Cablegate: U.S.-Brazil Bilateral Consultative Mechanism

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





E.O. 12958: N/A


1. (U) This cable is Sensitive But Unclassified.

2. (U) Summary and Introduction. Deputy United States Trade
Representative Peter F. Allgeier led an interagency
delegation to Brasilia, Brazil for the September 22 meeting
of the U.S.-Brazil Bilateral Consultative Mechanism (BCM).
Ambassador Clodoaldo Hugueney, Undersecretary for Economic
and Technological Affairs, led the Brazilian delegation. The
U.S. delegation consisted of USDOC DAS Walter Bastian, USTR
Senior Director for Brazil and the Southern Cone Sue Cronin,
State WHA/BSC Deputy Director Len Kusnitz, State EB/TPP/BTA
Chief Robin Matthewman, Chris Merriam of USDOJ, USPTO
Attorney-Advisor Caridad Berdut, and AmEmbassy Brasilia
officials. The meeting addressed bilateral trade issues,
principally the enforcement of intellectual property laws
regarding copyright piracy. The agenda also included
discussions on a pending U.S. antidumping investigation
against Brazilian shrimp, possible discrimination against
U.S. exports of soda ash into Rio state, and potential
exports of Brazilian fresh beef into the United States. On
September 21, DUSTR Allgeier met with copyright industry
representatives in Sao Paulo (refa) and addressed the Sao
Paulo American Chamber of Commerce, enroute to Brasilia. End
Summary and Introduction.

Copyright Protection and the GSP review
--------------------------------------------- -----

3 . (U) The main agenda item for the Bilateral Consultative
Mechanism meeting was the presentation of reports by both
countries on the enforcement of copyright law. The reports
stemmed from discussions held by a BCM bilateral IPR working
group, which was formed following the June 30 USTR
announcement of a ninety-day extension of a review of
Brazil's trade benefits under the Generalized System of
Preferences (GSP) due to concern over copyright enforcement.
The U.S. gave a summary of its written report (based on the
2003 NIPLECC report to Congress) emphasizing the importance
of the ex parte power enjoyed by U.S. Customs Border
Protection in identifying and seizing contraband at the
border, and the Department of Justice's prosecutions of
copyright offenses, including prison sentences and fines.
The U.S. also discussed the role of the Copyright Office in
advising the Congress on IPR issues and the work of the U.S.
Patent and Trademark Office.

4. (SBU) At the September 9-10 meeting of the BCM working
group on IPR in Washington, the USG had asked Brazil a series
of questions regarding enforcement, with the hope that these
questions would guide Brazil toward providing particular
information in the report (refb). The questions asked
concerned: 1) results of enforcement efforts, including
statistics on arrests, prosecutions, and convictions; 2)
cooperation with Paraguay stemming from the meeting between
President Lula and President Frutos on August 26, 2004; 3)
reports on any anti-piracy raids undertaken; 4) inspections
on the Friendship Bridge (Foz do Iguacu), including results;
5) the status of the decree that would create a new national
council to combat piracy, including the timeframe for issuing
the decree; 6) the initiation of a national media campaign to
fight piracy (the U.S. delegation to the Working Group asked
that the Lula Administration take a stand in publicly
promoting anti-piracy efforts); and 7) support for
legislation proposed by the Brazilian Congressional
Investigative Committee on Piracy (CPI) (the U.S. delegation
asked that the Administration make some pronouncement
regarding the GoB's IPR protection legislation, even if
simply endorsing its objectives).

