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EU-Brazil Relations at the World Trade Organization: Dispute Settlement as Leverage

Prof. Dr. Jan Wouters, Bregt Natens and David DHollander
Leuven Centre for Global Governance Studies, ! Leuven"

Table o !ontents
1. 2. Introduction .......................................................................................................................................... 1 Brazil, the EU and international trade .................................................................................................. 3 2.1. Economic weight ................................................................................................................................ 3 2.2. Brazil-EU trade and investment relations .......................................................................................... 4 3. 4. Brazil-EU interactions in W ! dis"ute settlement ............................................................................... # $everage %or Brazil vis-&-vis the EU ..................................................................................................... 12 4.1. Economic leverage ........................................................................................................................... 12 4.2. International and domestic mo'ilization and agenda-setting......................................................... 13 4.3. (udicialization o% W ! dis"ute settlement ...................................................................................... 1) ). *ecent develo"ments causing a loss o% leverage %or Brazil ................................................................ 1+ ).1. ).2. #. Emerging glo'al trends and develo"ments ................................................................................ 1, -evelo"ments undermining Brazil.s "osition vis-&-vis the EU ................................................... 2/

0oncluding remar1s ............................................................................................................................ 22

"# $ntrodu!tion
-uring the last decade, Brazil has 2oined the Euro"ean Union 3EU4 as one o% the "rinci"al "la5ers in the glo'al econom5. 6s the glo'al %inancial crisis and the Euro"ean sovereign de't crisis continue to sha1e the EU at is economic %oundations, Brazil.s has shown resilience against the economic downturn.1 7arallel to maintaining economic growth, Brazil has also 'een a'le to carve out a strategic "osition %or itsel% on the international scene, setting the tone and in%luencing "olic5 negotiations in several areas. Under the "residenc5 o% $ula da 8ilva, Brazil 'ecame an assertive glo'al "la5er. It re-orientated its %oreign
7ro%. -r. (an Wouters is (ean :onnet 0hair ad personam EU and ;lo'al ;overnance, <ull 7ro%essor o% International $aw and International !rganizations, -irector o% the $euven 0entre %or ;lo'al ;overnance 8tudies = Institute %or International $aw, Universit5 o% $euven and >isiting 7ro%essor at the 0ollege o% Euro"e 3Bruges4 and 8ciences 7o 37aris4? Bregt @atens and -avid -.Aollander are *esearch <ellows at the $euven 0entre %or ;lo'al ;overnance 8tudies, Universit5 o% $euven. 1 8ee 8. *ugir BBearish on BrazilC he 0ommodit5 8lowdown and the End o% the :agic :oment., D1 Foreign Affairs 3, 2/12, ,+? 6. Aurrell BBrazil and the @ew ;lo'al !rder., 1/D Current History +24, 2/1/, #/.
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"olic5 towards develo"ing countries, s"earheaded 8outh-8outh coo"eration and esta'lished new, largel5 in%ormal, strategic %ormations with other %ast growing world economies such as the B*I08 3Brazil, *ussia, India, 0hina and 8outh 6%rica4, the ;3 or IB86 3India, Brazil and 8outh 6%rica4, and B68I0 3Brazil, 8outh 6%rica, India and 0hina4.2 Brazil.s vocal advocac5 o% the B;lo'al 8outh. and its ca"acit5 to mo'ilize coalitions on international %ora has inevita'l5 come into con%lict with certain as"ects o% EU eEternal "olicies, %or eEam"le on com'ating climate change at the 0o"enhagen summit at the end o% 2//D, or '5 not su""orting Euro"ean "ositions in the U@ 8ecurit5 0ouncil 3e.g. '5 a'staining when U@80 *esolution 1D+3 on $i'5a was ado"ted4. 6t the same time, Brussels and Brasilia share a commitment to multilateralism and international rule-ma1ing. he (oint 6ction 7lan o% the EU-Brazil 8trategic

7artnershi" highlights this willingness to strengthen the multilateral s5stem. 3 8till, at the same time, Brazil is also a strong "ro"onent o% re%orming the current glo'al institutional architecture. <rom an international relations "ers"ective, Brazil acts as a Bmiddle-"ower., "re%erring multilateral solutions to international "ro'lems.4 he multilateral trading s5stem, em'odied '5 the World rade !rganization 3W !4, is one such area where Brazil and the EU have 'een interacting with each other.

his "a"er concentrates on the relationshi" 'etween the EU and Brazil at the W !, with a s"eci%ic %ocus on how Brazil uses the latter.s dis"ute settlement s5stem, and how this im"acts their trade relations. rade ties are at the heart o% EU-Brazil relationsC as stated '5 EU rade 0ommissioner Farel -e ;ucht, Bi% we can ma1e "rogress on our economic agenda we will 'e la5ing solid %oundations %or a stronger alliance across all areas..)

Interaction concerning trade 'etween the EU and Brazil ta1es "lace on several "olic5 levelsC multilaterall5 through the W ! %ramewor1? interregionall5 through the EU-:ercosur dialogue? and 'ilaterall5 through the dialogue as "art o% their strategic "artnershi". -es"ite these eEchanges and the increasing trade %lows 'etween Brazil and the EU, a com"rehensive and su'stantial trade agreement has not materialized. his "a"er "ro'es into the d5namics connecting these di%%erent levels o% engagement
8ee 8. Burges, Brazilian Foreign Policy After the Cold ar! Universit5 7ress o% <lorida 2//D? 7. >izentini, BBrazil.s 0ontem"orar5 <oreign 7olic5C 6n 6%%irmative 6genda., in W. Ao%meister and 8. >ogt, "#$ % Perceptions and Perspecti&es for "lo'al "o&ernance! Fonrad 6denauer 8ti%tung 2/11? 0. 6lden and :.6. >ieira B he @ew -i"lomac5 o% the 8outhC 8outh 6%rica, Brazil, India and rilateralism., 2# (hird orld Quarterly +, 2//), 1/++-1/D)? 7. 8otero, BBrazil.s *ising 6m'ition in a 8hi%ting ;lo'al Balance o% 7ower., 3/ Politics 1, 2/1/, +1-,1.? 7. -auvergne and -. <arias B he *ise o% Brazil as a ;lo'al -evelo"ment 7ower., 33 (hird orld Quarterly ), 2/12, D/3-D1+. 3 0ouncil o% the Euro"ean Union, BEuro"ean Union-Brazil 8trategic 7artnershi", (oint 6ction 7lan. Brussels, 4 !cto'er 2/11. 4 -. <lemes, BBrazilian <oreign 7olic5 in the changing World !rder., 1# )outh African *ournal of +nternational Affairs 2, 2//D, 1#3. ) F. -e ;ucht, BBrazil and the Euro"ean UnionC 6llies in a 0hanging World., 8"eech delivered at the International 0on%erence 8trategic 0hallenges in the EU-Brazil *elationshi", Brussels, + :a5 2/12.
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'etween the EU and Brazil. <irst, it argues that Brazil has ado"ted an assertive "osition in the W !, and "articularl5 in the use o% its dis"ute settlement s5stem, in order to generate leverage. G$everageG is understood here as encom"assing the %ollowing indirect e%%ects o% W ! dis"ute settlementC 3i4 economic leverage, 3ii4 international and domestic mo'ilization and agenda-setting, and 3iii4 2udicialization o% the W ! dis"ute settlement s5stem. 6s one o% the most %reHuent and success%ul users o% this s5stem, Brazil has 'een a'le to use it as a strategic tool, strengthening its "osition vis-&-vis the EU and the U.8. 8econd, it is su'mitted that recent develo"ments, inter alia related to "olitical econom5, have resulted in a loss o% leverage and wea1ened BrazilGs strategic "osition in trade negotiations.

he structure o% the "a"er is as %ollows. 8ection 2 s1etches the 'roader economic conteEt and nature o% EU-Brazil trade relations. 8ection 3 ela'orates how Brazil.s use o% the W ! dis"ute settlement s5stem has created leverage and how the EU interacts with Brazilian actions. 8ection 4 connects these d5namics to Brazil.s "osition in trade negotiations, "articularl5 those %or an EU-:ercosur agreement. 8ection ) discusses how recent develo"ments undermine Brazil.s 'argaining strength.

%# Brazil& the EU and international trade

%#"# E!onomi! 'eight
he decade o% growth eE"erienced '5 Brazil.s econom5 stands in contrast to the stagnation o% the Eurozone, and this trend is li1el5 to continue.# In terms o% ;-7, Brazil has 'ecome the seventh 'iggest econom5 in the world, and '5 2/1)-1# it is eE"ected to overta1e the UF and <rance according to I:< estimates.+ Brazil is not onl5 the largest econom5 in the 6mericas a%ter the U.8., it also has a signi%icantl5 higher overall ;-7 than the other B*I08 countries. 6lthough the 0hinese and Indian economies are growing at a %aster "ace, Brazil.s higher ;-7 "er ca"ita is em'odied '5 a 'road and growing middle class and a thriving consumer mar1et, leading a <inancial mar1et"lace.. , imes article to descri'e it as Bthe "er%ect

:oreover, Brazil.s %inancial res"onsi'ilit5, eEem"li%ied '5 its e%%orts to resist

h5"erin%lation and cur' its de't, has made it an attractive "lace %or %oreign direct investment and argua'l5 one o% the most Bh5"ed. ones among the emerging mar1et nations.D

he I:< "ro2ects health5 growth rates %or Brazil in 2/13, while the EU2+ is eE"ected to eE"erience a minimal decline. 8ee I:<, BWorld Economic !utloo1 U"dateC ;radual U"turn in ;lo'al ;rowth -uring 2/13.. + I:<, BWorld Economic !utloo1 U"dateC ;radual U"turn in ;lo'al ;rowth -uring 2/13.. , 6. ;.6. >alladIo, BEmergent Brazil and the 0urse o% the BAen.s <light., C,P) or-ing Document 3+D , 2/13, 3? $. $ucas and 8. 7earson, BBrazilC 0onsumer *h5thm., Financial (imes + (anuar5 2/13. D 8. *ugir BBearish on BrazilC he 0ommodit5 8lowdown and the End o% the :agic :oment., D1 Foreign Affairs 3, 2/12, ,+.

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Brazil.s sustained growth and the EU.s lac1 o% growth characterizes the 'road macro-economic conteEt o% their mutual trade relations, 'ut this image should 'e nuanced. While Brazil.s growth has "ro"elled its status on the international scene, the com'ined economic weight o% the EU :em'er 8tates still dwar%s the Brazilian econom5. he EU is the largest economic entit5 in the world, more than seven times the size o% Brazil in terms o% ;-7. 7utting things in "ers"ective '5 loo1ing at glo'al trade %lows, W ! statistics indicate that EU2+ economies account %or 3+J o% the total glo'al eE"ort value and a similar share o% total glo'al im"orts, whereas Brazil.s share is 1.3J and 1.4J res"ectivel5.1/ @onetheless, Brazil and the EU are im"ortant economic "artners to each other.

