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Executive Summary

PMA SEEKING ADDITIONAL TRADE SANCTIONS AGAINST BRAZIL to spur the country to improve intellectual property rights protection. The Pharmaceutical Manufacturers Association on June 1 asked the Office of the United States Trade Representative to recommend withdrawal of Brazil's status as a "beneficiary developing country," which allowed the import of approximately $ 1.3 bil. in Brazilian goods into the U.S. duty-free last year, according to PMA. In the request for USTR review of the designation, the association said "the initiation of an investigation into Brazil's GSP [generalized system of preferences] status, in addition to the trade measures that have been applied to date, will serve to encourage the government of Brazil to take serious and meaningful steps to amend its patent law." Under Section 502 of the "Generalized System of Preferences Renewal Act of 1984," beneficiary developing country designation is tied to the requirement of adequate and effective intellectual property rights protection. Therefore, the revocation of that trade designation "provides an additional measure available in the panoply of trade remedies that are open to the United States in order to encourage the Government of Brazil to take meaningful steps toward improving intellectual property rights protection," PMA maintained in its comments to the USTR Trade Policy Staff Committee's GSP Subcommittee. The review of the trade designation would be the third tier of trade sanction actions against Brazil. In October, ad valorum trade sanctions were imposed on Brazil by then-President Reagan under Section 301 of the Omnibus Trade Act. In late May, Brazil was added to the USTR "priority watch list" of five countries recommended by PMA as deserving priority attention for inadequate pharmaceutical patent protection ("The Pink Sheet" May 29, p. 17). Despite the imposition of trade sanctions, the Brazilian government has not taken "adequate steps" to beef up its patent protection laws, PMA contends. Earlier this year, Brazil appealed to the General Agreement on Tariff and Trade (GATT) asking that the U.S. action under Section 301 be overruled on the grounds that trade sanctions cannot be used as a weapon in intellectual property rights disputes. GATT is not expected to issue a decision before next year. There is precedent for PMA's request. On Jan. 19, Reagan decided to adjust Thailand's GSP status and impose some trade restrictions, citing Thailand's failure to "provide adequate and effective means to secure, exercise and enforce exclusive rights in intellectual property." The restrictions, which go into effect July 1, change the primary and secondary standard competitive limit on Thai goods imported in to the U.S. The Thailand decision, which followed a May 1987 PMA petition requesting the withdrawal of GSP benefits, was the first case in which the USTR only partially reduced GSP benefits; prior trade sanctions have revoked all benefits, according to a USTR spokesperson. Thailand is also one of the five countries on the USTR "priority watch list."

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