September 20, 2012 / 5:15 PM / 7 years ago

US urges Brazil in "clear terms' not to hike tariffs

WASHINGTON (Reuters) - U.S. Trade Representative Ron Kirk, in a letter obtained on Wednesday, urged the Brazilian government to reconsider plans for “protectionist” tariff increases expected to have a significant negative effect on 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 a Sept 19 letter to Brazilian Foreign Minister Antonio de Aguiar Patriota.

Brazil recently announced plans to raise import tariffs on 100 foreign products to help struggling local industries, triggering international concerns over growing protectionism in the world’s No. 6 economy.

The move is the latest step taken by President Dilma Rousseff to fend off competition from foreign producers, which has hit local industries and dragged down an economy that until recently was the star among emerging market nations.

The temporary increase - initially for a year - in levies will apply to products ranging from iron pipes to glass 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 earlier this month.

Kirk said the United States expects scheduled tariff hikes on or about Sept 25, and more possible 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.

Kirk also expressed concern Brazil’s trading partners could respond in kind by increasing their own tariffs, a move that “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.

Additional reporting by Luciana Otoni in Brasilia; Editing by Neil Stempleman

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