- The Washington Times - Tuesday, March 22, 2005

President Bush has laid out a bold agenda for Ohio Rep. Rob Portman, his nominee for U.S. trade representative. The president urged Mr. Portman to “continue to vigorously enforce the trade laws on the books so that American businesses and workers are competing on a level playing field.”

Maybe the president was thinking of Brazil when he said that. It certainly made me think of the country that is flagrantly failing to crack down on intellectual property piracy.

Intellectual property piracy has become a major problem for U.S. corporations and jobs. The U.S. Customs Service estimates counterfeiting costs the U.S. more than $200 billion every year and has cost 750,000 U.S. jobs.

Brazil happens to be among the biggest offenders of intellectual property rights. Piracy is particularly rampant there in records and music, business software, motion pictures and the pharmaceutical industry.

While spending a paltry 2 percent of its massive gross domestic product on health, Brazil, the world’s 11th-largest economy, recently astonishingly claimed it is justified in violating U.S. companies’ AIDS patents since it cannot afford to pay for retroviral AIDS drugs.

Revoking Brazil’s preferred trade status — or Generalized System of Preferences (GSP) status — would be a damaging blow to the Latin American powerhouse: this status allows billions worth of Brazilian exports to enter the U.S. duty-free.

In 2003, duty-free imports to the U.S. from Brazil totaled $2.5 billion, or around 14 percent of all Brazilian imports. Brazil’s dependence on U.S. duty-free trade is even higher in specific sectors such as the motor-vehicle industry and copper and wood products, all very labor-intensive.

While all World Trade Organization members are supposed to provide minimum standards of intellectual property rights protection under the TRIPS agreement, piracy remains rampant in Brazil, and also China, Pakistan and Russia. These countries generally do very little to enforce such laws they may have on their books to prevent intellectual property theft.

The International Intellectual Property Alliance says, over the last several years, the high copyright piracy in Brazil has been virtually unchanged. As a result, in 2003 alone there were more than $900 million in estimated trade losses due to this piracy. That makes Brazil by far the largest Western Hemisphere property rights offender.

All this has prompted the Bush administration to put Brazil on a Special 301 Priority Watch List. Brazil’s day of reckoning will come next Thursday, when the USTR decides if Brazil’s bad behavior warrants revoking of its duty-free status, the only way the United States can really pressure Brazil.

Tempting and satisfying as it might be to withdraw Brazil’s GSP preferential treatment, the administration must weigh the wider effect. In particular, it must ponder how such a move might affect progress in the Free Trade Agreement of the Americas, which Brazil has been delaying.

More importantly, the U.S. trade representative must consider how such action might affect the all-important Doha round of global trade liberalization, now at a critical stage. Experts believe the Doha round could offer benefits to the world economy of between $250 billion and $750 billion.

President Bush, in his remarks on Mr. Portman’s nomination, even urged his nominee “to complete the Doha round negotiations within the World Trade Organization to reduce global barriers to trade.”

President Bush is very familiar with making tough, unpopular choices he believes are for the betterment of society. The president must believe Mr. Portman shares this inclination. And after Mr. Portman sorts out Brazil, let us hope he turns his attention to China, whose currency manipulation makes Brazil’s trade policy transgressions look minor.

Desmond Lachman is resident fellow at American Enterprise Institute and studies major emerging market economies and the role of multilateral lending institutions.

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