As anticipated by members of the government, the Presidency of the Republic published Provisional Measure No. 1.098/2022 last week, which authorizes the application of unilateral retaliation, if the country has its demands confirmed by a panel (in part or in full), and the respondent member country appeals to the stalled Appellate Body.
The Measure seems to have originated from the frustration of countries acting in the World Trade Organization (WTO) and its Dispute Settlement Body (DSB), such as Brazil and the European Union, which have seen claims confirmed, in at least one instance, not being concluded.
Respondent countries that have their policies found to be in violation of multilateral rules have strategically used the suspension of the Appellate Body (AB) to prevent the conclusion of cases by filing appeals that cannot be reviewed until the AB is restored (appeal in blank).
This was the strategy that recently prevented the conclusion of disputes initiated by Brazil, which had already had a favorable decision from the DSB. In January 2022, India announced its intention to appeal (in blank) against the panel report that confirmed the claims made by Brazil in a sugar dispute. In December 2020, Indonesia, who had requested additional time to adopt a WTO ruling (from November 2017), appealed against a report, which found that the country had not yet properly adjusted its measures related to the importation of poultry meat from Brazil, so that WTO rules were not violated.
Moreover, such cases can happen again if the Appellate Body is not reestablished. According to a survey carried out by the Portal da Indústria at the end of 2021, Brazil is the fifth largest user of the WTO dispute settlement mechanism, the fourth country that most complains among all members, and the first among emerging countries. Still, Brazil is proportionally the most offensive member in its use of the DSB, being the claimant in 67% of the cases in which it is involved.
The Provisional Measure published by Brazil, regarding this, authorizes the government to suspend concessions or other obligations to other member countries (retaliation) in the following circumsstances:
- Brazil is authorized by the DSB to suspend the application of concessions or other obligations to a particular Member under WTO agreements, or
- The WTO panel report confirms, in whole or in part, the allegations made by Brazil, as a complaining party, provided that
- There is an appeal by the WTO member, as the respondent party,
- The appeal cannot be heard by the Appellate Body or the Appellate Body’s report cannot be adopted by the DSB, or
- The period of sixty days has expired after Brazil’s notification to the respondent WTO Member of its intention to suspend concessions or other obligations.
Therefore, the Brazilian Government’s orientation is within WTO rules. This is to seek consultations and negotiation with eventual member countries that are the object of retaliation, but to ensure greater strength to Brazil in these discussions, in view of the possibility of suspension of concessions given to the importation of goods and services from these countries, or even suspension of intellectual property rights.
The conduct and steps to be adopted by Brazil, however, will be known as the discussions with India and Indonesia move forward.
The full text of the Provisional Measure can be found here.