%#%# Brazil-EU trade and investment relations

he EU is Brazil.s largest %oreign direct investor and also its largest trading "artner, accounting %or 21.+J o% its total trade in 2/1/. 11 >ice versa, the economic weight o% Brazil in Euro"e has increased dramaticall5 over the last decade, with the value o% Brazilian im"orts dou'ling 'etween 2/// and 2//,. Brazil advanced %rom 'eing ran1ed the EU.s twel%th trading "artner in 2//#, to its ninth in 2/11.12 In the %irst hal% o% 2/11, the total volume o% EU-Brazil trade reached new record heights.13 Aowever, the rise o% 0hina as a trade "artner %or Brazil has led to a relative decline o% the EU.s "rime "osition. 0hina has alread5 sur"assed the U.8. to 'ecome Brazil.s second largest trading "artner, and when considering EU :em'er 8tates. trade se"aratel5, 0hina is Brazil.s 'iggest "artner. he increasing im"ortance o% 0hina notwithstanding, the EU is still central to Brazil.s trade "olic5 agenda.

wo 1e5 issues re"resent the most contentious as"ects o% the trade relations 'etween Brazil and the EU. <irst, the Brazilian and EU "ositions with regard to agriculture has u" to now "roven to 'e irreconcila'le. he ma2orit5 o% Brazilian eE"orts to the EU are agricultural "roducts, ma1ing u" a'out 42J o% eE"orts in 2/11.14 Brazil is the single 'iggest eE"orter o% agricultural "roducts to the EU, giving it a clear o%%ensive interest in this area. 6gricultural out"ut is a 1e5 com"onent o% the other :ercosur economies as well.
1/ 11

W !, +nternational (rade )tatistics #$.#, W ! 7u'lications 2/12, 24. Euro"ean 0ommission, BBrazilC EU Bilateral rade and rade with the World. htt"CKKtrade.ec.euro"a.euKdocli'KdocsK2//#Kse"tem'erKtradocL1133)D."d% accessed 2 6"ril 2/13. 12 Euro"ean 0ommission, BBilateral *elationsC 8tatistics. htt"CKKec.euro"a.euKtradeKcreating-o""ortunitiesK'ilateralrelationsKstatisticsK accessed 2 6"ril 2/13. 13 Euro"ean 0ommission, BBilateral *elationsC 8tatistics. htt"CKKec.euro"a.euKtradeKcreating-o""ortunitiesK'ilateralrelationsKstatisticsK accessed 2 6"ril 2/13. 14 Euro"ean 0ommission, BBrazilC EU Bilateral rade and rade with the World. htt"CKKtrade.ec.euro"a.euKdocli'KdocsK2//#Kse"tem'erKtradocL1133)D."d% accessed 2 6"ril 2/13.

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6ccordingl5, 'etter mar1et access %or Brazil.s = and :ercosur.s = agricultural eE"orts, mainl5 so5 'eans, co%%ee, sugar, meat, and dair5 "roducts, has 'een one o% the most sensitive issues in trade negotiations. hus, the Euro"ean 0ommission.s rade 8ustaina'ilit5 Im"act 6ssessment o% a "ossi'le EU-:ercosur trade agreement notes that Bthe overall e%%ect %or EU agricultural "roduction is eE"ected to 'e adverse. while the com"etitive agricultural sector in Brazil and other :ercosur countries would 'ene%it signi%icantl5.1) 6s is well-documented, certain 1e5 EU :em'er 8tates, a 'loc which, in this res"ect, is Bnotoriousl5 more "rotectionist than the U.8..,1# have shown unwillingness to com"romise on reducing tari%%s or increasing tari%% Huotas %or these "roduct grou"s, "rotecting Euro"ean %armers %rom eEternal com"etition. he EU.s agricultural "rotectionism has 'een o"enl5 challenged '5 Brazil on various occasions, 'oth through dis"ute settlement at the W ! and in the -oha *ound o% negotiations, where Brazil has "ushed %or a multilateral solution in this area.1+

6 second 1e5 issue in EU-Brazil trade dialogues has arisen %rom Brazil.s de%ensive interests in the manu%acturing sector. Aistoricall5, "rotecting the domestic econom5 %rom "otential trade-related vulnera'ilities has 'een central to Brazilian %oreign "olic5, and argua'l5, it still has one o% the most "rotected economies in the world.1, -es"ite economic li'eralization ta1ing o%% in the earl5 1DD/s, some manu%acturing sectors, nota'l5 the automo'ile sector, were a'le to maintain high levels o% "rotection.1D :ore recentl5, the increasing im"ortance o% agricultural and commodit5 eE"orts to the EU and 0hina has generated %ears concerning a "ossi'le de-industrialization o% the Brazilian econom5. his in turn has s"urred the *ousse%% administration to em"hasize its de%ensive interests in trade negotiations and ta1e additional "rotectionist measures, while neatl5 remaining within the 'oundaries o% its W ! o'ligations.2/ 6s EU eE"orts to Brazil consist "rinci"all5 o% manu%actured goods, "articularl5 machiner5 and trans"ort eHui"ment, these develo"ments have led the Euro"ean 0ommission to urge Brasilia to

0. Fir1"atric1 and 0. ;eorge, B rade 8ustaina'le Im"act 6ssessment o% the 6ssociation 6greement under @egotiation Between the Euro"ean 0ommunit5 and :ercosur, <inal overview rade 8I6 EU-:ercosur., Universit5 o% :anchester 2//D, 41. 1# 7. :esserlin, B he :ercosur-EU 7re%erential rade 6greementC 6 view %rom Euro"e., C,P) or-ing Document 3++, 2/13, 3. 1+ *. $eal-6rcas, B he Euro"ean Union and @ew $eading 7owersC owards 7artnershi" in 8trategic rade 7olic5 6reas., 32 Fordham +nternational /a0 *ournal 34), 2//,-2//D, 3,#. 1, :. -octor, BBrazil.s @ew ;overnment and radeC 6n Evaluation o% 7olic5 and 7er%ormance., 3, Critical )ociology #, 2/12, ,//? 8. *ugir BBearish on BrazilC he 0ommodit5 8lowdown and the End o% the :agic :oment., D1 Foreign Affairs 3, 2/12, ,+. 1D 7. :otta >eiga, BBrazil.s rade 7olic5C :oving 6wa5 %rom !ld 7aradigmsM., in $. Brainard and $. :artinez--iaz 3eds.4, Brazil as an ,conomic )uperpo0er1 2nderstanding Brazil3s Changing 4ole in the "lo'al ,conomy, Broo1ings Institution 2//D, 113=13#. 2/ :. -octor, BBrazil.s @ew ;overnment and radeC 6n Evaluation o% 7olic5 and 7er%ormance., 3, Critical )ociology #, 2/12, ,/3? 7. :esserlin, B he :ercosur-EU 7re%erential rade 6greementC 6 view %rom Euro"e., C,P) or-ing Document 3++, 2/13, 2.

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re%rain %rom "rotectionism.21 Im"ortantl5, the EU has also "ointed Brazil to its res"onsi'ilit5 to address the 'roader trend towards "rotectionism within the :ercosur 'loc1, "articularl5 concerning 6rgentina, which, as discussed 'elow 3infra! ).24, has ado"ted a "ro'lematic "osition in this regard.22

hese main o%%ensive and de%ensive trade interests have mar1ed EU-Brazil trade relations and not sur"risingl5, have resulted into cases at the W !. he5 are also a crucial o'stacle in EU-:ercosur trade negotiations. Aowever, recentl5 EU o%%icials and commentators have indicated that these traditional issues are not the main "ro'lem at hand, 'ut that the "ro'lem is one o% a changed "olitical climate 3see in more detail infra! ).24.

(# Brazil-EU intera!tions in WTO dispute settlement

Brazil has 'een a contracting "art5 to the ;6 , the "recursor to the W !, since (ul5 1D4,, onl5 months a%ter the multilateral trading s5stem was esta'lished. 6s the %i%th most active user, Brazil %reHuentl5 engaged in the ;6 dis"ute settlement s5stem.23 <rom the 'eginning, Huite some o% these dis"utes

involved the then Euro"ean Economic 0ommunit5.24 8ince the esta'lishment o% the W ! in 1DD) Brazil 'ecame a ver5 active user o% the W ! dis"ute settlement s5stem as well. 2) !n a total o% around 4)/ cases, it 'rought com"laints in 2# cases, was res"ondent in 14 and acted as a third "art5 in +4 more. he EU ma1es even more use o% the s5stem, acting as com"lainant in ,+ cases, as res"ondent in +3 and as a third "art5 in 131. 0onsidering these %igures and the reci"rocal im"ortance o% their economies %or each other, it is inevita'le that Brazil and the EU were to 'ring com"laints against each other. his occurred in %ive dis"utes leading to "anel re"orts and, as each o% them was also a""ealed, 6""ellate Bod5 36B4

Euro"ean 0ommission, BW ! rade 7olic5 *eview - EU urges Brazil to resist "rotectionism., 7ress *elease D :arch 2//D htt"CKKtrade.ec.euro"a.euKdocli'KdocsK2//DKmarchKtradocL1424+4."d% accessed + 6"ril 2/13. 6lso see Euro"ean 0ommission, B rade and Investment Barriers *e"ort 2/13., *e"ort %rom the 0ommission to the Euro"ean 0ouncil, 2, <e'ruar5 2/13. 22 F. -e ;ucht, BBrazil and the Euro"ean UnionC 6llies in a 0hanging World. 8"eech delivered at the International 0on%erence 8trategic 0hallenges in the EU-Brazil *elationshi", Brussels, + :a5 2/12. 23 ;. 8ha%%er, :. *atton 8anchez N B. *osen'erg, B he rials o% Winning at the W !C What $ies Behind Brazil.s 8uccessM., 41 Cornell +nternational /a0 *ournal 2, 2//,, 4/4-4/). 24 6s concerns ado"ted 7anel re"ortsC Brazilian Internal aEes, ;6 K07.3K42 - IIK1,1 31D4D4? Euro"ean 0ommunities - *e%unds on EE"orts o% 8ugar, 0om"laint '5 Brazil, $K)/11 - 2+8K#D 31D,/4? 8"ain - ari%% reatment o% Unroasted 0o%%ee, $K)13) 2,8K1/2 31D,14? (a"an - rade in 8emiconductors, $K#3/D - 3)8K11# 31D,,4 3Brazil was a third "art5 in this case4? United 8tates 0ountervailing -uties on @on-*u''er <ootwear %rom Brazil, 80:KD4 31D,D4? United 8tates - *estrictions on Im"orts o% 8ugar, $K#)14 - 3#8K331 31D,D4 3Brazil was a third "art5 in this case4? United 8tates - -enial o% :ost-<avoured-@ation reatment as to @on-*u''er <ootwear %rom Brazil, -81,K* - 3D8K12, 31DD24? Brazil - Im"osition o% 7rovisional and -e%initive 0ountervailing -uties on :il1 7owder and 0ertain 5"es o% :il1 %rom the Euro"ean Economic 0ommunit5, 80:K1+D, and 0orr.19 31DD44? E0 Im"osition o% 6nti--um"ing -uties on Im"orts o% 0otton Oarn %rom Brazil, 6-7K13+ 31DD)4. 2) his ha""ened right %rom the startC Brazil was the com"lainant in the %ourth W ! case, W K-84K6BK*, U8 - ;asoline.

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re"orts.2# 8iE dis"utes 'etween 'oth "arties were settled.2+ he "resent section illustrates how Brazil has attem"ted to in%luence and strengthen the rules-'ased nature o% the W ! dis"ute settlement s5stem and which role the EU "la5ed in this res"ect, and how Brazil.s success%ul use o% the dis"ute settlement s5stem resulted in increased leverage vis-&-vis the EU.

Brazil.s gradual shi%t towards a more o"en mar1et under the "residenc5 o% AenriHue 0ardoso coincided with the esta'lishment o% the W ! and its dis"ute settlement s5stem.2, Brazil 'uilt u" signi%icant domestic legal ca"acit5 to adeHuatel5 deal with issues o% W ! law and "olic5. his resulted in a B"luralist trade law communit5. 'ased on three "illarsC a s"ecialized W ! dis"ute settlement unit within the government, the W ! mission in ;eneva which coordinates with the W ! unit in Brazil, and coordination 'etween 'oth the W ! unit and the W ! mission and the "rivate sector, law %irms and economic consultants.2D :oreover, the countr5 'ene%its %rom strong trade associations which hel" 'usinesses mo'ilize, com"ile in%ormation and %und assistance to the government %or trade dis"utes i% necessar5.3/ Brazil has used this "luralist trade law communit5 intensivel5 to advance its interests.

