Brazil to defend taxes on car imports at WTO
November 1, 2014, 5:58 am

File photo from the inauguration of the Brazil room, DG Azevêdo’s inaugural speech to the General Council and press conference, 9 September 2013 [Image: WTO]

“Our tax regimen is perfectly compatible and we are going to prove this at the panel,” Brazilian Foreign Minister Luiz Alberto Figueiredo said Friday.

The Brazilian government has reacted to the EU’s announcement on Friday asking the WTO to establish a panel to look into possible unfair taxes imposed by Brazil on foreign-made cars.

EU is Brazil’s biggest trade partner – ahead of the US and its BRICS partner China.

The Brazilian Minister, however denied that the dispute would cast a shadow on the long-pending EU-Brazil free trade deal, saying “they are different issues.”

The two sides have held more than 10 rounds of discussion to resolve a long-running row over Brazilian import taxes that Europe says are unfair and break global trade rules.

Brazil’s “Inovar Auto” program was launched in 2013 and stays effective until 2017 thorugh which Brazil has sought to build up a local car industry, offering tax breaks for carmakers that increase domestic investments.

European car manufacturers, including BMW, Volkswagen and British luxury car builder Jaguar Land Rover, a unit of India’s Tata Motors are building car plants in Brazil to get around taxes on imported vehicles.

“Products manufactured in the European Union and sold in Brazil face higher taxes than Brazilian products,” the European Commission (EC) said in a press release.

“In addition, Brazil restricts trade by demanding Brazilian manufacturers use domestically-made components as a condition to receive tax breaks,” the EC said.

Brazil and the EU began discussions on a free-trade deal in 1999.

Data from the European Commission shows Brazil’s trade with the EU accounts for 34.4 per cent of the EU’s total trade with the Latin American region (2013).

EU’s exports to Brazil consist mainly of manufactured products, such as machinery, transport equipment and chemicals.

The EU is the biggest foreign investor in Brazil with investments in many sectors of the Brazilian economy. Around 50 per cent of the FDI flows received by Brazil during the last 5 years originated in the EU.

 TBP and Agencies