U.S. urges Brazil in 'clear terms' not to raise tariffs

WASHINGTON Thu Sep 20, 2012 6:56pm EDT

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WASHINGTON (Reuters) - U.S. Trade Representative Ron Kirk urged the Brazilian government in a letter sent on Wednesday to reconsider plans for "protectionist" tariff increases expected to hurt U.S. exports.

"I am writing to state in strong and clear terms the United States' concern about scheduled and proposed tariff increases in Brazil and Mercosur," Kirk said in the letter to Brazilian Foreign Minister Antonio de Aguiar Patriota.

Brazil triggered international concerns over growing protectionism in the world's No. 6 economy when it announced plans to raise import tariffs on 100 foreign products.

This is the latest step by President Dilma Rousseff to fend off competition from foreign producers, which has hit local industries and Brazil's economy.

The temporary increase in levies, initially for a year, would apply to products ranging from glass to iron pipes and bus tires. The rate will reach 25 percent for most of those products, an increase from the low teens.

"We live in a time when the world market is shrinking and exporters flood Brazil, which is one of the few growing markets, and our industry is being harmed by this," Brazilian Finance Minister Guido Mantega told reporters this month.

Kirk said the United States expects scheduled tariff increases around September 25, and possibly more increases in October, to "significantly hit U.S. exports to Brazil in key areas of export interest to the United States."

"Further, these two sets of tariff increases follow earlier increases that have been implemented during the course of the past year ... Brazil's tariff increases will significantly restrict trade from current levels and clearly represent protectionist measures," Kirk said.

"The overall effect is that an ever broader range of industrial goods faces deteriorating market conditions in Brazil's market," Kirk said.

A spokesman for Brazil's foreign ministry said the criticisms were "baseless" and the letter was "unjustifiable."

"This format is not consistent with the relationship we have with the United States," ministry spokesman Tovar Nunes said in a telephone interview. He added that Brazil would likely have a formal response ready by Friday.

Kirk also expressed concern that Brazil's trading partners could respond by increasing their own tariffs, which "would amplify the negative impact" of Brazil's actions.

The United States also takes no comfort in the fact that the tariff increases are intended to be temporary, Kirk said.

Brazilian officials have chafed at descriptions of the tariff increases as protectionist since they do not exceed Brazil's "bound" limits under World Trade Organization rules.

U.S. Ambassador to the WTO Michael Punke told reporters on Thursday that the tariff hikes clearly impede trade, even if they are technically within the limits of WTO rules.

"For us, that's the essence of (being) protectionist. And from that standpoint, we find Brazil's action very inconsistent with commitments it made, for example, in the G20 to fight protectionism," Punke said after a congressional hearing.

(Additional reporting by Luciana Otoni and Jeferson Ribeiro in Brasilia; Editing by Neil Stempleman and M.D. Golan)

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