6"art %rom 'eing an avid user o% the W ! dis"ute settlement s5stem, Brazil has also "ut %orth several "ro"osals at the W ! regarding the im"rovement o% its rules and "rocedures, %our o% which are highlighted here. he EU has "la5ed a signi%icant role in two o% these "rocedural re%orm issues as well. hese "ro"osals all seem to aim at strengthening the 2udicialization o% the s5stem 3see infra! 4.34.

<irst, 'oth Brazil and the EU have 'een involved in the contentious issue o% amicus curiae 'rie%s in W ! dis"ute settlement since 2///, the 5ear o% the %irst case in which the 6""ellate Bod5 36B4 "resented its legal reasoning on acce"ting such 'rie%s31, which it had acce"ted alread5 in an earlier case.32 In 2) % /ead
2#

W K-8#D, E0 - 7oultr5? W K-821D, E0 - u'e or 7i"e <ittings? W K-82##, E0 - EE"ort 8u'sidies on 8ugar? W K-82#D, E0 0hic1en 0uts? W K-8332, Brazil - *etreaded 5res. 2+ W K-8,1, Brazil - 6utos? W K-811#, Brazil - 7a5ment erms %or Im"orts? W K-81)4, E0 - 0o%%ee? W K-81,3, Brazil - Im"ort $icensing N Im"ort 7ricing? W K-82/D, E0 - 8olu'le 0o%%ee? W K-84/D, E0 - ;eneric -rugs. 2, ;. 8ha%%er, :. *atton 8anchez N B. *osen'erg, B he rials o% Winning at the W !C What $ies Behind Brazil.s 8uccessM., 41 Cornell +nternational /a0 *ournal 2, 2//,, 4/4. 2D 8ee eEtensivel5 ;. 8ha%%er, :. *atton 8anchez N B. *osen'erg, B he rials o% Winning at the W !C What $ies Behind Brazil.s 8uccessM., 41 Cornell +nternational /a0 *ournal 2, 2//,, 423-44#. 3/ ;. 8ha%%er, :. *atton 8anchez N B. *osen'erg, B he rials o% Winning at the W !C What $ies Behind Brazil.s 8uccessM., 41 Cornell +nternational /a0 *ournal 2, 2//,, 3DD-4/4 and 44#-4)#. 31 W K-813,K6BK*, U8 - $ead and Bismuth II, P3D-42. 8ee %or a detailed anal5sis o% the issue inter alia 7. 6la.i, B(udicial $o''5ing at the W !C he -e'ate over the Use o% 6micus 0uriae Brie%s and the U.8. EE"erience., 24 Fordham +nternational /a0 *ournal 1, 2///, #2-D4? 6. 6""leton, BAmicus Curiae 8u'missions in the Car'on )teel 0aseC 6nother *a''it %rom the 6""ellate Bod5.s AatM., 3 *ournal of +nternational ,conomic /a0 4, 2///, #D1-#DD? ;. :arceau N :. 8tillwell, B7ractical 8uggestions %or Amicus Curiae Brie%s Be%ore W ! 6d2udicating Bodies., 4 *ournal of +nternational ,conomic /a0 1, 2//1, 1))-1,+? 7. 0. :avroidis,

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and Bismuth ++, the U.8. argued in %avour o% the 6B acce"ting amicus curiae 'rie%s. he EU 3com"lainant in the case4 and Brazil 3as a third "art54 o""osed such acce"tance, 'oth arguing that the 6B could not acce"t such 'rie%s. Brazil also stated that "arties and third "arties are BuniHuel5 Huali%ied to ma1e legal arguments..33 @onetheless, the 6B %ollowed the reasoning o% the U.8. and held that the 6B 'ut also "anels ma5 acce"t amicus curiae 'rie%s when the5 %ind them use%ul and "ertinent 'ased on their right to dra%t their own wor1ing "rocedures, enshrined in 6rticle 1+.D -8U.34 It has 'een argued that the 6B.s "osition was an attem"t to manage and ma1e "u'lic an eEisting "ractice o% B2udicial lo''5ing.3), although it did so "erha"s in an Bactivist. wa5 '5 assuming a 'road inter"retation o% the wor1ing "rocedures it ado"ted.3# In a su'seHuent re"ort, the 6B even drew u" an additional "rocedure, a""lica'le onl5 to the case at hand, regulating the %iling o% amicus curiae 'rie%s.3+ his led man5 W ! :em'ers, including Brazil and the EU, to %iercel5 o'2ect this o"enness to acce"t 'rie%s.3, @onetheless, "anels and the 6B continue to acce"t and ta1e into consideration unsolicited amicus curiae 'rie%s.3D

8econd, in 2//3 Brazil "resented a "ro"osal to amend the W ! -is"ute 8ettlement Understanding 3-8U4, which esta'lishes the "rocedures o% the W ! dis"ute settlement s5stem. 6ccording to Brazil, the s5stem would 'e rendered more e%%icient and streamlined '5 a B%ast trac1. "anel or eE"edited "rocedure. 6ccording to the "ro"osal, in cases in which a :em'er.s measure has 'een %ound inconsistent with W ! law through the W ! dis"ute settlement s5stem, another :em'er whose rights are nulli%ied or im"aired '5 that same measure would have the right to an eE"edited "rocedure, %aster than the ordinar5 one. he com"lainant would %irst have to "rove that the measure is identical to the one %ound inconsistent with the issuing :em'er.s o'ligations. 6 se"arate %inding on that matter would determine whether, in case the measure is not the same, the ordinar5 "rocedure a""lies, or i% it is the

B6micus 0uriae Brie%s Be%ore the W !C :uch 6do 6'out @othing., in 6. von Bogdand5, 7. 0. :avroidis N O. :en5 3eds.4., Festschrift f5r Claus%Dieter ,hlermann, Fluwer International 2//2? 0. $. $im, B he Amicus Brie% Issue at the W !., 4 Chinese *ournal of +nternational /a0 1, 2//), ,)-12/? ;. :arceau N :. Aurle5, B rans"arenc5 and 7u'lic 7artici"ation in the W !C 6 *e"ort 0ard on W ! rans"arenc5 :echanisms., 4 (rade! /a0 6 De&elopment 1, 2/12, 1D-44. 32 W K-8),K6BK*, U8 - 8hrim", PD1. 33 W K-813,K6BK*, U8 - $ead and Bismuth II, P3+. 34 W K-813,K6BK*, U8 - $ead and Bismuth II, P3D. 3) 7. 6la.i, B(udicial $o''5ing at the W !C he -e'ate over the Use o% 6micus 0uriae Brie%s and the U.8. EE"erience., 24 Fordham +nternational /a0 *ournal 1, 2///, D4. 3# 6. 6""leton, BAmicus Curiae 8u'missions in the Car'on )teel 0aseC 6nother *a''it %rom the 6""ellate Bod5.s AatM., 3 *ournal of +nternational ,conomic /a0 4, 2///, #DD. 3+ W K-813)K6BK*, E0 - Aormones, P)2. 3, W K;0K:K#/, :inutes o% the :eeting Aeld in the 0entre William *a""ard on 22 @ovem'er 2///, 23 (anuar5 2//1, P41-4+ and D4-D#. 3D <or a detailed account o% "ractice, see ;. :arceau N :. Aurle5, B rans"arenc5 and 7u'lic 7artici"ation in the W !C 6 *e"ort 0ard on W ! rans"arenc5 :echanisms., 4 (rade! /a0 6 De&elopment 1, 2/12, 3/-34.

Draft: Do Not Quote

same, the eE"edited "rocedure.4/ 6s a result, a %ast trac1 "anel would reduce the time%rame and o"tions %or "olitical com"romise or di"lomatic tactics, there'5 "utting em"hasis on legal rules rather than di"lomatic "ower.41 6lthough the EU highlighted that a similar eE"edited "rocedure could 'e use%ul with regard to un2usti%ied initiations o% antidum"ing and countervailing dut5 investigations42, it did not ta1e a %ormal stance regarding Brazil.s "ro"osal. he "ro"osal does no longer a""ear to 'e on the ta'le.

6 third "oint concerns the relationshi" 'etween W ! disci"lines and currenc5 mani"ulations. 6lthough the 'est 1nown case is the one o% the U.8.. discontent with 0hina.s monetar5 "olic5, Brazil "la5s a central role in this de'ate. In 2/1/, Brazil.s <inance :inister ;uido :antega stated that the glo'al econom5 was in an Binternational currenc5 war. as develo"ed economies 3among which he re%erred eE"licitl5 to the EU4 were devaluating their currenc5 to im"rove their com"etitiveness.43 hese headlinegra''ing remar1s were the result o% an a""reciated real, which negativel5 in%luenced Brazil.s eE"ort ca"acit5 and augmented im"orts, "utting "ressure on domestic "roducers.44 riggered '5 these e%%ects, Brazil has raised its tari%%s on certain goods and im"osed anti-dum"ing measures on 0hinese steel.4) :oreover, Brazil too1 eEchange rate volatilit5 and currenc5 misalignment to the W ! and has activel5 tried to have the organization deal with the trade-distortive e%%ects o% these issues. 6lthough eEchange rate volatilit5 and undervaluation o% currencies do have an im"act on trade, it remains su'2ect to de'ate to what eEtent the W ! is or should 'e the %orum to address these issues.4# It was argued recentl5 that

