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Cablegate: Gsp/Ipr: Gob Moves in Right Direction, but has Not

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

UNCLAS SECTION 01 OF 03 BRASILIA 002557

SIPDIS

SENSITIVE

STATE FOR WHA/BSC, EB/TPP/MTA/IPC, EB/TPP/BTA
STATE PASS TO USTR FOR PALLGEIER, SCRONIN, LYANG, BPECK
USDOC FOR
4322/ITA/MAC/WH/OLAC/WBASTIAN/JANDERSEN/MWARD /DRISCOLL
USDOC FOR 3134/USFCS/OIO/EOLSON/DDEVITO
TREASURY FOR OASIA SEGAL
NSC FOR DEMPSEY
JUSTICE FOR CCIPS-CMERRIAM

E.O. 12958: N/A
TAGS: ETRD KIPR BR
SUBJECT: GSP/IPR: GOB MOVES IN RIGHT DIRECTION, BUT HAS NOT
YET ARRIVED

REF: BRASILIA 2526 (NOTAL)

1. SENSITIVE BUT UNCLASSIFIED, PLEASE TREAT ACCORDINGLY

2. (SBU) Summary and Introduction. Post offers the following
thoughts as interagency deliberations proceed on review of
Brazil's trade benefits under the Generalized System of
Preferences (GSP) resulting from a petition filed by the
International Intellectual Property Alliance (IIPA) that
alleges the country provides inadequate copyright protection.
Post is not averse to removing GSP trade benefits from
Brazil should it cease cooperating with the USG within the
GSP/IPR review process and fail to follow through on
substantive actions to combat piracy. However, a number of
positive developments have emerged during the bilateral
consultative process stemming from the GSP review. While
insufficient to warrant a closure of the investigation, Post
believes a move toward punitive action at this juncture would
be counterproductive. Post recommends that the GSP review be
extended for a substantial period of time to encourage
continued constructive engagement with the GoB on copyright
enforcement, and to enable evaluation of the effectiveness of
anti-piracy measures it has recently put into motion and its
commitment for future action. Post also proposes
consideration of technical assistance, as warranted, to help
the GoB advance its anti-piracy efforts. End Summary and
Introduction.

Positive Developments
----------------------------

3. (SBU) Work by Brazil's Congressional Investigative
Committee (CPI) on Piracy, and extension of the USG's GSP
review have compelled the GoB to focus attention and
resources on fighting copyright piracy. The CPI has been
persuasive in arguing to the Executive Branch and public that
the level of economic informality, crime, and tax evasion
bred by piracy is crippling Brazil's development. It is
finally starting to dawn on opinion leaders that piracy hurts
Brazil even more than it does U.S. copyright industries. The
GSP review brought home potential negative international
consequences of GoB inaction to stem the tide, but also
presented an opportunity for the United States and Brazil to
recast a typically contentious issue as one in which
collaboration could bear fruit.

4. (SBU) During the 90-day GSP review extension, which ended
September 30, the GoB accelerated consideration and action on
a number of recommendations included in the CPI's final
report. Most notable were formation of a public-private
sector national council to combat piracy, and Mercosul
deliberations, led by Brazil, on coordinating anti-piracy
efforts region-wide. (Note: The Presidential Palace issued a
&medida provisoria8 to enable formation of the council
within the Ministry of Justice, but the presidential decree
establishing the council has not yet been signed.) The GOB
has also conducted raids (admittedly, without coordination at
the federal level and without bringing convictions) and
continues to strengthen its border measures, for example, by
blocking the free-customs transit of blank CD-ROM's through
Paraguay and cracking down on buses smuggling cargo across
the border.

