Exclusive: Brazil sees WTO's duties as insufficient: sources

BRASILIA Wed Mar 21, 2012 8:24pm EDT

International Monetary Fund (IMF) Managing Director Christine Lagarde (L) and World Trade Organization (WTO) Director-General Pascal Lamy chat at the beginning of the Development Committee meeting during the annual IMF-World Bank meetings in Washington September 24, 2011. REUTERS/Yuri Gripas

International Monetary Fund (IMF) Managing Director Christine Lagarde (L) and World Trade Organization (WTO) Director-General Pascal Lamy chat at the beginning of the Development Committee meeting during the annual IMF-World Bank meetings in Washington September 24, 2011.

Credit: Reuters/Yuri Gripas

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BRASILIA (Reuters) - Brazil plans to signal its growing concern about intense foreign competition hurting its industries by suggesting at the World Trade Organization that the ceiling for its import tariffs is too low, government sources told Reuters on Wednesday.

Brazil considers the 35 percent tariff ceiling authorized by the WTO as "insufficient" to battle a flood of cheap imports prompted in part by a stronger local currency.

Brazilian officials will discuss import duty levels during a currency and trade symposium scheduled at the WTO next week, but has no plans to formally request a hike of the tariffs' ceiling, the sources said.

"This tariff (ceiling) is losing effectiveness in the current scenario," said one government official who asked for anonymity to speak freely. Officials said it would be too difficult to seek higher tariffs at the WTO.

Talks of higher tariffs may be aimed at sending a strong message to China and other key trade partners that Latin America's top economy is considering tougher actions to halt the avalanche of cheap imports that undermines local producers.

The warning by the world's No. 6 economy over insufficient imports tariff is likely to raise concerns at the WTO about a revival of protectionism.

Finance Minister Guido Mantega has already warned that Brazil plans to make unspecified hikes in import duties on up to 100 products under WTO rules. Mantega says rich nations are flooding emerging-market nations with cheap money that strengthens their local currencies in detriment of local industries.

The government of President Dilma Rousseff pressured Mexico to lower auto exports last week after tense negotiations to overhaul a decade-old automotive deal that could fray ties between the Latin American giants.

Brazil's actions have stoked fears of widespread protectionism across the emerging-market world.

Neighboring Argentina on Tuesday also asked Mexico to rework a similar auto pact that is hurting its trade balance.

Mantega has said the WTO should consider more measures that allow countries to defend themselves against what he calls "currency dumping."

Industries ranging from auto makers to shoe and food producers have been hit by the strong real, raising their costs and making imports cheaper.

A slew of government measures has helped revert some of the gains of the real so far this. However, analysts doubt the measures could effectively weaken the real in the long run.

Brazil has seen its trade deficit of manufactured products surge over the last few years, prompting complains by business leaders and union bosses who demand more government action to preserve jobs and stoke growth.

Brazil already applies the maximum tariff under the WTO rules to some products in the textile sector.

(Writing by Alonso Soto; Editing by Richard Chang)

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