@K-8KWK4)K*ev.1, 0ontri'ution o% Brazil to the Im"rovement o% the W ! -is"ute 8ettlement Understanding 0ommunication %rom Brazil, 4 :arch 2//3. he "ro"osal was discussed at a meeting o% the -is"ute 8ettlement Bod5 8"ecial 8ession, see @K-8K:KD, :inutes o% :eeting Aeld in the 0entre William *a""ard on 1+-1, <e'ruar5 2//3, 1 (ul5 2//3. 41 . 6. Qimmermann, B he -8U *eview 31DD,-2//44C @egotiations, 7ro'lems and 7ers"ectives., in -. ;eorgiev and F. >an der Borght 3eds.4, 4eform and De&elopment of the (7 Dispute )ettlement )ystem, 0ameron :a5 2//#, 4)) and 4)+-4),. 42 @K*$KWK#+, @egotiations on 6nti--um"ing and 8u'sidies - *e%lection 7a"er o% the Euro"ean 0ommunities on a 8wi%t 0ontrol :echanism %or Initiations, + :arch 2//3? @K*$KWK142, *e"lies '5 the Euro"ean 0ommunities to Ruestions on @K*$KWK#+ - S*e%lection 7a"er o% the Euro"ean 0ommunities on a 8wi%t 0ontrol :echanism %or InitiationsS, 2, (ul5 2//3. 43 I0 8-, BBrazilian <inance :inister Warns o% BInternational 0urrenc5 War., 14 Bridges ee-ly 33, 2D 8e"tem'er 2/1/. 44 I0 8-, BBrazil 7ushes <orward with 0urrenc5 -iscussion at W !., 1) Bridges ee-ly 32, 2, 8e"tem'er 2/11. 4) I0 8-, BBrazil 8la"s 6nti--um"ing aE on 0hinese 8teel Im"orts., 1) Bridges ee-ly 3/, 14 8e"tem'er 2/11. 4# 8ee, inter alia, A. (ung, B ac1ling 0urrenc5 :ani"ulation with International $awC Wh5 and Aow 0urrenc5 :ani"ulation 8hould 'e 6d2udicatedM., D 8anchester *ournal of +nternational ,conomic /a0 2, 2/12, 1,4-2//? *. 8taiger and 6. !. 851es, BT0urrenc5 :ani"ulationU and World rade., D orld (rade 4e&ie0 4, 2/1/, ),3-#2+? 0. Aerrmann, B-on OuanC 0hina.s T8elVshU EEchange *ate 7olic5 and International Economic $aw., in 0. Aerrmann and (.7. erhechte 3eds.4, ,uropean 9ear'oo- of +nternational ,conomic /a0 #$.$, 8"ringer 2/1/, 31-)1? <. Bergsten and (. ;agnon, B0urrenc5 :ani"ulation, the U8 Econom5, and the ;lo'al Economic !rder., Peterson +nstitute for +nternational ,conomics Policy Brief 12-2), 2/12, 2)".? :. Auchet-Bourdon and (. Forine1, B rade E%%ects o% EEchange *ates and their >olatilit5C 0hile and @ew Qealand., 7,CD (rade Policy Paper 13#, 2/12, 4+". Brazilian researchers have also shown a "articular interest in this matter. 8eeC 6. de $ima-0am"os and (. 6. ;aviria, 6 0ase %or :isaligned 0urrencies as 0ountervaila'le 8u'sidies, 4# *ournal of orld (rade ), 2/12, 1/1+-1/44? >. horstensen, E. :arWal and $. <erraz, BEEchange *ate :isalignments and International rade 7olic5C Im"acts on ari%%s., 4# *ournal of orld (rade 3, 2/12, )D+-#34? >. Bovarotti $o"es, BEEchange UndervaluationsC he 8olution :ust 0ome %rom the W !., 1 /atin American *ournal of +nternational (rade /a0 1, 2/13, 3,3-411? and >. horstensen, E. :arWal and $. <erraz, BEU-:ercosur rade *elationsC Im"acts o% EEchange *ate :isalignments on ari%%s., C,P) or-ing Document 3+2, 2/13, 1D".

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the W ! and the International :onetar5 <und 3I:<4 should not renounce res"onsi'ilit5 %or this issue considering the eEtraordinar5 monetar5 "olicies resulting %rom the economic and %inancial crisis, without eE"licitl5 indicating whether W ! andKor I:< disci"lines a""l5.4+ Brazil clearl5 %avours the %ormer and "re"ared two su'missions.4, :eanwhile, as attention had shi%ted %rom eEchange rate volatilit5 to currenc5 misalignment, Brazil issued a conce"tual note on the latter. In this note it holds that Bthe W ! should loo1 into wa5s to address their e%%ects in a s5stemic manner.. Brazil su'mits that no a""ro"riate remedies currentl5 eEist under ;6 law and there%ore suggests starting anal5tical wor1

to consider the need %or eEchange rate trade remedies.4D 6side %rom some remar1s on the a""reciation o% currencies in Eastern Euro"e, the EU remained silent on the matter, at least on the record)/, a"art %rom a statement '5 the <rench delegation welcoming the discussion o% the issue at the W !.)1 -es"ite <inance :inister :antega.s naming and shaming the EU as one o% the currenc5 mani"ulators, an overvalued currenc5 is a "ro'lem %or the EU as well. he euro a""reciated su'stantiall5 with res"ect to ma2or currencies, deteriorating the com"etitive "osition o% Euro"ean eE"orters. )2 Aowever, %rom o""osite views within the Euro area on "olitical intervention in the euro.s eEchange rate)3 it a""ears that the EU is not loo1ing to su'2ect the sensitive issue o% eEchange rate "olic5 to the scrutin5 o% the W ! dis"ute settlement s5stem.
4+

8ee %ormer U8 rade *e"resentative and %ormer World Ban1 "resident *. Qoellic1, BRuestions %or the World.s @eEt rade 0hie%., Financial (imes 1 6"ril 2/13, htt"CKKwww.%t.comKcmsKsK/K)%D%)ece-D23a-11e2-,)1%-//144%ea'dc/.html accessed 2 6"ril 2/13. 4, W KW; -<KWK)3, he *elationshi" 'etween EEchange *ates and International rade - 8u'mission '5 Brazil, 13 6"ril 2/11? W KW; -<KWK)#, he *elationshi" 'etween EEchange *ates and International rade - 8u'mission '5 Brazil, 2/ 8e"tem'er 2/11. 8u'seHuentl5, the W ! 8ecretariat issued a note on the su'2ectC W KW; -<KWK)+, he *elationshi" 'etween EEchange *ates and International radeC 6 *eview !% Economic $iterature, 2+ 8e"tem'er 2/11 and the u"date W KW; -<KWK#), he *elationshi" 'etween EEchange *ates and International radeC 6 *eview !% Economic $iterature, 1, (ul5 2/12. 4D W KW; -<KWK#,, he *elationshi" 'etween EEchange *ates and International rade - EEchange-*ate :isalignment and rade *emediesC 6 0once"tual @ote '5 Brazil, ) @ovem'er 2/12. )/ W KW; -<K:K24, *e"ort o% the :eeting o% 2+ and 2, :arch 2/12, 24 8e"tem'er 2/12, P24. )1 W KW; -<KWK#4, 8eminar at the W ! on International rade and EEchange *ates - 8tatement '5 the <rench -elegation, 2) :a5 2/12. )2 6. Evans-7ritchard, BEuro"e -rawn into ;lo'al 0urrenc5 Wars as 8lum" -ee"ens., (he (elegraph 1# (anuar5 2/13, htt"CKKwww.telegra"h.co.u1K%inanceK%inancialcrisisKD,/+/D2KEuro"e-drawn-into-glo'al-currenc5-wars-as-slum"-dee"ens.html, accessed 2, :arch 2/13 and 8. Fenned5 N 8. *ose, B*ussia 8a5s World Is @earing 0urrenc5 War as Euro"e (oins., Bloom'erg 1# (anuar5 2/13, htt"CKKwww.'loom'erg.comKnewsK2/13-/1-1#Krussia-sa5s-world-is-nearing-currenc5-war-as-euro"e-2oins.html, accessed 2, :arch 2/13? :. Aesse N 6. 8eith, B0alls %or 0hea" EuroC E0B 0aught in 0urrenc5-War 0ross%ire., Der )piegel 11 <e'ruar5 2/13, htt"CKKwww.s"iegel.deKinternationalK'usinessKec'-resisting-calls-to-chea"en-euro-as-currenc5-war-rages-a,,24#2.html, accessed 2D :arch 2/13. With regard to the 8wiss %ranc.s "eg to the euro, see -. ;ros, B6n !verloo1ed 0urrenc5 War in Euro"e., :o;%,2 11 !cto'er 2/12, htt"CKKwww.voEeu.orgKarticleKoverloo1ed-currenc5-war-euro"e, accessed 2, :arch 2/13. he issue is not new, as the 0hinese renmin'i "eg to the U.8. dollar, which is no longer in "lace, has created a""reciation with res"ect to the renmin'i %or all currencies which a""reciated with res"ect to the U.8. dollar, such as the Brazilian real and the euro. 8ee, %or eEam"le, *. E. 8chott, B0urrenc5 :ani"ulation = Aistor5 8hows that 8anctions 6re @eeded., ,conomic Policy +nstitute 7olic5 :emo #4, 2/1/, +". )3 I. Wishart, B0oncerns ;rowing over ;lo'al 0urrenc5 Wars., ,uropean :oice 14 <e'ruar5 2/13, htt"CKKwww.euro"eanvoice.comKarticleKim"ortedKconcerns-growing-over-glo'al-currenc5-wars-K+#41D.as"E, accessed 2, :arch 2/13.

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6 %ourth "oint concerns the "ro'lematiHue o% access to documents, a theme on which the EU has develo"ed a great amount o% case-law 'e%ore its 0ourt o% (ustice. 6t the 2, (anuar5 2/13 meeting o% the -is"ute 8ettlement Bod5 3-8B4, Brazil issued a statement on the manner in which "reliminar5 rulings have 'een issued as o% late. It su'mitted that an indiscriminate use o% "reliminar5 rulings in the a'sence o% "ro"er rules ma5 have s5stemic im"acts on dis"ute settlement "roceedings as a whole. :oreover, the "rocedural as"ects which are usuall5 the su'2ect o% reHuests %or "reliminar5 rulings are relevant rules o% the -8U.)4 6lthough it is not clear what s5stemic conseHuences Brazil re%erred to, it a""eared again in %avour o% a trans"arent rules-'ased a""roach to the W !.s dis"ute settlement s5stem. 8cholarshi" is divided on the Huestion whether "anels are well-suited to issue "reliminar5 rulings and how to a""roach them.)) In an5 case, Brazil.s concerns on "reliminar5 rulings were "artl5 echoed at the same meeting '5 the EU, which raised the issue o% third "art5 access to documents in "reliminar5 ruling "rocedures. While such rulings are usuall5 re"roduced in the "anel re"orts, this ma5 'e too late %or third "arties to antici"ate and act u"on them. here%ore, the Huestion arose whether "anels should issue the "reliminar5 ruling to third "arties. 0urrentl5, this is a discretionar5 decision '5 the "anel in the conteEt o% its right to organize wor1ing "rocedures, within the limits o% the -8U and more s"eci%icall5 6""endiE 3 thereo%. 7ractice shows that "anels sometimes do and sometimes do not issue the rulings.)# he same is true %or the "artici"ation o% third "arties in "reliminar5 "roceedings. !n this issue, a "anel has held that in such a case third "arties were to 'e invited to "artici"ate in the "roceedings u" to the time the "anel issued its "reliminar5 ruling.)+ 6 di%%erent "anel, in a case where Brazil was the com"lainant, held that third "arties should have access to the "arties. initial written comments and an5 written comments the "arties ma5 ma1e on each other.s comments.),

he matter continues to 'e contested as, in the a%orementioned -8B meeting, the EU 3and 6ustralia and 0hina4 stated that third "arties should 'e given access to in%ormation su'mitted '5 the "arties and

he minutes o% this meeting were still restricted at the time o% writing. 6 summar5 o% the meeting was "re"ared '5 the W ! 8ecretariat and is availa'le at htt"CKKwww.wto.orgKenglishKnewsLeKnews13LeKds'L2,2an13Le.htm. )) 8ee %or eEam"le a current 6""ellate Bod5 mem'er who, "rior to his a""ointment, indicated dealing with "reliminar5 rulings as an issue o% the current s5stem o% ad hoc "anelsC 8. W. 0hang, B0omment on a W ! 7ermanent 7anel Bod5., # *ournal of +nternational ,conomic /a0 1, 2//3, 221. 8ee %or a di%%erent view '5 an eE"erienced "anellist, :. 0artland, B0omment on a W ! 7ermanent 7anel Bod5., # *ournal of +nternational ,conomic /a0 1, 2//3, 21#. )# 8ee %or eEam"le W K-81)#K*, ;uatemala - 0ement II, P,.11, in which the third "arties were issued the "reliminar5 ruling, and W K-82D1K*, W K-82D2K*, W K-82D3K*, E0 - 6""roval and :ar1eting o% Biotech 7roducts, P+.4+, in which onl5 the "arties did. )+ W K-82+#K*, 0anada - Wheat EE"orts and ;rain Im"orts, P#.# and %ootnote 3. ), W K-82#+K* U8 - U"land 0otton, P+.3.