5. (SBU) At the September 22 BCM meeting, Brazil presented a
summary of its report addressing some, though not all, of the
issues raised September 9-10. Hugueney described the report
as the first document fully consolidating information on
Brazil's wide-ranging efforts to enforce copyright law. He
said that he was impressed with the work that had been done,
and that this effort should satisfy the concerns of the
United States. Brazil's summary highlighted new legislative
provisions lengthening prison terms; training efforts;
increased public awareness; the need for international
cooperation; a nationwide reduction in software piracy; an
increase in the rate of CD seizures (up 200 percent); various
raids and investigations; increased inspections of buses on
the Friendship Bridge; a new priority within Mercosul to
fight piracy; the importance of the Congressional
Investigative Committee report on piracy and tax evasion;
legislation recommended in the CPI report (two bills dealing
with copyright protection and others on smuggling and
piracy), and establishment of an inter-ministerial council
which would produce a national action plan. (Note: the
decree to establish the council has not yet been signed by
the president).

6. (SBU) Following Brazil's summary, various agencies
contributed additional information. The representative from
the Ministry of Justice said that combating piracy was a
primary concern to the MoJ. He noted that the MOJ cooperates
closely with customs and will start checking on the
immigration status of people dealing in pirated goods. He
also said the MOJ would be considerinh state-level
specialized courts for piracy and smuggling.

7. (U) The Brazilian Federal Police noted that four tons of
IT products coming from Miami had recently been seized.
Further comments included the observation that cyber-crime
was getting increased attention, and that most counterfeit
CD's contain Brazilian music providing Brazil with an
incentive to work to stop the problem. The Federal Police
representative noted the formation of a special division to
deal with copyright crimes.

8. (U) Brazil's Internal Revenue and Customs representative
said that his agency was updating and modernizing its
practices, in particular, improving risk assessment
procedures and working with the private sector. He also
noted that Brazil has a cooperative agreement with U.S.
Customs and Border Protection.

9. (SBU) Hugueney characterized the exchange between the two
sides as "very positive". He found Brazil's report reflected
recent enhancement of measures to combat piracy and that the
exchange of views on actions was very useful. He hoped the
report, plus the CPI efforts, would demonstrate Brazil's
commitment to combating copyright piracy. Allgeier commented
that he hoped the BCM would continue to deal with IP problems
on a continuing basis. He expressed USG hopes that the new
Council be formed and begin work on developing and
implementing the national intellectual property right
protection plan very soon.

10. (U) U.S. Delegation member Chris Merriman (USDOJ) gave
an overview of international cooperation opportunities,
including Operation Fast Link and noted that meeting with GoB
law enforcement officials within the IPR Working Group had
been beneficial. In addition, Attorney-Advisor Caridad
Berdut (USPTO) described the role of her agency in combating
piracy, with an emphasis on training opportunities.

11. (U) At the conclusion of the IP discussion, Ambassador
Allgeier provided an overview of the GSP petition process.
He explained that the U.S. Congress had included in GSP
legislation a variety of conditions that need to be met by
countries receiving benefits, one of which is adequate
enforcement of intellectual property laws. He described next
steps in considering the International Intellectual Property
Alliance's GSP petition on Brazil, including an interagency
review after September 30 of information provided in the GOB
report. He suggested that intellectual property protection
remain a part of the BCM agenda to which Hugueney tentatively

The Doha Round

12. (SBU) Allgeier and Hugueney discussed the framework
agreement, non-agricultural market access, services and the
special and deferential treatment package that should
contribute to progress. Both agreed that work needs to be
accelerated to achieve sufficient progress in time for the
Hong Kong Ministerial.

