
February 19, the GOB decided to extend its minimum price
antidumping measure against imports of Argentine powdered
milk, which was due to expire on February 23. Brazilian
trade defense authorities decided to initiate a formal
review of the price agreement that has been in effect since
February 2001. This is Brazil's only antidumping measure in
effect against Argentina. Instituted after the GoB
determined that Argentine milk suppliers were selling below
cost, it affects bulk imports of whole and nonfat powdered
milk. Following the February 19 decision, the Department of
Commercial Defense (DECOM) noted that while Brazil's
domestic industry showed significant positive development
during the last three years, it had not reached the
productivity level of "important world producers," and
agreed with petitioners that sufficient factors indicate the
likely re-emergence of dumping and its associated damage
should the price agreement expire.

2. The decision to review the price agreement (rather than
let it lapse), published in the GoB Official Journal of
February 20, allows the continuation of the minimum price of
US$ 1,900 per ton of powered whole or nonfat milk from
Argentina for a period of one year, during which the review
is to be completed following WTO regulations. Citing the
effect of the Parmalat crisis on Brazilian milk producers,
primarily family farmers, and the continued fragility of the
industry, the Minister of Agricultural Development and the
President of the National Commission of Milk Producers of
the Brazilian Farm Bureau defended the move. The powdered
milk anti-dumping measures in effect against the EU, New
Zealand, Argentina and Uruguay caused imports to drop from
3.2 billion liters in 2001 to 500 million liters in 2003.
Argentina and Uruguay together furnished 95 percent of
Brazil's imported powdered milk in 2003. The EU and New
Zealand have been practically squeezed out of the Brazilian
market; their imports totaled slightly more than 3 percent.
The measure against Uruguay, also a price agreement, is due
to expire in April 2004 and will also likely be extended
pending review, according to Itamaraty trade officials.
Measures against the EU and New Zealand (application of
antidumping duty margins) remain in effect until 2006.

3. Comment: The continuation of this agreement provides
further evidence of Brazil's and Argentina's trade balancing
act -- addressing local constituencies' need for protection
within the context of the Mercosul free-trade experiment and
an internationally united negotiating bloc. Unlike the
recent bilateral trade difficulties with textiles, shoes and
home appliances (reftel), this uncontroversial case has
elicited little press coverage in the Brazilian media.
Argentine milk suppliers presumably expected the antidumping
price to continue and did not mount serious opposition,
perhaps content with a larger share of the dwindling market
now that competition from the Europeans and Kiwis has been
effectively eliminated. Argentine imports of subsidized EU
milk and the subsequent re-export to Brazil -- the so-called
triangle operation -- formed the basis for the GoB's 2001
antidumping investigation. While uninterested in seeking
the dismissal of this measure, the GoB's emphasis on a trade-
friendly atmosphere with Argentina should work toward
preventing a second anti-dumping case in the near term.

HRINAK

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