)4

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should 'e given the o""ortunit5 to comment.)D he EU.s statement should not come as a sur"rise, as it has long 'een addressing third "art5 rights to access to documents. <or eEam"le, the EU has "reviousl5 reHuested "reliminar5 rulings giving third "arties access to all written su'missions o% the "arties in 6rticle 21.) -8U "roceedings. Aowever, these reHuests were denied '5 "anels in various instances.#/ he EU "ersevered and %ound a "anel which endorsed its reasoning.#1 Aowever, the %inding was not %ollowed '5 another "anel in a su'seHuent case.#2 o settle the matter, the 6B stated that the relevant "rovision o% the -8U, 6rticle 1/.3, is to 'e inter"reted as meaning that third "arties shall 'e given all written su'missions made "rior to the %irst meeting o% the "anel.#3 In "ractice, this means that onl5 the %irst written su'missions o% the com"lainant and the res"ondent are to 'e issued to third "arties, as the re'uttal su'missions o% 'oth "arties are t5"icall5 onl5 %iled a%ter the %irst meeting o% the "anel.#4

)# Leverage or Brazil vis-*-vis the EU

his section esta'lishes how the a'ove interactions in the area o% W ! dis"ute settlement ma5 have increased Brazil.s leverage vis-&-vis the EU in three res"ectsC 3i4 economic leverage, 3ii4 international and domestic mo'ilization and agenda-setting, and 3iii4 2udicialization o% the W ! dis"ute settlement s5stem.

)#"# E!onomi! leverage

<irst o% all, the active use o% the dis"ute settlement s5stem and concurrent domestic ca"acit5 'uilding has made Brazil a ver5 success%ul W ! com"lainant, who is a'le to 'ring and win cases against highl5 contested EU measures, es"eciall5 in the conteEt o% the EU.s agricultural "olic5.#) he outcome in ,C % ,;port )u'sidies on )ugar##! a "rominent case against essential measures o% EU sugar "olic5, induced signi%icant sectoral changes with "ositive e%%ects %or the Brazilian econom5. 6%ter the 6B %ound the EU.s eE"ort su'sidies on sugar inconsistent with the W ! 6greement on 6griculture, the EU.s sugar "olic5
)D

he minutes o% this meeting were still restricted at the time o% writing. 6 summar5 o% the meeting was "re"ared '5 the W ! 8ecretariat and is availa'le at htt"CKKwww.wto.orgKenglishKnewsLeKnews13LeKds'L2,2an13Le.htm. #/ W K-81,K*W, 6ustralia - 8almon, P+.)-+.#? W K-812#K*W, 6ustralia - 6utomotive $eather II, P3.D. #1 W K-81/3K*W, W K-8113K*W, 0anada - -air5, P2.34. #2 W K-81/,K*W , U8 - <80, P#.1-#.3. #3 W K-81/,K6BK*W, U8 - <80, P24). #4 6""endiE 3 to the -8U, P12. #) 8ee W K-8#DK6BK*, E0 - 7oultr5, in which a Euro"ean measure which disadvantaged eE"orted "oultr5 %rom Brazil, was deemed inconsistent with 6rticle ).) o% the 6greement on 6griculture? W K-82#DK6BK*, E0 - 0hic1en 0uts, in which a modi%ication o% the EU.s 0om'ined @omenclature altered the tari%%s %or salted chic1en cuts, leading to less %avoura'le treatment %or "oultr5 within this categor5 than the treatment awarded in the EU.s tari%% concessions? and W K-82##K6BK*, E0 EE"ort 8u'sidies on 8ugar, also discussed in this section. ## W K-82##, E0 - EE"ort 8u'sidies on 8ugar.

12

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was su'stantiall5 re%ormed.#+ 6s a result o% these re%orms, the EU 'ecame a net im"orter o% sugar. Even though the EU im"orts mainl5 %rom 6%rican, 0ari''ean and 7aci%ic states and least develo"ed countries which ma5 'ene%it %rom dut5-%ree Huota-%ree access to the EU mar1et, its altered sugar "olic5 %avours Brazil as the world.s largest sugar "roducer and eE"orter.#, hese 'ene%its eEtend the direct outcome o% the dis"ute, and thus create economic leverage %or Brazil. his case, as well as the dis"ute against U.8. eE"ort su'sidies %or u"land cotton, which was 'rought 'e%ore the W ! on the same da5#D, were also instrumental in a 'roader sense and enhanced Brazil.s "osition as a com"lainant.

)#%# $nternational and domesti! mobilization and agenda-setting

his relates to a second "oint. hrough its success as a W ! litigator, Brazil was a'le to "rominentl5 and 'luntl5 "ut the EU.s restrictive agricultural "olic5 measures on the international agenda. his

strengthened the "osition o% o""onents o% agricultural su'sidies 'oth within the EU and amongst other W ! :em'ers.+/ 0onseHuentl5, international "ressure mounted on the EU regarding one o% the most contentious issues o% its trade "olic5. In return, this gave more weight to Brazil.s reHuest to diminish or end EU eE"ort su'sidization o% agricultural "roducts. 8imilar d5namics can 'e seen in a "atent "rotection case lodged '5 the U.8. against Brazil, in which the latter claimed that the contested measures were necessar5 to com'at an AI> e"idemic.+1 6%ter initial international outrage regarding the relationshi" 'etween trade and access to medicine and a s5m'olicall5 interesting o"ening o% the United @ations ;eneral 6ssem'l5 on AI>K6ids, the case was settled.+2 Aere too, international agenda-setting "roved valua'le %or Brazilian trade "olic5. With res"ect to the EU and 'uilding on their "osition as "ro"onents o% access to generic medicines+3, Brazil and India lodged two se"arate W ! com"laints against the EU and the @etherlands regarding Indian "roduced generic drugs on their wa5 to Brazil which were seized
Euro"ean 0ommission, B8ugar., 2/12, htt"CKKec.euro"a.euKagricultureKsugarKindeELen.htm accessed 2 6"ril 2/13. -. Brough, BBrazil 8ugar, Ethanol EE"orts at 7ea1s I8!G, 4euters , (anuar5 2/13, htt"CKKwww.reuters.comKarticleK2/13K/1K/,K'razil-sugar-ethanol-idU8$)ED0,6D82/13/1/, accessed 2 6"ril 2/13. #D W K-82#+, U8 - U"land 0otton. +/ ;. 8ha%%er, :. *atton 8anchez N B. *osen'erg, B he rials o% Winning at the W !C What $ies Behind Brazil.s 8uccessM., 41 Cornell +nternational /a0 *ournal 2, 2//,, 421-422. +1 W K-81DD, Brazil - :easures 6%%ecting 7atent 7rotection. +2 7. 0a"ella, BBrazil wins AI> -rug 0oncession %rom U8., (he "uardian 2# (une 2//1, htt"CKKwww.guardian.co.u1K'usinessK2//1K2unK2#Kinternationaleducationnews.medicalscience accessed 2 6"ril 2/13. Brazil.s counterclaim, W K-8224, United 8tates - U8 7atents 0ode, which is o%%iciall5 still not resolved, was uno%%iciall5 settled as well. 8ee O. <u1anaga, BEn%orcing *I78C 0hallenges o% 6d2udicating :inimum 8tandards 6greements., 23 Ber-eley (echnology /a0 *ournal 2//,, ,,4 at note 112. +3 8ee (. Wouters, I. ;oddeeris, B. @atens and <. 0iortuz, B8ome 0ritical Issues in EU-India <ree rade 6greement @egotiations., /eu&en Centre for "lo'al "o&ernance )tudies or-ing Paper 1/2, 2/13, 14-1#. India has reached an interim agreement with the EU on the matter, BB0, BIndia-EU ;eneric -rug *ow G*esolvedG at Brussels 8ummit., BBC Ne0s ,urope 1/ -ecem'er 2/1/ htt"CKKwww.''c.co.u1KnewsKworld-euro"e-11D+1)#, accessed 2 6"ril 2/13.
#, #+

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when in transit in the @etherlands.+4 he measure "rovo1ed comments %rom inter alia siEteen W ! :em'ers, "u'lic health advocates, glo'al health care interest grou"s and @;!s.+) In the end, Brazil was a'le to "ut its interests in a "ositive da5light in com"arison to the EU.s inter"retation o% intellectual "ro"ert5 "rotection and trade rules.

Brazil.s e%%orts to 'ring such high-"ro%ile contentious issues 'e%ore the W !.s dis"ute settlement s5stem led to increased leverage %or it as a negotiator in the -oha *ound, rea%%irming its leadershi" in the B;-2/ o% develo"ing countries., an in%ormal coalition which it had co-esta'lished with India and 8outh 6%rica.+# :oreover, Brazil.s harder negotiation "osition during the $ula administration vis-&-vis the EU in the -oha *ound was argua'l5 one o% the main reasons wh5 Brussels decided to esta'lish the EU-Brazil 8trategic 7artnershi".++

6"art %rom these eEternal as"ects, W ! litigation also contains a domestic leverage dimension %or Brazil. <irst o% all, and im"ortantl5, com"laints have given rise to increased domestic interest and su""ort %rom well-organized sectoral interest grou"s and "rivate sector actors. heir trade 1nowhow and "olitical and %inancial mo'ilization resulted in interactions with the government, hel"ing Brazil to win cases and 'uild more ca"acit5.+, 8econd, a num'er o% s5m'olicall5 im"ortant cases in which Brazil acted as a res"ondent have incited attention in "u'lic o"inion. he most s5m'olic dis"ute settlement saga %ollowed a

com"laint o% 0anada against Brazil %or alleged aircra%t su'sidies, %ollowed '5 two com"laints '5 Brazil against 0anada on the same su'2ect.+D 6t %irst, 0anada.s claim was success%ul. Aowever, in the cases 'rought '5 Brazil, the 0anadian su'sidies were deemed inconsistent with W ! law as well. 8hortl5 a%ter this decision, 0anada 'anned Brazilian 'ee% on the account o% alleged ris1s o% B8E or mad cow disease.,/
+4

W K-84/,, EU and a :em'er 8tate - 8eizure o% ;eneric -rugs in ransit, 'rought '5 India and W K-84/D, EU and @etherlands - 8eizure o% ;eneric -rugs in ransit, 'rought '5 Brazil. +) I0 8-, B-utch 8eizure o% ;eneric -rugs 8"ar1s 0ontrovers5., 13 Bridges ee-ly 3, 2, (anuar5 2//D? I0 8-, BBrazil 8lams EU %or 8eizure o% ;eneric -rugs., 13 Bridges ee-ly 4, 4 <e'ruar5 2//D? I0 8-, BEuro"ean ;eneric -rug 8eizures a1e 0entre 8tage at *I78 0ouncil :eeting., 13 Bridges ee-ly 21, 1/ (une 2//D? I0 8-, BBrazil, India 0hallenge ;eneric -rug -etentions., 14 Bridges ee-ly 1+, 12 :a5 2/1/? I0 8-, BEU 0hallenged on ;enerics 8eizures., 14 Bridges 3, 8e"tem'er 2/1/. +# ;. 8ha%%er, :. *atton 8anchez N B. *osen'erg, B he rials o% Winning at the W !C What $ies Behind Brazil.s 8uccessM., 41 Cornell +nternational /a0 *ournal 2, 2//,, 421-422. ++ E. :esHuita 0eia,. he new a""roach o% the Euro"ean Union towards :ercosurC what is 'ehind the launch o% the strategic "artnershi" with Brazil and what are its chances o% 'eing e%%ectiveM., #1 )tudia Diplomatica 4, 2//,, ,1. +, ;. 8ha%%er, :. *atton 8anchez N B. *osen'erg, B he rials o% Winning at the W !C What $ies Behind Brazil.s 8uccessM., 41 Cornell +nternational /a0 *ournal 2, 2//,, 4,1. <or a case stud5 on 0hina, see 7. $. Asieh, B0hina.s -evelo"ment o% International Economic $aw and W ! $egal 0a"acit5 Building., 13 *ournal of +nternational ,conomic /a0 4, 2/1/, DD+. +D W K-84#, Brazil - 6ircra%t? W K-8+/, 0anada - 6ircra%t? W K-8222, 0anada - 6ircra%t 0redits and ;uarantees. 8ee ;. 8ha%%er, :. *atton 8anchez N B. *osen'erg, B he rials o% Winning at the W !C What $ies Behind Brazil.s 8uccessM., 41 Cornell +nternational /a0 *ournal 2, 2//,, 414-41# %or an account o% these matters. ,/ I0 8-, B0anadian Ban on Brazilian Bee% Im"orts Escalates rade Battle., ) Bridges ee-ly ), 13 <e'ruar5 2//1.

