US embassy cable - 04BRASILIA2526

UNCLAS SECTION 01 OF 04 BRASILIA 002526 
 
SIPDIS 
 
SENSITIVE 
 
STATE FOR WHA/BSC, EB/TPP/MTA/IPC, EB/TPP/BTA FOR MATTHEWMAN 
STATE PASS TO USTR FOR PALLGEIER, SCRONIN, LYANG, BPECK 
USDOC FOR 
4322/ITA/MAC/WH/OLAC/WBASTIAN/JANDERSEN/MWARD /DRISCOLL 
USDOC FOR 3134/USFCS/OIO/EOLSON/DDEVITO 
TREASURY FOR OASIA SEGAL 
NSC FOR DEMPSEY 
JUSTICE FOR CCIPS-CMERRIAM 
 
E.O. 12958: N/A 
TAGS: ETRD, KIPR, EAGR, BR, Trade 
SUBJECT: U.S.-BRAZIL BILATERAL CONSULTATIVE MECHANISM 
MEETING 
 
REF: A)SAO PAULO 1326 B) BRASILIA 2253 
 
1.  (U) This cable is Sensitive But Unclassified. 
 
2.  (U) Summary and Introduction.  Deputy United States Trade 
Representative Peter F. Allgeier led an interagency 
delegation to Brasilia, Brazil for the September 22 meeting 
of the U.S.-Brazil Bilateral Consultative Mechanism (BCM). 
Ambassador Clodoaldo Hugueney, Undersecretary for Economic 
and Technological Affairs, led the Brazilian delegation.  The 
U.S. delegation consisted of USDOC DAS Walter Bastian, USTR 
Senior Director for Brazil and the Southern Cone Sue Cronin, 
State WHA/BSC Deputy Director Len Kusnitz, State EB/TPP/BTA 
Chief Robin Matthewman, Chris Merriam of USDOJ, USPTO 
Attorney-Advisor Caridad Berdut, and AmEmbassy Brasilia 
officials.  The meeting addressed bilateral trade issues, 
principally the enforcement of intellectual property laws 
regarding copyright piracy.  The agenda also included 
discussions on a pending U.S. antidumping investigation 
against Brazilian shrimp, possible discrimination against 
U.S. exports of soda ash into Rio state, and potential 
exports of Brazilian fresh beef into the United States.  On 
September 21, DUSTR Allgeier met with copyright industry 
representatives in Sao Paulo (refa) and addressed the Sao 
Paulo American Chamber of Commerce, enroute to Brasilia.  End 
Summary and Introduction. 
 
Copyright Protection and the GSP review 
--------------------------------------------- ----- 
 
3 .  (U) The main agenda item for the Bilateral Consultative 
Mechanism meeting was the presentation of reports by both 
countries on the enforcement of copyright law.  The reports 
stemmed from discussions held by a BCM bilateral IPR working 
group, which was formed following the June 30 USTR 
announcement of a ninety-day extension of a review of 
Brazil's trade benefits under the Generalized System of 
Preferences (GSP) due to concern over copyright enforcement. 
The U.S. gave a summary of its written report (based on the 
2003 NIPLECC report to Congress) emphasizing the importance 
of the ex parte power enjoyed by U.S. Customs Border 
Protection in identifying and seizing contraband at the 
border, and the Department of Justice's prosecutions of 
copyright offenses, including prison sentences and fines. 
The U.S. also discussed the role of the Copyright Office in 
advising the Congress on IPR issues and the work of the U.S. 
Patent and Trademark Office. 
 
4.  (SBU) At the September 9-10 meeting of the BCM working 
group on IPR in Washington, the USG had asked Brazil a series 
of questions regarding enforcement, with the hope that these 
questions would guide Brazil toward providing particular 
information in the report (refb).  The questions asked 
concerned: 1) results of enforcement efforts, including 
statistics on arrests, prosecutions, and convictions; 2) 
cooperation with Paraguay stemming from the meeting between 
President Lula and President Frutos on August 26, 2004; 3) 
reports on any anti-piracy raids undertaken; 4) inspections 
on the Friendship Bridge (Foz do Iguacu), including results; 
5) the status of the decree that would create a new national 
council to combat piracy, including the timeframe for issuing 
the decree; 6) the initiation of a national media campaign to 
fight piracy (the U.S. delegation to the Working Group asked 
that the Lula Administration take a stand in publicly 
promoting anti-piracy efforts); and 7) support for 
legislation proposed by the Brazilian Congressional 
Investigative Committee on Piracy (CPI) (the U.S. delegation 
asked that the Administration make some pronouncement 
regarding the GoB's IPR protection legislation, even if 
simply endorsing its objectives). 
 
