RESTRICTED
WORLD TRADE G/L/68
26March 1996
ORGANIZATION(96-1084)
COUNCIL FOR TRADE INGOODS Original: English
22May1996
BRAZIL
Request foraWaiver under Article IXoftheMarrakesh Agreement
Establishing theWorld Trade Organization
Thefollowing communication, dated 15March 1996, hasbeenreceived fromthedelegation
ofBrazil withtherequest thatitbecirculated toWTO Members.
________________
Introduction
1. TheTreatyofMontevideoof12August1980createdtheLatinAmericanIntegrationAssociation
inreplacement oftheLatin American FreeTrade Association formed in1960. TheTreaty allowed
itsmembers togrant preferences among themselves andnottoextend those tothirdcountries. Itwas
anexpress derogation oftheMost Favoured Nation clause, inaccordance withArticle XXIV ofthe
General Agreement onTariffs andTrade, asnotified under theEnabling Clause. Since theconclusion
ofthe1980 Treaty ofMontevideo, numerous treaties andprotocols were signed under itsaegis.
2. Thus, theTreaty forIntegration, Cooperation andDevelopment, signed between Brazil and
Argentina on29November 1988, settheconditions fortheestablishment ofacommon economic space
between thetwocountries. TheAgreement forEconomic Complementation N.14, signed on
20December1990,setthenecessaryconditionsfortheenlargementofthatintegrationprocesstoinclude
Paraguay andUruguay.
3. Under theintegration process, Brazil andArgentina havebeenoperating aspecial regime for
theautomotive sector since 1991, asconsubstantiated inProtocol 21oftheProgram forEconomic
Integration andCooperation. Suchregime favours theindustrial complementation inthatsector and
regulates thetrade ofvehicles.
4. On26March 1991, theTreaty ofAsuncion created theSouthern Common Market -
MERCOSUL, anagreement aiming atfulleconomic integration among Argentina, Brazil, Paraguay
andUruguay. Thecommon market istooperate under itsprinciples andobjectives which include:
"thecoordinationofmacro-economicsandsectoralpoliciesamongtheStates-trade,agricultural,
industrial, fiscal, monetary, foreign exchange andcapital, services, customs, transportation
andcommunication policies andother thatmaybeagreed upon-toensure adequate conditions
ofcompetition between States."G/L/68
Page2
5. TheTreaty ofAsuncion alsosetsforth
"thecommitment bytheStates toharmonize theirlegislation, inthepertinent areas, tofoster
thestrengthening oftheintegration process."
6. OnDecember 16and17,1994, theMercosul Council adopted Decision 29ontheestablishment
ofacommon automotive regime bytheyear2000. According tosuchdecision, thefulltextofa
document establishing thecommon regime should befinalized before December 31,1997. Until then,
bilateral agreements (Brazil/Argentina, Argentina/Uruguay andBrazil/Uruguay) would continue to
regulate theautomotive sector, allunder theexisting mechanisms.1Paraguay doesnotmanufacture
vehicles orautoparts.
7. Oneofthemostsignificant achievements ofMERCOSUL wastheestablishment ofaCustoms
Union lessthanfouryears aftertheTreaty ofAsuncion, thatis,on1January 1995, theverysame
daytheWorld Trade Organization entered intoforce.
8. Bythen,Argentina andUruguay maintained special regimes fortheirautomotive sector which
included investment measures. Having dulynotified suchmeasures toWTO (G/TRIMS/N/ARG/1
andG/TRIMS/N/URY/1), Argentina andUruguay benefit fromthetransition period andtheirregimes
shallremain inforce untilDecember 31,1999.
Specific Policy Objectives
9. Compliance withtheWTO Agreements andthefulfilment ofMERCOSUL 'smandate toward
theestablishment ofacommon market forthesub-region figure veryprominently inBrazil 'strade
policy agenda. Recent efforts tostreamline andrevamp Brazil 'sregulatory tradeandinvestment regimes
haveinlarge measure reflected these priorities asBrazil attempts toreconcile theharmonization of
lawsandregulations atthesub-regional levelwiththeaimsandobjectives oftheWTO.