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his caused a stir among Brazilian trade unions and %armers and heated anti-0anadian actions '5 the Brazilian "u'lic.,1 he result o% such internal leverage was increased "olitical and %inancial mo'ilization in %avour o% Brazil.s trade interests. @onetheless, indirect domestic %actors do not seem to "la5 a vital role in Brazil.s "osition in trade negotiations, even though their in%luence is signi%icant.,2

)#(# +udi!ialization o WTO dispute settlement

Brazil.s active use o% the dis"ute settlement mechanism and its "ro"osals %or re%orm contri'ute to %ocusing the W ! dis"ute settlement s5stem more on rules and hence less on economic "ower. (udicialization aims at increasing "redicta'ilit5 and trans"arenc5 and allows economicall5 wea1er "arties to 'ring com"laints against stronger economies = as t5"i%ied '5 the catch"hrase Bright "erseveres over might..,3 he s"lit 'etween 2udicialization and "oliticization has 'een re%erred to as Bthe %undamental controvers5. in negotiations on amending the dis"ute settlement s5stem.,4 6lthough Brazil can hardl5 'e considered a small econom5 and one ma5 there%ore as1 what interest it has in 2udicialization, it must 'e noted that its trade dis"utes mainl5 involve the U.8. and the EU. hese actors are not onl5 Brazil.s main trading "artners 'ut also the two largest economies in the world. 6dditionall5, a rules-'ased orientation im"lies that legal ca"acit5 is crucial to ma1e an o"timal use o% the com"leE and eE"ensive s5stem.,) 0om'ining these two %actors, it 'ecomes clear wh5 Brazil is a %ierce "ro"onent o% an increased 2udicialization o% the W ! dis"ute settlement s5stem.,#

Brazil.s use o% the W ! dis"ute settlement s5stem and its re%orm "ro"osals illustrate its interest in the 2udicialization o% the s5stem. 6n active use o% the dis"ute settlement s5stem allows the "anels and 6B to
I0 8-, B0anada Under 7ressure to *evo1e Ban on Brazilian Bee%., ) Bridges ee-ly #, 2/ <e'ruar5 2//1? (. *ich, B em"ers <lare and $osses :ount 6%ter 0anada Bans Brazil Bee%., (he Ne0 9or- (imes 2/ <e'ruar5 2//1, htt"CKKwww.n5times.comK2//1K/2K2/K'usinessKtem"ers-%lare-and-losses-mount-a%ter-canada-'ans-'razil-'ee%.htmlMsrcX"m accessed 2 6"ril 2/13. ,2 6. Aurrell N 6. @arli1ar, B6 @ew 7olitics o% 0on%rontationM Brazil and India in :ultilateral rade @egotiations., 2/ "lo'al )ociety 4, 2//#, 433. ,3 (. $acarte-:urY N 7. ;a""ah, B-evelo"ing 0ountries and the W ! $egal and -is"ute 8ettlement 85stemC 6 >iew %rom the Bench., 3 *ournal of +nternational ,conomic /a0 3, 2///, 4//-4/1 3original em"hasis4. ,4 . 6. Qimmermann, B he -8U *eview 31DD,-2//44C @egotiations, 7ro'lems and 7ers"ectives., in -. ;eorgiev and F. >an der Borght 3eds.4, 4eform and De&elopment of the (7 Dispute )ettlement )ystem, 0ameron :a5 2//#, 4))-4#,. ,) :. $. Busch, E. *einhardt N ;. 8ha%%er, B-oes $egal 0a"acit5 :atterM 6 8urve5 o% W ! :em'ers., , orld (rade 4e&ie0 4, 2//D, es"eciall5 "". ))D-)#3 in which the authors re%er to various other studies on the im"act o% legal ca"acit5 in W ! law. ,# :ore so, these two %actors are to 'e seen in a direct relationshi" with the 2udicialization o% the W ! dis"ute settlement s5stem. 8ee -. -e BiZvre, B$egislative and (udicial -ecision :a1ing in the World rade !rganization., in :. Foenig-6rchi'ugi and :. Q[rn 3eds.4, Ne0 8odes of "o&ernance in the "lo'al )ystem: ,;ploring Pu'licness! Delegation and +nclusi&eness, 7algrave :acmillan 2//#, )1. 8ee more generall5C ;. 8ha%%er, BAow to :a1e the W ! -is"ute 8ettlement 85stem Wor1 %or -evelo"ing 0ountriesC 8ome 7roactive -evelo"ing 0ountr5 8trategies., in I0 8-, )ustaina'le De&elopment and (rade +ssues 4esource Paper ), 2//3, 1-#).
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inter"ret W ! law, which reduces the sco"e %or "olitical arguments as economic and legal arguments 'ecome more im"ortant.,+ 7artici"ation hel"s sha"ing W ! law '5 in%luencing how the ga"s in the W ! agreements are %illed '5 the "anels and 6B. his in turn a%%ects the 'argaining "osition o% a :em'er in su'seHuent negotiations.,, he relative "ower o% an economicall5 more "ower%ul "art5 ma5 decline as a result o% the other "art5.s in%luence on how legal ga"s are 'ridged. Aowever, in the case o% Brazil and the EU, 'oth a""ear to 'e on the same side o% this argument. 6"art %rom its "ositions on re%orm discussed in the "revious section, the EU also "ro"osed increasing eEternal trans"arenc5 ,D and strengthening third "art5 rightsD/ in order to reduce the "ower element in the W !.s dis"ute settlement s5stem.D1 his 'eing said, the EU has also initiated a "ro"osal %or re%orm which at %irst glance ma5 tend to strengthen the "ower-orientation o% the dis"ute settlement s5stem. he "ro"osal concerns an automatic la"se and easier withdrawal o% reHuests %or consultations or %or the esta'lishment o% "anels.D2 his ma5 'e seen as %acilitating a tactical use o% such reHuests %or the "ur"ose o% negotiations.D3 @onetheless, considering that at the time o% writing 143 dis"utes are in consultationsD4 and that in 22 cases a "anel has 'een esta'lished 'ut not 5et com"osedD) on a total o% 4)# dis"utes, current "rocedures have clearl5 not restrained :em'ers %rom tacticall5 reHuesting consultations and, to a lesser eEtent, the esta'lishment o% a "anel. In that sense, the EU.s "ro"osal does not reduce the 2udicialization o% the dis"ute settlement s5stem. he %oregoing does not mean that Brazil or the EU re%rain %rom using "ower "olitics in trade dis"utes. Brazil does use the threat o% W ! dis"ute settlement vis-&-vis the EU %rom time to time. 6"art %rom the

(. Wouters N :. Burna5, B0hina 6nd he Euro"ean Union in the World rade !rganizationC $iving 6"art ogetherM. in (. Wouters, . de Wilde, 7. -e%raigne and (.0 -e%raigne 3eds.4, China! the ,uropean 2nion and the 4estructuring of "lo'al "o&ernance, Edward Elgar 2/12, ,). ,, ;. 8cha%%er, B-evelo"ing 0ountr5 Use o% the W ! -is"ute 8ettlement 85stemC Wh5 it :atters, the Barriers 7osed., in (. Aartigan 3ed.4, (rade Disputes and the Dispute )ettlement 2nderstanding of the (7: An +nterdisciplinary Assessment, Emerald 2//D, 1+2. ,D @K-8KWK1, 0ontri'ution o% the Euro"ean 0ommunities and its :em'er 8tates to the Im"rovement and 0lari%ication o% the W ! -is"ute 8ettlement Understanding - 0ommunication %rom the Euro"ean 0ommunities, 13 :arch 2//2, #-+. D/ @K-8KWK3,, 0ontri'ution o% the Euro"ean 0ommunities and its :em'er 8tates to the Im"rovement and 0lari%ication o% the W ! -is"ute 8ettlement Understanding - 0ommunication %rom the Euro"ean 0ommunities, 23 (anuar5 2//3, P1)-1#. D1 8ee, %or a categorisation o% "ro"osals %or re%orm, . 6. Qimmermann, B he -8U *eview 31DD,-2//44C @egotiations, 7ro'lems and 7ers"ectives., in -. ;eorgiev and F. >an der Borght 3eds.4, 4eform and De&elopment of the (7 Dispute )ettlement )ystem, 0ameron :a5 2//#, 4##. D2 @K-8KWK1, 0ontri'ution o% the Euro"ean 0ommunities and its :em'er 8tates to the Im"rovement and 0lari%ication o% the W ! -is"ute 8ettlement Understanding - 0ommunication %rom the Euro"ean 0ommunities, 13 :arch 2//2, D. D3 . 6. Qimmermann, B he -8U *eview 31DD,-2//44C @egotiations, 7ro'lems and 7ers"ectives., in -. ;eorgiev and F. >an der Borght 3eds.4, 4eform and De&elopment of the (7 Dispute )ettlement )ystem, 0ameron :a5 2//#, 4#3. D4 !% which onl5 a'out 3/ stem %rom the last %ive 5ears and can thus 'e eE"ected to "ossi'l5 lead to the esta'lishment o% a "anel. D) !% which a'out hal% %or more than %ive 5ears.

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dis"ute regarding the seizure o% generic drugs mentioned a'ove, it threatened to lodge a W ! com"laint i% EU environmental standards would harm Brazilian ethanol eE"orts.D#

When considering the im"act o% 2udicialization o% the W ! dis"ute settlement s5stem on the interaction 'etween Brazil and the EU, it should also 'e noted that the EU, one o% two most eE"erienced users o% the s5stem, has eHuall5 'uilt u" strong legal ca"acit5 in the W !. :oreover, whether %or ideological, cultural, historical or strategic reasons, the EU also %avours the 2udicialization o% the W ! dis"ute settlement s5stem. his is "erha"s not sur"rising, as even %rom the "ers"ective o% "ower "olitics, this a""roach entails less uncertaint5 on the outcome o% dis"utes and alleviates "otential economic "ower loss. Aowever this ma5 'e, the increasing im"ortance o% rules over "ower ma5 onl5 shi%t the concern, as su'stantial legal ca"acit5 ma5 serve as a deterrent in a similar wa5 as economic "ower.D+ @onetheless, the %ormer ma5 "erha"s 'e solved more easil5 than the latter.D, In this sense, Brazil ma5 serve as a model %or newl5 emerging economies as it a""ears to have strengthened its trade "osition through legal ca"acit5-'uilding whilst gaining economic "ower.