5.  (SBU) At the September 22 BCM meeting, Brazil presented a 
summary of its report addressing some, though not all, of the 
issues raised September 9-10.   Hugueney described the report 
as the first document fully consolidating information on 
Brazil's wide-ranging efforts to enforce copyright law.  He 
said that he was impressed with the work that had been done, 
and that this effort should satisfy the concerns of the 
United States.  Brazil's summary highlighted new legislative 
provisions lengthening prison terms; training efforts; 
increased public awareness; the need for international 
cooperation; a nationwide reduction in software piracy; an 
increase in the rate of CD seizures (up 200 percent); various 
raids and investigations; increased inspections of buses on 
the Friendship Bridge; a new priority within Mercosul to 
fight piracy; the importance of the Congressional 
Investigative Committee report on piracy and tax evasion; 
legislation recommended in the CPI report (two bills dealing 
with copyright protection and others on smuggling and 
piracy), and establishment of an inter-ministerial council 
which would produce a national action plan.  (Note: the 
decree to establish the council has not yet been signed by 
the president). 
 
6.  (SBU) Following Brazil's summary, various agencies 
contributed additional information.  The representative from 
the Ministry of Justice said that combating piracy was a 
primary concern to the MoJ.  He noted that the MOJ cooperates 
closely with customs and will start checking on the 
immigration status of people dealing in pirated goods.  He 
also said the MOJ would be considerinh state-level 
specialized courts for piracy and smuggling. 
 
7.  (U) The Brazilian Federal Police noted that four tons of 
IT products coming from Miami had recently been seized. 
Further comments included the observation that cyber-crime 
was getting increased attention, and that most counterfeit 
CD's contain Brazilian music providing Brazil with an 
incentive to work to stop the problem.   The Federal Police 
representative noted the formation of a special division to 
deal with copyright crimes. 
 
8.  (U) Brazil's Internal Revenue and Customs representative 
said that his agency was updating and modernizing its 
practices, in particular, improving risk assessment 
procedures and working with the private sector.  He also 
noted that Brazil has a cooperative agreement with U.S. 
Customs and Border Protection. 
 
9.  (SBU) Hugueney characterized the exchange between the two 
sides as "very positive".  He found Brazil's report reflected 
recent enhancement of measures to combat piracy and that the 
exchange of views on actions was very useful.   He hoped the 
report, plus the CPI efforts, would demonstrate Brazil's 
commitment to combating copyright piracy.  Allgeier commented 
that he hoped the BCM would continue to deal with IP problems 
on a continuing basis.  He expressed USG hopes that the new 
Council be formed and begin work on developing and 
implementing the national intellectual property right 
protection plan very soon. 
 
10.  (U) U.S. Delegation member Chris Merriman (USDOJ) gave 
an overview of international cooperation opportunities, 
including Operation Fast Link and noted that meeting with GoB 
law enforcement officials within the IPR Working Group had 
been beneficial.  In addition, Attorney-Advisor Caridad 
Berdut (USPTO) described the role of her agency in combating 
piracy, with an emphasis on training opportunities. 
 
11.  (U) At the conclusion of the IP discussion, Ambassador 
Allgeier provided an overview of the GSP petition process. 
He explained that the U.S. Congress had included in GSP 
legislation a variety of conditions that need to be met by 
countries receiving benefits, one of which is adequate 
enforcement of intellectual property laws. He described next 
steps in considering the International Intellectual Property 
Alliance's GSP petition on Brazil, including an interagency 
review after September 30 of information provided in the GOB 
report.  He suggested that intellectual property protection 
remain a part of the BCM agenda to which Hugueney tentatively 
agreed. 
 
The Doha Round 
-------------------- 
 
12.  (SBU) Allgeier and Hugueney discussed the framework 
agreement, non-agricultural market access, services and the 
special and deferential treatment package that should 
contribute to progress.   Both agreed that work needs to be 
accelerated to achieve sufficient progress in time for the 
Hong Kong Ministerial. 
 