10. Inorder tocoordinate policies regarding investments, toharmonize legislation regarding the
automotive sector andtoavoid distorting theconditions ofcompetition between newinvestments and
established enterprises oftheautomotive sector within thescope ofthecommon market, Brazil held,
in1995, negotiations withitsMercosul partners, aiming attheadoption ofasimilar andcompatible
domestic investment regime, inharmony withthose existent inthesub-region. Suchnegotiations were
heldincompliance withMERCOSUL 'sDecision 29/94 referred toinparagraph 6above which
established atransition period untiltheentry intoforce ofacommon automotive regime.
11. Provisional Measure 1,235 ofDecember 14,1995 (later re-issued under number 1,272), the
provisions ofwhich wereregulated byDecree 1,761 ofDecember 27,1995, istoasignificant extent
theresult ofthose negotiations. Theproducts covered bythemeasures arelikeproducts tothose of
theenterprises established inArgentina andUruguay under theirrespective automotive regimes now
under harmonization withBrazil.
Reasons which prevent Brazil from otherwise achieving itspolicy objectives
12. Inorder toavoid distortions intheconditions ofcompetition prevailing inMERCOSUL during
thetransition period accorded totwoofitsParty States (Argentina andUruguay) under theterms of
theTRIMs Agreement, Brazil hadtoadopt comparable legislation. Indoing soitcomplied withthe
1TheLatin American Integration Association 'sbi-annual report ontheperiod 1992-1994, about
tobesenttotheWTO, contains theaforementioned documents.G/L/68
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decision made byMERCOSUL tohaveacommon automotive regime. Itshould benoted thatthe
transition period agreed among MERCOSUL partners fortheirautomotive sector coincides withthe
transitionperiodsetoutunderWTOrulesfortrade-relatedinvestmentmeasuresindevelopingcountries-
i.e.,31December 1999.
13. Intheabsence ofasimilar andharmonized legislation andregulatory approach applying to
theautomotive sector inBrazil, itwould bedifficult forthesub-region tocorrect existing, andavoid
future, distortions inbothtradeandinvestment flows. Investment decisions would necessarily behighly
influenced bydifferences inregulatory frameworks among thefourParty States -asituation which
wouldgoagainsttheoverallMERCOSULaimofmovingincreasinglyandconsistentlytowardacommon
market fortheautomotive andother sectors.
THE REQUEST FOR AWAIVER
14. TheGovernment oftheFederative Republic ofBrazil, based onArticle IXoftheMarrakesh
Agreement establishing theWTO, hereby requests awaiver ofitsobligations under Article 5.1ofthe
TRIMs Agreement fortheperiod oftimeandproducts specified initsProvisional Measure 1,235 and
Decree 1,761 notified totheCouncil forTrade inGoods oftheWTO on31January 1996(WT/L/132).
Thelimits ofthewaiver requested
15. Provisional Measure 1,235 anditsregulatory provisions clearly statethenewregime forthe
automotive sector willexpire onDecember 31,1999, which isalsothetimelimit forboththe
Argentinean andUruguayan transition periods.
16. Provisional Measure 1,235 anditsregulatory provisions specify theproducts subject tothe
regime, i.e.
(a) passenger andmixed usevehicles andjeeps;
(b) station wagons, vans, pick-up trucks andvehicles fortransportation ofgoods;
(c) truck-tractors;
(d) agricultural tractors andharvesting machines;
(e) tractors, road-building andexcavation machines andforklifts;
(f) bodies forautomotive vehicles ingeneral;
(g) trailers andsemi-trailers forthetransportation ofgoods;
(h) parts, pieces andcomponents, setsandsubsets, finished andunfinished, pneumatic
tires, forutilization inthemanufacturing oftheproducts listed above.