,# Re!ent developments !ausing a loss o leverage or Brazil

he "revious sections eE"lained how Brazil and the EU are 'oth committed to strengthening the W ! dis"ute settlement s5stem.s rules-'ased a""roach, and how Brazil has success%ull5 created leverage though using the s5stem to %urther its economic interests, strengthen its "osition in trade negotiations and consolidate its image o% an assertive new glo'al "la5er. Aowever, this leverage might 'e dam"ened '5 several trade d5namics that currentl5 sha"e international trade and commerce.

I0 8-, B-oha *ound at 0rossroads., 12 Bridges 3, :a5 2//,, 1D. Brazil had a similar trade row with the U.8. on ethanol, see inter alia I0 8-, BEthanolC to ari%% or @ot to ari%%M., 14 Bridges 2, :a5 2/1/ and I0 8-, B<uture o% U8 Ethanol 8u'sid5, Im"ort aE under *eview., 14 Bridges ee-ly 43, D -ecem'er 2/1/. his led to a reHuest %or consultations in W K-83#), U8 6gricultural 8u'sidies. he com"laint was %ramed 'roader than ethanol. he "anel was esta'lished, however 5ears later it has not 'een com"osed, indicating that a mutual agreement was %ound. he U.8. ethanol taE credit, one o% the targeted measures, was ended in 2/11. 8ee $. Far" N :. 8tevenson, B;reen Industrial 7olic5C rade and heor5., orld Ban- Policy 4esearch or-ing Paper #23,, 2/12, 12-13. In this res"ect, also see W K-8443, Euro"ean Union and a :em'er 8tate - 0ertain :easures 0oncerning the Im"ortation o% Biodiesels in which 6rgentina 'rought a com"laint against 8"ain and the EU attac1ing the 8"anish im"lementation o% the EU regulator5 %ramewor1 %or energ5 %rom renewa'le sources. D+ :. $. Busch, E. *einhardt N ;. 8ha%%er, B-oes $egal 0a"acit5 :atterM 6 8urve5 o% W ! :em'ers., , orld (rade 4e&ie0 4, 2//D, )++. D, . 8attler N . Bernauer, B;ravitation or -iscriminationM -eterminants o% $itigation in the World rade !rganisation., )/ ,uropean *ournal of Political 4esearch 2, 2/11, 1#3.

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,#"#

Emerging global trends and developments

<irst, the stalemate at the W !.s -oha *ound o% negotiations is a disa""ointing outcome %or Brazil, as it has 'een one o% the %ocal "oints o% its trade negotiation strateg5 %or more than a decade.DD 6s illustrated a'ove, Brazil uses the dis"ute settlement s5stem to success%ull5 target the "rotectionist agricultural "olicies o% develo"ed countries, strengthening its negotiating "osition in the -oha *ound, where it initiall5 "la5ed an assertive role. Brazil and the EU have moderated their demands and ado"t a constructive a""roach in the *ound, 'ut India and the U.8. still cling to their initial "ositions. o a certain eEtent, this neutralizes the 1e5 role o% Brazil and the EU in these negotiations.1// 6t the 8iEth EU-Brazil 8ummit in (anuar5 2/13, 'oth "artners agreed on the Bneed to accelerate negotiations in ;eneva. and reiterated their commitment to concluding the -oha *ound. 1/1 -es"ite this rea%%irmation = an evergreen in all statements under the EU-Brazil 8trategic 7artnershi" - 'oth "artners seem una'le to reinvigorate the -oha "rocess.

8econd, at the same time Brazil.s overall trade negotiating "osition is 'eing undermined '5 a num'er o% 'roader d5namics outside the W ! %ramewor1. his includes the in%ormal consultations on a "lurilateral %ree trade agreement addressing solel5 services, the International 8ervices 6greement or rade in 8ervices 6greement. his initiative was launched '5 a grou" o% countries in 2/12 in an e%%ort to ma1e "rogress on services li'eralization outside the B"aral5zed. -oha %ramewor1. @egotiations are meanwhile entering the %ormal stage.1/2 Brazil and other emerging economies are not involved, though, and have o"enl5 criticized this initiative %or com"romising "rogress in the -oha *ound and not meeting the standards o% trans"arenc5 and inclusiveness.1/3

DD

1//

6. ;.6. >alladIo, BEmergent Brazil and the 0urse o% the BAen.s <light., C,P) or-ing Document 3+D, 2/13, 1. 7. :esserlin, B he :ercosur-EU 7re%erential rade 6greementC 6 view %rom Euro"e., C,P) or-ing Document 3++, 2/13, 1-

2. 0ouncil o% Euro"e, B>I Brazil-EU 8ummit (oint 8tatement., Brasilia, 24 (anuar5 2/13. !n 1) (anuar5 2/13 U8 rade o%%icials noti%ied 0ongress o% the intention to 'egin negotiations %or a "lurilateral agreement on services and on 1) <e'ruar5 2/13 the Euro"ean 0ommission o%%iciall5 reHuested a mandate %rom the 0ouncil to 'egin %ormal negotiations with the interested countries. !%%ice o% the Unites 8tates rade re"resentative BU.8. rade *e"resentative *on Fir1 @oti%ies 0ongress o% Intent to @egotiate @ew International rade 6greement on 8ervices., 7ress *elease 1) (anuar5 2/13, htt"CKKwww.ustr.govKa'out-usK"ress-o%%iceK"ress-releasesK2/13K2anuar5Kustr-1ir1-noti%ies-congress-new-itas-negotiations accessed /D 6"ril 2/13? Euro"ean 0ommission, B@egotiations %or a 7lurilateral 6greement on rade in services., :E:!K13K1/+, 1) <e'ruar5 2/13, htt"CKKeuro"a.euKra"idK"ress-releaseL:E:!-13-1/+Len.htm accessed D 6"ril 2/13. 1/3 *emar1s made '5 IB86 trade re"resentatives in antici"ation o% the third in%ormal session on a "lurilateral services agreement ta1ing "lace on 21 :arch 2/12. 8ee *.F. -evara1onda, B6n 6ssault on :ultilateral rade @egotiations., International 7ress 8ervice 1+ :arch 2/12, htt"CKKwww.i"snews.netK2/12K/3Kan-assault-on-multilateral-trade-negotiationsK accessed D 6"ril 2/13.
1/2 1/1

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<urthermore, "rogress has recentl5 'een made towards several com"rehensive multilateral trade negotiations, which signals a trend towards Bmega-regionalism.. here is the rans-7aci%ic 7artnershi" 3 774 'etween the U.8. and ten countries around the 7aci%ic, with the "ossi'le inclusion o% (a"an1/4 and "erha"s 8outh Forea in a later stage.1/) In the same region, tal1s to %orm a trilateral trade agreement 'etween (a"an, 8outh Forea and 0hina have 'een initiated 'ut have not 5et entered the stage o% %ormal negotiations.1/# In addition, negotiations %or a rans-6tlantic rade and Investment 7artnershi" 3 I74 'etween the U.8. and the EU are eE"ected to start in 2/13. I% concluded, the I7 would 'e the 'iggest

trade deal ever negotiated.1/+ Im"ortantl5, Brazil is not "art o% an5 o% these "rocesses.

While the sco"e and success%ul conclusion o% these mega-regional trade agreements is still ver5 uncertain, these agreements, i% concluded, will sha"e the %uture o% the glo'al trade regime. Because o% the sheer com'ined size and economic weight o% the trade 'locs involved, these new agreements have the "otential to set standards %or international trade. he create a BW ! version 2./..
1/,

I7 has even 'een descri'ed as an attem"t to

Brazil.s economic interests and its role in the -oha *ound could 'e

undermined '5 the emergence o% these mega-regional trade 'locs. hese concerns have 'een eE"ressed '5 its <oreign :inister 6ntonio 7atriota. 6ddressing the EU-U.8. negotiations, he noted there is a Bstrong "ossi'ilit5 that something might emerge outside the %ramewor1 and regulations o% the World rade !rganization., re%erring to a B%ramewor1 which then the5 will want to im"ose on the rest o% world trade..1/D Brazil seems to %ear that W ! rules, including the -oha *ound, might lose relevance, while this is "erha"s o% a lesser concern %or the EU.

8ee 7. 6. 7etri and :. ;. 7lummer, B he rans-7aci%ic 7artnershi" and 6sia-7aci%ic IntegrationC 7olic5 Im"lications., Peterson +nstitute for +nternational ,conomics Policy Brief (une 2/12? !%%ice o% the Unites 8tates rade re"resentative, B 77 @egotiations 8hi%t Into Aigher ;ear at 1#th *ound., 7ress *elease 13 :arch 2/13, htt"CKKwww.ustr.govKa'out-usK"ress-o%%iceK"ressreleasesK2/13KmarchKt""-negotiations-higher-gear accessed 1# 6"ril 2/13. 1/) B(a"an and <ree radeC Better $ate than @ever., (he ,conomist 23 :arch 2/13. 1/# In 2//D, %irst ste"s were ta1en as the three countries agreed to esta'lish a (oint 8tud5 0ommittee %or the 0(F < 6, which recommended %urther ste"s towards %ormal negotiations in its re"ort. 8eeC (oint 8tud5 0ommittee, B(oint 8tud5 *e"ort %or an < 6 among 0hina, (a"an and Forea., 3/ :arch 2/12, htt"CKKwww.meti.go.2"KenglishK"ressK2/12K/33/L/#.html accessed 1# 6"ril 2/13. !n 21 :arch 2/13, a "re"arator5 meeting %or %uture negotiations too1 "lace in o15o. 8eeC :inistr5 o% <oreign 6%%airs o% (a"an, B7re"arator5 :eeting %or the @egotiations on <ree rade 6greement 3< 64 among (a"an, 0hina and the *!F., 7ress *elease 21 <e'ruar5 2/13, htt"CKKwww.mo%a.go.2"KannounceKannounceK2/13K2K/221L/1.html accessed 1# 6"ril 2/13. 1/+ Euro"ean 0ommission, BEuro"ean Union and United 8tates to launch negotiations %or a ransatlantic rade and Investment 7artnershi". :E:!K13KD), 13 <e'ruar5 2/13. 1/, 7. :esserlin, B he :ercosur-EU 7re%erential rade 6greementC 6 view %rom Euro"e., C,P) or-ing Document 3++, 2/13, 4. 1/D Ruote %rom <oreign :insiter 7atriota made during his statements 'e%ore the Brazilian 8enate <oreign 6%%airs 0ommittee. 8eeC Brics7ost, BBrazil <: Warns EU-U8 on trade tal1s., # 6"ril 2/13, htt"CKKthe'rics"ost.comK'razil-%m-warns-eu-us-on-tradetal1sK\.UWRlHUrQ% o accessed D 6"ril 2/13? and :erco7ress, BBrazil ho"e%ul an EUK:ercosur rade 6ccord can 'e 0oncluded his Oear., # 6"ril 2/13, htt"CKKen.merco"ress.comK2/13K/4K/#K'razil-ho"e%ul-an-eu-mercosur-trade-accord-can-'econcluded-this-5ear accessed D 6"ril 2/13.

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he "ros"ect o% a I7 'etween the U.8. and the EU also has im"lications %or EU-:ercosur negotiations.