Trade and Economic Overview 
-------------------- 
13.  (SBU) Hugueney expressed concerns about the relatively 
limited growth in bilateral trade and the decline in 
investment by U.S. companies.  In response, DOC DAS Walter 
Bastian highlighted positive examples of U.S.-Brazil 
commercial relationships by thanking those present for their 
assistance and sense of fair play regarding Motorola's bid on 
the Federal Police communications system contract, and 
mentioning the selection of the Embraer/Lockheed Martin team 
to provide an aircraft platform for the US Army's Aerial 
Common Sensor program.  He noted that this USG decision 
demonstrates that Brazilian companies can compete on a level 
playing field, even in the traditionally sensitive area of 
military procurement.  Bastian pointed out that although 
Brazil is the United States' third largest trading partner in 
the hemisphere behind Canada and Mexico, the volume pales in 
comparison.  While part of the difference may be attributable 
to geography, part may also reflect the commercial and 
investment climate.  Bastian gave indications based on 
concerns expressed by U.S. businesses for why it has been a 
challenge for Brazil to attract competitive investment. 
These concerns include unclear and complicated regulations at 
all levels of government, lack of transparency, bureaucratic 
bottlenecks, critical infrastructure deficiencies, 
inefficient customs and slow judicial proceedings.  Bastian 
cited a World Bank study of business practices in 133 
countries as independent evidence that that these types of 
issues need attention in the context of competitiveness, 
noting that Brazil ranked 6th to last when it comes to the 
burden of red tape in opening a company. 
 
14.  (SBU) Bastian raised the possibility of establishing 
informal commercial exchanges (ICE) between Brazil and the 
United States, an idea initially broached between DOC Under 
Secretary Aldonas and GoB Minister of Development, Industry 
 
SIPDIS 
and Trade, Luiz Furlan, to provide a forum for discussion of 
issues of mutual interest, such as issues of competitiveness, 
corporate governance, and mitigation of the commercial impact 
of strengthened security measures.  Bastian noted that these 
would not be for high-level policy discussions, but 
foundational fora for business interests with a goal to 
prepare the private sector to pro-actively identify issues 
and address regulations.  Bastian noted that the U.S. and 
Mexico have a number of these groups that work well, and that 
the idea was not duplicative of the BCM; there are already 
Brazil/U.S. counterpart discussions between Ministries of 
Agriculture, Energy, Finance, for example.  Hugueney opined 
that the decline in investment in Brazil is part of a global 
trend, rather than an indication of Brazil's competitiveness. 
 Nonetheless, he expressed openness toward a possible ICE 
dialog. 
 
Shrimp Anti-Dumping Case 
--------------------------------------------- ----- 
15.  (SBU) Hugueney explained GoB sensitivities regarding the 
current antidumping investigation on shrimp, pointing out 
that it potentially will hit a sector that has been providing 
growing employment in the poorest region in Brazil. He 
expressed hope that withdrawal from the investigation of a 
company that had been assessed the highest preliminary 
dumping margin would lower any dumping margin that may be 
calculated for "other" producers in the DOC's final 
determination.  Hugueney provided Allgeier and Bastian with a 
nonpaper on the issues and noted that the GOB will continue 
to closely monitor the case.  DAS Bastian noted that the DOC 
was aware of Norte Pesca's withdrawal from the investigation 
and acknowledged the effect this could have on the "all 
others" rate in the final determination, all else being 
equal.  Bastian underscored the transparency and the 
deliberative legal aspect of the process, and explained that 
a final determination would be made in December.  DAS Bastian 
also noted that the DOC Import Administration has provided 
technical assistance on antidumping procedures to other 
countries in the past, and Brazil expressed an interest in 
pursuing this type of opportunity. 
 
SPS - Beef 
------------- 
16.  (U) Regarding Brazil's request for certification to 
export fresh, chilled and frozen beef products to the United 
States, Allgeier noted that there would be a meeting of the 
U.S.-Brazil Consultative Committee on Agriculture the week of 
September 27, which would include discussion of this matter, 
including, the issue of the presence (or lack thereof) of 
foot and mouth disease.  He added that the USG was working 
closely with Brazil. 
 
Soda Ash 
----------- 
17. (SBU)  Allgeier raised concern over possible 
discrimination against U.S. soda ash exports entering the 
state of Rio de Janeiro due to preferential tax treatment for 
a domestic soda ash producer.  Post and other USG officials 
had raised the issue with the GoB on past occasions. 
Hugueney said tax experts from the state of Rio had assured 
the Foreign Ministry that there was no discrimination against 
foreign suppliers.  According to Hugueney, they claimed that 
Rio state has merely provided an excise tax payment option 
designed to reduce the accounting burden for small producers, 
as opposed to providing them with a lower tax burden. 
Hugueney admitted, however, that he did not fully understand 
all the details and suggested the two countries convene 
experts to further discuss the matter.  Post will follow up. 
 
18.  (U)  This cable has been cleared by DUSTR Allgeier. 
Danilovich