Trump's taxation could trigger Brazilian reciprocity law; understand
The economic reciprocity law requires regulation by the federal government , a fact that does not prevent it from being used as a response to the 50% surcharge on Brazilian goods and services imposed by the United States, announced by US President Donald Trump.
Starting August 1st, items produced in Brazil will be subject to taxation , in response to the trial of former president Jair Bolsonaro (PL), accused of attempted coup d'état, according to a letter published by Trump on the social network Truth Social on July 9th.
Renê Medrado, partner in international trade disputes at Pinheiro Neto Advogados and PhD in international trade from USP (University of São Paulo), explains that the legislation was created as an alternative to the WTO (World Trade Organization) .
According to the expert, the WTO no longer has an appeals court, as it has not had any judges appointed to the position by the US since 2018. Therefore, a decision by the organization cannot be challenged.
Medrado indicates that the United States can be classified under sections I and II of the law.
According to the law, “economic reciprocity applies when a country or economic bloc interferes in Brazil’s legitimate and sovereign choices, seeking to prevent or obtain the cessation, modification or adoption of a specific act or practice in Brazil, through the application or threat of unilateral application of commercial, financial or investment measures.”
While the second paragraph indicates “actions that violate or are inconsistent with the provisions of trade agreements or otherwise deny, nullify or impair benefits to Brazil under any trade agreement”.
“Donald Trump’s letter indicates that the US wants to interfere in Brazil’s choices, so much so that Trump mentions the Supreme Federal Court ,” says Medrado.
Ana Caetano, partner in the Foreign Trade area of Veirano Advogados, explains that the law provides for the possibility of suspending commercial concessions, investments and obligations related to intellectual property in response to unilateral actions, policies or practices of a country (or bloc) that have a negative impact on Brazil's international competitiveness.
“The Reciprocity Law would allow Brazil to react when a trading partner has acted unilaterally against Brazil’s commercial interests,” says the lawyer.
Both Medrado and Caetano explain that the law still needs to be regulated by decree, and that the legislation requires steps that will be determined in the decree. However, the lack of a decree does not prevent the application of the measure.
The Veirano Advogados partner states that the law outlines steps for implementing countermeasures, and that these implementation steps will still be established in regulations. These implementation steps include public consultations, the establishment of deadlines, and the submission of countermeasure suggestions.
"All these steps seem to indicate the need for time. However, when it comes to retaliation/reciprocity, reaction time seems crucial to the dynamics of this process, which seems contradictory when it comes to emergency countermeasures," says Caetano.
However, Medrado states that this law has the role of inhibiting actions like that of the US and that the ideal would be to adopt the diplomatic route to resolve the issue.
"The law was created solely for deterrent purposes, designed not to be enforced, because deterrence is expected to be sufficient. The best approach is diplomatic; commercial retaliation is not good for anyone. However, from a legal standpoint, it is a concrete possibility," he concludes.
Despite the provision, for now Brazil has not officially taken retaliatory measures against the United States, although President Luiz Inácio Lula da Silva (PT) has already stated that the tariffs will be responded to “in light of the Brazilian Law of Economic Reciprocity” .
"Brazil is a sovereign country with independent institutions that will not accept being controlled by anyone," the president said on social media on the same day as Trump's announcement.
CNN Brasil