Trade and Economic Overview
13. (SBU) Hugueney expressed concerns about the relatively
limited growth in bilateral trade and the decline in
investment by U.S. companies. In response, DOC DAS Walter
Bastian highlighted positive examples of U.S.-Brazil
commercial relationships by thanking those present for their
assistance and sense of fair play regarding Motorola's bid on
the Federal Police communications system contract, and
mentioning the selection of the Embraer/Lockheed Martin team
to provide an aircraft platform for the US Army's Aerial
Common Sensor program. He noted that this USG decision
demonstrates that Brazilian companies can compete on a level
playing field, even in the traditionally sensitive area of
military procurement. Bastian pointed out that although
Brazil is the United States' third largest trading partner in
the hemisphere behind Canada and Mexico, the volume pales in
comparison. While part of the difference may be attributable
to geography, part may also reflect the commercial and
investment climate. Bastian gave indications based on
concerns expressed by U.S. businesses for why it has been a
challenge for Brazil to attract competitive investment.
These concerns include unclear and complicated regulations at
all levels of government, lack of transparency, bureaucratic
bottlenecks, critical infrastructure deficiencies,
inefficient customs and slow judicial proceedings. Bastian
cited a World Bank study of business practices in 133
countries as independent evidence that that these types of
issues need attention in the context of competitiveness,
noting that Brazil ranked 6th to last when it comes to the
burden of red tape in opening a company.

14. (SBU) Bastian raised the possibility of establishing
informal commercial exchanges (ICE) between Brazil and the
United States, an idea initially broached between DOC Under
Secretary Aldonas and GoB Minister of Development, Industry

and Trade, Luiz Furlan, to provide a forum for discussion of
issues of mutual interest, such as issues of competitiveness,
corporate governance, and mitigation of the commercial impact
of strengthened security measures. Bastian noted that these
would not be for high-level policy discussions, but
foundational fora for business interests with a goal to
prepare the private sector to pro-actively identify issues
and address regulations. Bastian noted that the U.S. and
Mexico have a number of these groups that work well, and that
the idea was not duplicative of the BCM; there are already
Brazil/U.S. counterpart discussions between Ministries of
Agriculture, Energy, Finance, for example. Hugueney opined
that the decline in investment in Brazil is part of a global
trend, rather than an indication of Brazil's competitiveness.
Nonetheless, he expressed openness toward a possible ICE

Shrimp Anti-Dumping Case
--------------------------------------------- -----
15. (SBU) Hugueney explained GoB sensitivities regarding the
current antidumping investigation on shrimp, pointing out
that it potentially will hit a sector that has been providing
growing employment in the poorest region in Brazil. He
expressed hope that withdrawal from the investigation of a
company that had been assessed the highest preliminary
dumping margin would lower any dumping margin that may be
calculated for "other" producers in the DOC's final
determination. Hugueney provided Allgeier and Bastian with a
nonpaper on the issues and noted that the GOB will continue
to closely monitor the case. DAS Bastian noted that the DOC
was aware of Norte Pesca's withdrawal from the investigation
and acknowledged the effect this could have on the "all
others" rate in the final determination, all else being
equal. Bastian underscored the transparency and the
deliberative legal aspect of the process, and explained that
a final determination would be made in December. DAS Bastian
also noted that the DOC Import Administration has provided
technical assistance on antidumping procedures to other
countries in the past, and Brazil expressed an interest in
pursuing this type of opportunity.

SPS - Beef
16. (U) Regarding Brazil's request for certification to
export fresh, chilled and frozen beef products to the United
States, Allgeier noted that there would be a meeting of the
U.S.-Brazil Consultative Committee on Agriculture the week of
September 27, which would include discussion of this matter,
including, the issue of the presence (or lack thereof) of
foot and mouth disease. He added that the USG was working
closely with Brazil.

Soda Ash
17. (SBU) Allgeier raised concern over possible
discrimination against U.S. soda ash exports entering the
state of Rio de Janeiro due to preferential tax treatment for
a domestic soda ash producer. Post and other USG officials
had raised the issue with the GoB on past occasions.
Hugueney said tax experts from the state of Rio had assured
the Foreign Ministry that there was no discrimination against
foreign suppliers. According to Hugueney, they claimed that
Rio state has merely provided an excise tax payment option
designed to reduce the accounting burden for small producers,
as opposed to providing them with a lower tax burden.
Hugueney admitted, however, that he did not fully understand
all the details and suggested the two countries convene
experts to further discuss the matter. Post will follow up.

18. (U) This cable has been cleared by DUSTR Allgeier.

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