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Cablegate: U/S Larson Discusses Ipr and Trade with Gob

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

281249Z Jul 04

UNCLAS SECTION 01 OF 04 BRASILIA 001864

SIPDIS

SENSITIVE

STATE PASS USTR FOR CRONIN
TREASURY FOR OASIA - DAS LEE AND SSEGAL
NSC FOR RENIGAR AND DEMPSEY
STATE FOR E - TOM SMITHAM
STATE FOR WHA/EPSC - URS
USDOC FOR 4332/ITA/MAC/WH/OLAC/DMCDOUGALL/ADRISCOLL
USDOC FOR 4332/ITA/MAC/WH/OLAC/JANDERSON/WBASTIAN
USDOC FOR 3134/USFCS/OIO/EOLSON/DDEVITO

E.O. 12958: N/A
TAGS: KIPR ETRD ECON EAGR PREL BR WTO
SUBJECT: U/S LARSON DISCUSSES IPR AND TRADE WITH GOB

REF: A) BRASILIA 1835 B) BRASILIA 1832

This cable is Sensitive But Unclassified, please protect
accordingly.

1. (SBU) Summary: In meetings with senior GoB officials
and representatives of U.S. industry, U/S Larson emphasized
that Intellectual Property Rights (IPR) protection was in
the interests of both countries; he highlighted the losses
that Brazilian artists and companies suffer from piracy.
Larson expressed appreciation for the GoB's willingness to
discuss actions that might be taken to improve IPR
enforcement under the current 90-day extension of Brazil's
access to benefits under the Generalized System of
Preferences (GSP). Larson welcomed the GoB's high level of
engagement in critical ongoing efforts to advance Doha Round
World Trade Organization (WTO) negotiations. He urged
Brazilian passage of a science-based biotechnology law.

2. (SBU) Minister of Development, Industry and Foreign
Trade Furlan expressed concern that, despite growth in
absolute levels of trade, the U.S. and Brazil had both seen
their shares of each other's markets fall. Furlan and his
Secretary for Industrial Development, Roberto Jaguaribe,

SIPDIS
outlined the GoB's efforts to strengthen the Intellectual
Property Institute (INPI) through staffing increases and
equipment modernization. They urged that the USG recognize
these efforts and maintain Brazil's GSP access. Both Furlan
and Agricultural Minister Rodrigues were optimistic that
progress would be made this month in reinvigorating Doha
Round negotiations. Foreign Ministry Economic Division
Chief Tarrago said that while the GoB is hoping for a Geneva
Doha Round breakthrough, it has some concerns with the
Oshima text and about whether sectoral negotiations might be
made mandatory. Rodrigues was surprised at the recent break-
off of EU-Mercosul FTA negotiations and said he was
particularly disappointed with the back-loading of increased
agricultural access within the 10-year phase-in period
contained in the EU's latest offer (Ref B). End Summary.

3. (U) Background: During a July 20-21 visit to Brazil,
U/S Larson met in Sao Paulo with representatives of a cross
section of U.S. businesses and in Brasilia with senior GoB
officials to discuss the full breadth of the bilateral
economic agenda. He met with Minister of Development,
Industry and Foreign Trade Luiz Furlan and his Secretary of
Industrial Development (and newly-nominated INPI President)
Roberto Jaguaribe to discuss trade and IPR. Larson also met
with Agriculture Minister Rodrigues, Congressman Julio
Semeghini, one of the leading figures of the Congressional
Investigatory Commission (CPI) into IPR piracy, and Foreign
Ministry officials, including Economic Division Chief
Piragibe Tarrago and Chief of Scientific, Technical and
Technological Cooperation Antonino Marques Porto. Ref A
reported on U/S Larson's conversations concerning President
Lula's hunger initiative. Septel reports on Larson's
meetings with Central Bank President Meirelles and Finance
Ministry and Finance Ministry Executive Secretary Bernard
Appy and International Secretary Luis Pereira on the broader
economic situation and the reform agenda.

IPR and GSP
-----------

4. (SBU) In Sao Paulo, U/S Larson attended a dinner with
10 senior representatives of U.S. companies operating in
Brazil, including representatives of the banking,
pharmaceutical, energy, agriculture, construction, and
consumer-products sectors. On IPR, the consensus was that
Brazil's current legislation was good, but enforcement
remained a serious problem. A pharmaceutical-sector
representative noted that serious backlogs remain in patent
processing, and that the Intellectual Property Institute
(INPI) has been starved for resources and leadership. He
expressed hope that the naming of a new INPI president
(Roberto Jaguaribe) would result in operating improvements.

5. (SBU) In his meetings in Brasilia, U/S Larson
emphasized the cost of piracy to Brazil, both directly to
Brazilian industry and indirectly in lost tax revenues to
the GoB. U.S. business estimates of its losses to piracy
($745 million), Larson noted, give an idea of the scope of
the problem. He welcomed the GoB's willingness to discuss
actions under USTR's current 90-day extension of its review
of Brazil's GSP access. The USG wants to work
collaboratively and quietly with the GoB on practical ways
to address the problem, Larson stated.