5. (SBU) A further positive development has been the
empowerment of Brazilian government entities that
institutionally share our interest in tougher IPR
enforcement. Through the CPI's efforts, agencies such as the
Federal Police and Customs have gained greater stature within
the administration for their roles in fighting piracy and
smuggling, enhancing their ability to secure political and
financial support for this effort. Likewise, now that those
agencies have opened lines of communication among themselves,
coordinated action -- as opposed to efforts by individual
ministries -- is becoming more the norm. Interaction on a
technical as well as political level in the bilateral IPR
Working Group has opened additional channels for discourse
between our two governments, undercutting the more
antagonistic Foreign Ministry as the exclusive government
interlocutor on IPR issues. The make-up of the new council
may also help bolster these like-minded agencies and
ministries; it is being established as a permanent organ of
the Ministry of Justice, headed by its Executive Secretary,
and will include representatives of the Federal Police as
well as private sector.

Shortcomings
-----------------

6. (SBU) During the September 22 meeting of the Bilateral
Consultative Mechanism (reftel), Ambassador Hugueney
commented that he had been surprised at what the GoB had been
able to accomplish in such a short time, implicitly
acknowledging that the GSP threat had compelled the GoB to
mobilize on the issue. He claimed the GoB's actions
represented a sincere and determined effort to address
Brazil's piracy problem, and that this should be sufficient
reason to close the investigation resulting from the 2001
IIPA petition. Embassy does not agree. We believe that
ninety days is too short a time to turnaround what has been
for years a worsening piracy situation -- recent GoB actions
represent only a start.

7. (SBU) There still is no "national" policy or strategy for
combating piracy and without one the prospect for
significant, sustained improvement in copyright protection in
Brazil is dim. The GoB answer is the new council, which will
explicitly be charged with shaping and implementing a
national plan. While there is plenty of room for skepticism
concerning the council, given the inadequate performance of
the lower level inter-ministerial committee formed in 2001,
the context in which the council is being formed is quite
different. The scourge of piracy was not an issue in public
debate in 2001, but the CPI has brought it front and center
as an urgent domestic issue. Furthermore, with six seats at
the table, private sector participation in the Council should
help ensure that its work is focused and relevant.

Recommendations
----------------------

8. (SBU) Despite Ambassador Hugueney's urgings, the situation
on the ground has not improved sufficiently to warrant
closure of the IIPA investigation. But likewise, the
constructive way in which the GoB has engaged on this issue
and its initial efforts to address the problem, suggest the
other extreme of removing GSP benefits from Brazil at this
time is neither warranted nor wise. Post believes our
positive bilateral engagement on the issue would evaporate in
a backlash against USG imposed norms should we act in a
punitive way at this juncture. The ensuing conflict would
produce little of value with the bilateral dialog likely
shifting from improving copyright protection to GoB efforts
to fight the "unjust" removal of GSP benefits, including
perhaps a protest in the WTO. Although some industries would
no doubt complain to the GoB about the loss of trade
preferences, it is unlikely the commercial impact on Brazil
would be sufficient enough to force a change in GoB policy.
We believe the mere threat of removing benefits creates much
more positive pressure for change than the actual removal of
benefits.

9. (SBU) Given the coincidence in timing of the CPI's efforts
and our GSP review, we have a rare opportunity to make
headway with the GoB on an extremely sensitive issue. So far
the bilateral dialog has been constructive; we should act to
maintain this positive momentum by not escalating the issue
at this time. For now, Post recommends Washington agencies
extend the review to enable the USG and U.S. copyright
industries to gauge the effectiveness of recent GoB actions
and its commitment to sustained anti-piracy efforts for the
future. The extension should provide the GoB with a
reasonable amount of time for formation of the council and
for its formulation and implementation of a national plan
while preserving the "pressure" implied in an ongoing review.
Embassy believes six to nine months may be required to see
tangible effects on piracy in the country. If at the end of
that we do not see sufficient progress on IPR enforcement,
then it will be time to turn towards more coercive measures.
We also recommend that consideration be given to offering
technical assistance, as warranted, to help the GoB advance
its anti-piracy efforts.
Danilovich

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