<oreign :inister 6ntonio 7atriota, while admitting that the start o% EU-U.8. negotiations constitutes an Balert signal., reassured the Brazilian senate.s <oreign 6%%airs 0ommittee that EU-:ercosur negotiations have reached a %urther stage. Whereas the emergence o% mega-regionals is "ressuring Brazil to conclude an agreement with the EU, similar d5namics "ressure the EU to reassess its "riorities and ma1e a B"ivot. to East 6sia, awa5 %rom $atin 6merica.11/

,#%#

Developments undermining Brazil-s position vis-*-vis the EU

Brazil.s a'ilit5 to generate leverage and gain in%luence in the international trade communit5 was one o% the reasons wh5 the EU too1 ste"s to Bu"grade. its relationshi" with Brazil to a Bstrategic "artnershi". in 2//+. Aowever, since then Brazil.s "osition vis-&-vis the EU has come under "ressure. <irst o% all, at the end o% 2/13 Brazil will 'e removed %rom the list o% countries 'ene%iting %rom the EU.s ;eneralized 8cheme o% 7re%erences 3;874, which grants "re%erential access to the EU mar1et.111 o come to a new, su'stantive trade agreement on mar1et access with the EU, Brazil is de"endent on "rogress in the EU:ercosur dialogue. While negotiations on the EU-:ercosur trade agreement have carried on since 1DD,, %i%teen 5ears later Brussels and Brasilia still remain committed to an interregional agreement and do not o"enl5 consider a 'ilateral Brazil-EU alternative.112 -es"ite this commitment, EU-:ercosur trade negotiations continue to %ace a num'er o% challenges. he :ercosur 'loc is eE"eriencing internal changes which ma1e it di%%icult %or Brazil, its largest economic "ower and hence the main negotiator, to turn all heads in the same direction. hese changes include the new mem'ershi" o% >enezuela, the "ossi'le o"ening o% accession dialogues with Bolivia and the sus"ension o% 7aragua5.113 In addition to these mem'ershi" issues, :ercorus is "lagued '5 a num'er o% economic di%%iculties. 6rgentina, the second 'iggest econom5 in :ercosur, has "roven to 'e unwilling to ma1e concessions to clinch the trade agreement. 6t the same time, the countr5 %aces "ro'lematic in%lation rates, and the government has ta1en a num'er o% controversial regulator5 measures. 7articularl5 "ain%ul %or relations with the EU has 'een 6rgentina.s eE"ro"riation o% the 8"anish-owned "etrol com"an5 O7< *e"sol. In late 2/12, the

11/ 111

7. :esserlin, B he :uch @eeded EU 7ivoting to East 6sia., 1/ Asia%Pacific *ournal of ,2 )tudies 2, 2/12, 1-1,. 6s Brazil has entered the grou" countries with a high or u""er middle income "er ca"ita according to World Ban1 classi%ication, the EU.s ;87 eE"ires. 112 In the second (oint 6ction 7lan o% the EU-Brazil 8trategic 7artnershi", covering 2/12-2/14, the "artners agreed to Bcontinue to wor1 towards the conclusion o% a 'alanced and com"rehensive EU-:ercosur agreement.. 8ee 0ouncil o% the Euro"ean Union, BEuro"ean Union-Brazil 8trategic 7artnershi", (oint 6ction 7lan., 4 !cto'er 2/11. 113 *. ;. <l]res BIn 8earch o% a <easi'le EU-:ercosul <ree rade 6greement., C,P) or-ing Document 3+,, 2/13, )-#.

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EU, (a"an and the U.8. reHuested a W ! dis"ute "anel to rule on 6rgentina.s im"ort restrictions.114 Buenos 6ires has made the "ros"ects o% trade and %oreign investment in 6rgentina increasingl5 unattractive, to the "oint where it has 'een la'eled a B"ariah. in the glo'al econom5.11) @ot sur"risingl5, to" EU o%%icials have denounced 6rgentina.s actions and s"elled out its negative e%%ects %or the EU:ercosur negotiations.11# Within :ercosur, similar trade tensions have arisen, and Brazil has eE"ressed %rustration with 6rgentina.s regulator5 measures which dela5 Brazilian im"orts.11+

Both :ercosur.s mem'ershi" issues and the "ro'lematic economic "olicies o% 6rgentina greatl5 undermine Brazil.s negotiating "osition vis-&-vis the EU. Indeed, as Brazilian and EU o%%icials reiterated the need to come to an agreement as %ast as "ossi'le, 6rgentina.s 7resident 0ristina Firchner down"la5ed this sense o% urgenc5 and called %or a more cautious a""roach.11, While Brazil accounts %or ,/J o% :ercosur.s total ;-7, the Bhighl5 as5mmetrical. "ower relations within the trade 'loc have im"eded it %rom e%%ectivel5 leading and concluding negotiations.11D

@ot onl5 do these issues com"licate Brazil.s e%%orts to conclude a trade agreement with the EU, in all li1elihood, the EU.s trade "olic5 will 'e %ocused elsewhere %or the coming 5ears. <irst, the I7

negotiations will 'e a "riorit5. 8econd, in res"onse to the U.8.-led 77 and the "ossi'le start o% trilateral negotiations 'etween 0hina, (a"an and 8outh Forea, the EU is li1el5 to invest its e%%orts in securing its trade interests in East 6sia.12/ o this end, in addition to the EU-Forea trade agreement, o%%icial negotiations with (a"an were launched in :arch 2/13. he u"coming negotiations with Washington and o15o, and, additionall5, the "lurilateral services agreement, are eE"ected to 'e demanding and will li1el5 a'sor' much o% the high-level "olitical su""ort needed to conclude such com"rehensive trade
114

W K-843,, W K-844) and W K-844#, 6rgentina - :easures 6%%ecting the Im"ortation o% ;oods. In all three cases, the "anel is esta'lished 'ut it has not 'een com"osed. 6lso seeC I0 8-, B<our 6rgentina W ! -is"utes *each 7anel 8tage., 1+ Bridges ee-ly 3, 3/ (anuar5 2/13. 11) <. EriEon N $. Brandt, B7ariah in the World Econom5C Aow 8hould 0ountries *es"ond to 6rgentina.s *eturn to Economic @ationalismM., ,C+P, Policy Brief 1, 2/13. 11# 8ee :erco7ress, BB6rgentina.s Behaviour. :ain !'stacle %or EU-:ercosur rade al1s 8a5s Brussels., 14 -ecem'er 2/12, htt"CKKen.merco"ress.comK2/12K12K14Kargentina-s-'ehaviour-main-o'stacle-%or-eu-mercosur-trade-tal1s-sa5s-'russels accessed 1# 6"ril 2/13? and :erco7ress, BE0 *egrets 8tances o% T7rotectionismU and T7o"ulismU in some :ercosur :em'ers., ) 8e"tem'er 2/12, htt"CKKen.merco"ress.comK2/12K/DK/)Kec-regrets-stances-o%-"rotectionism-and-"o"ulism-in-somemercosur-mem'ers accessed 1# 6"ril 2/13. 11+ I0 8-, BBrazilian :inisterC EU-:ercosur al1s to 7ic1 U" :omentum his Oear., 1+ Bridges ee-ly 12, 11 6"ril 2/13. 11, :erco7ress, B0ristina <ernandez -ela5ing :ercosurKEU discussions %or a <ree rade 6greement., 2, (anuar5 2/13, htt"CKKen.merco"ress.comK2/13K/1K2,Kcristina-%ernandez-dela5ing-mercosur-eu-discussions-%or-a-%ree-trade-agreement accessed 1# 6"ril 2/13. 11D *. $eal-6rcas, B he Euro"ean Union and @ew $eading 7owersC owards 7artnershi" in 8trategic rade 7olic5 6reas., 32 Fordham +nternational /a0 *ournal 34), 2//,-2//D, 3,4. 12/ 7. :esserlin, B he :uch @eeded EU 7ivoting to East 6sia., 1/ Asia%Pacific *ournal of ,2 )tudies 2, 2/12, 1-1,.

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agreements. Aence, trade negotiations with Brazil or :ercosur are unli1el5 to receive similar attention. It has 'een argued that onl5 when Brazil.s econom5 will eventuall5 'ecome B'ig, d5namic and 'etter regulated enough., it will a""ear on the EU.s "olitical agenda and "rogress will 'e made.121 8everal eE"erts advance alternative a""roaches to the EU-:ercosur dialogue, indicating that it might 'e more constructive to %irst agree on a Bsmaller "ac1age. or an agreement on Ban5thing 'ut trade..122 Aowever, such a""roach seems unli1el5 as the EU has signaled that it is onl5 interested in concluding a trade agreement with :ercosur i% it is su'stantial. :oreover, to come to a %ull5-%ledged trade agreement, there might also 'e hurdles within the EU. @ot onl5 does the economic crisis continue to "lague Euro"ean economies, it is also uncertain whether the current <rench administration has the "olitical ca"ital to %ace Euro"e.s strongest agricultural lo''5, which stands to lose %rom a %uture EU-:ercosur trade agreement.123

.# /on!luding remar0s
!n international trade issues the EU and Brazil interact at several scenesC multilaterall5 in the W !, "lurilaterall5 through the EU-:ercosur dialogue, and 'ilaterall5. his "a"er eEamined how Brazil created leverage through these interactions in the W !, and how recent trade develo"ments are li1el5 to reduce this leverage. Brazil made success%ul use o% the W ! dis"ute settlement s5stem and is committed to strengthening the rules-'ased a""roach o% the s5stem. 6s a result o% its success%ul challenges o% inter alia EU agricultural measures, Brazil created internal and eEternal leverage to strengthen its "osition in the trade dialogue with the EU. In this sense, the eE"erience o% Brazil might serve as an eEam"le %or other develo"ing countries, and highlights the im"ortance o% domestic ca"acit5'uilding.

@onetheless, it was %ound that a num'er o% current develo"ments undermine Brazil.s "osition. hese include the negotiations to conclude a num'er o% ver5 large trade agreements, such as the I7, the 7,

trade integration "ro"osals in 6sia, or the international services agreement. hese agreements are 'eing negotiated outside the W ! %ramewor1 as regional trade agreements, and Brazil is not involved in an5 o% them. I% these agreements are concluded, the5 ris1 to isolate Brazil and reduce its com"etitiveness as concerns mar1et access conditions and trade diversion. 6s a result o% this "ressure, Brazil a""ears
7. :esserlin, B he :ercosur-EU 7re%erential rade 6greementC 6 view %rom Euro"e., C,P) or-ing Document 3++, 2/13, ). hese views were "resented at the con%erence B he Brazil-EU 8trategic 7artnershi"C *ealities and 7otential., organized '5 0entre %or Euro"ean 7olic5 8tudies 30E784, Brussels, 4-) :arch 2/13. 123 6. ;.6. >alladIo, BEmergent Brazil and the 0urse o% the BAen.s <light., C,P) or-ing Document 3+D , 2/13, 12.
122 121

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committed to conclude the long overdue EU-:ercosur %ree trade agreement, 'ut %aces challenges in %inding a common "osition with other :ercosur mem'ers, "articularl5 6rgentina. :oreover, the EU.s interest to conclude the tal1s will 'e limited at a time where negotiations with the U.8. and (a"an and the international services agreement are more li1el5 to attract "olitical su""ort and "rioritization.

In the meantime, the EU and Brazil continue to address and denounce each other.s trade restrictive measures. he 0ommission.s most recent re"ort on B7otentiall5 rade *estrictive :easures. lists Brazil, as wells as 6rgentina, among the countries which have resorted to the highest num'er o% new restrictive measures.124 It remains to 'e seen how trade relations 'etween the EU and Brazil will continue to 'e sha"ed '5 all these current develo"ments. I% no agreement is reached swi%tl5, it would a""ear that Brazil.s "osition will graduall5 deteriorate. It might then ta1e a long time 'e%ore Brussels and Brasilia reconnect.

Euro"ean 0ommission, B@inth *e"ort on 7otentiall5 rade *estrictive :easures Identi%ied in the 0onteEt o% the <inancial and Economic 0risis, 8e"tem'er 2/11-:a5 2/12. # :a5 2/12, 1,2".

124

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