January 21, 2011 / 6:11 PM / 8 years ago

Exclusive: Brazil steps up WTO measures in currency war

BRASILIA (Reuters) - Prompted by an escalating global currency war, Brazil is preparing to challenge U.S. ethanol aid and EU beef import barriers in the World Trade Organization, industry and government sources said on Friday.

“The government is preparing those cases together with industry groups,” a senior government official familiar with the cases told Reuters.

The Brazilian government is also set to expand anti-dumping barriers to several Asian countries allegedly being used by China as a front for exports to Brazil, another official said.

The moves reflect a broader effort by the new administration of President Dilma Rousseff to fight back in what Brazil considers a global currency war that is fueling a rally of its real and is fast eroding the country’s trade balance.

The Brazilian currency has gained more than a third against the dollar in just over two years.

The country’s trade surplus is expected to plummet to $8 billion this year and $5 billion in 2012 from $20 billion last year, already its lowest in eight years.

As one of the world’s bread baskets, Brazil has long championed farm trade liberalization and pushed for cuts in rich nations’ agricultural subsidies.

Following recent cases it has won in the WTO, including one against U.S. cotton aid, Brazil intends to question Washington’s support for corn-derived ethanol and its import tariffs on cheaper Brazilian ethanol made from sugar cane.

“We’re working with our lawyers and will provide the government the necessary documentation to move ahead,” Marcos Jank, head of the influential sugar cane industry lobby Unica, told Reuters.

Brazil used to be the world’s largest ethanol producer for decades but was surpassed by the United States a few years ago. It remains one of the biggest exporters of the fuel.

Earlier this month U.S. Senator John McCain of Arizona said the WTO was likely to consider U.S. ethanol support illegal.

Brazilian beef exporters, meanwhile, plan to show that European Union trade restrictions in 2008 were illegal and had caused their exports to plummet.

“We will show that the measures are discriminatory,” said Antonio Jorge Camardelli, head of the beef exporters association Abiec. He said he expected to formalize Abiec’s request for a WTO dispute panel with the foreign ministry in the coming weeks.

Separately, the government is finalizing a WTO case over EU poultry regulations it considers illegal.

While Brazilian farmers have been able to partly offset the impact of a stronger real through high commodity prices, the country’s manufacturers have suffered more.

The trade balance in manufactured goods has swung from a surplus of $5 billion in 2006 to a deficit of $71 billion last year.

As a result the government plans in coming weeks to impose restrictions on shoe imports from several Asian countries it says act as a “front” for Chinese shoe exporters that have to pay an anti-dumping tariff in Brazil.

The ministry of industry is currently studying more than a dozen industry requests to impose anti-dumping tariffs.

In December former President Luiz Inacio Lula da Silva’s administration raised tariffs on 14 categories of imported toys to 35 percent from 20 percent to help stem a flood of cheap Chinese imports.

Editing by Paul Simao

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