6. (SBU) Minister Furlan stated that Brazil wants to
maintain its GSP privileges. Furlan claimed that his naming
of the Secretary of Industrial Development, Roberto
Jaguaribe, to be double-hatted as President of INPI, was a
measure of the importance he attaches to the issue.
Jaguaribe outlined the GoB's current efforts to improve
INPI's functioning. INPI has an increased budget, it is
hiring additional patent examiners, renovating the building,
investing in new information technology and restructuring
the organization. Jaguaribe stated he is in contact with
Commerce U/S Dudas to explore cooperation between INPI and
the U.S. Patent and Trademark Office.

7. (SBU) Jaguaribe argued that Brazil's patent backlog is
an operational issue while copyright and trademark problems
are both operational and enforcement issues. By renovating
INPI the GoB believes that it will create awareness of the
IPR issue and thus enhance its ability to protect copyrights
and trademarks. Jaguaribe and U.S. Under Secretary of
Commerce Dudas have discussed enforcement and patent
cooperation programs. Minister Furlan added that the GoB is
studying special tax treatment for software, IT services,
and computer hardware and capital goods that the GoB
believes will act as a development incentive as well as a
way to reduce piracy by making pricing of legitimate
software more competitive.

WTO Doha Round
--------------

8. (SBU) Larson welcomed Brazil's high level of engagement
in efforts to advance the Doha Round. Ministers Furlan and
Rodrigues both expressed optimism that a deal could be
reached this month. Itamaraty Economic Division Chief
Tarrago said the GoB had some specific concerns with the
Oshima text currently being discussed in Geneva. The GoB
opposes making sectoral negotiations mandatory, Tarrago
said. This, along with agriculture, are the biggest issues
for developing countries, he said. The Oshima text did not
go as deep into detail on these issues as developing
countries expected, Tarrago cautioned.

9. (SBU) Minister Rodrigues stated that he understands
that developed countries like the United States must
maintain subsidies to protect their farmers, but argued that
this support should not result in an exportable surplus.
Such surpluses hurt developing countries that can't provide
domestic subsidies. The Undersecretary responded that he
agrees with the principle of eliminating export subsidies
and hopes that one result of the Doha Round will be to
decouple payments from production. He believes this is
possible because of strong commercial interests and because
it is a development issue.


Bilateral Trade Issues
----------------------

10. (SBU) Minister Furlan expressed concern that, despite
growth in absolute levels of trade, the U.S. and Brazil had
both seen their shares of each other's import markets fall.
Furlan said he had discussed this "under-performance" with
Commerce Under Secretary Aldonas the previous month and that
both agreed on a positive bilateral agenda for cooperation
to increase trade. Larson argued that working together on
the FTAA could help address the fall-off in market share.

11. (SBU) Ethanol. Furlan stated that Brazil wanted a
level playing field in the U.S. ethanol market. U.S.
ethanol producers receive a 50% rebate on excise taxes and
subsidies of 54 cents per gallon that create barriers to
Brazil's sugar cane-based ethanol. Furlan proposed allowing
Brazil to export ethanol to California, a market that is a
long distance from U.S. Midwestern ethanol producers.
Larson noted that strong U.S. Congressional interest in corn-
based ethanol production made a change in policy difficult.
Only a negotiation on the scale of FTAA or the Doha Round,
which had scope for broad-based trade-offs, would offer any
chance for an outright change. Larson also invited the GoB
to try to show how they could grow the U.S. ethanol market
so that Brazilian imports did not displace current U.S.
production. Furlan said he would like to invite Senator
Grassley to visit Brazil to gain insight into the local
ethanol industry.

12. (SBU) Shrimp, Fresh Beef and Soybeans. Furlan, and
separately Itamaraty's Tarrago, urged that the USG dismiss
claims of dumping of farmed shrimp on the U.S. market by
producers in Brazil's poor northeastern region. Larson
noted that a decision would be made towards the end of the
month. Tarrago also raised the issue of access to the U.S.
market for Brazilian fresh (non-processed) beef. Larson
reassured Tarrago that while the USDA rule-making process
might be lengthy, it was objective and scientifically sound.
Larson related to Rodrigues that the USG recently had
delivered a formal demarche to the Government of China
protesting its barring, on questionable phytosanitary
grounds, of several soybean shipments, primarily from Brazil
but also affecting U.S. shippers. Rodrigues stated his
personal belief that the real reason Chinese soybean
processors had rejected the shipments was to take advantage
of the drop in world soybean prices. Rodrigues alleged that
Chinese soybean processors were looking for a reason to
break the (high-priced) contracts and "we gave them one," in
the form of shipments containing with relatively high levels
of fungicide-treated soybean seeds.

Biotech
-------

13. (SBU) Larson urged Rodrigues to work for passage of a
science-based law allowing the use of genetically modified
(GM) crops. Rodrigues said he leads the faction within the
GoB that is in favor of the use of GM crops. He told Larson
that Congressional passage of a biosafety law, which would
formalize the use of GM crops, may not occur in time for the
planting season later this calendar year. In the absence of
a law, Rodrigues said, he had been able to convince the
President to sign decrees, which provisionally allowed
biotech soybean planting, but would expire this year.
Rodrigues expressed confidence that the Congress eventually
would pass a reasonably liberal biosafety law; he believed
the Senate would reverse troublesome changes the Chamber of
Deputies had made to the executive's original draft. Those
changes, however, would then need to go back to the Chamber.

14. (U) U/S Larson was unable to clear this message before
departing Brazil.

CHICOLA

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