BRAZIL REMOVED FROM SUPER 301 INVESTIGATION NATION'S REFORMS PROMPT US MOVE

BRAZIL REMOVED FROM SUPER 301 INVESTIGATION NATION'S REFORMS PROMPT US MOVE

Sweeping policy reforms enacted this month by Brazil's new government led to a Bush administration decision Monday to end a major investigation of Brazilian trade practices.

The case formally began last May when the U.S. government named Brazil, Japan and India, under the Super 301 provision of the Trade Act of 1988, for hindering trade through broad trade barriers.The United States specifically charged Brazil with using quantitative import restrictions, import bans and a rigid import licensing scheme to limit imports into the country. The 18-month U.S. investigation launched last June could have led to U.S. retaliation if the barriers were not lifted.

But on May 7 the newly elected government of President Fernando Collor de Mello eliminated the quantitative import restrictions, bans and licensing systems involved. To prevent surges in imports, the Brazilian government has replaced these quotas with tariffs, a system that is legal under international trade rules.

Brazil follows Japan as the second country to extricate itself from under the Super 301 shadow, and India remains the only nation facing retaliation under this controversial provision. President Bush must decide by June 16 whether to take action against India for that nation's barriers to foreign investment and trade in services.

U.S. Trade Representative Carla Hills announced the decision to end the Super 301 investigation after a meeting Monday with Brazilian Economy Minister Zelia Cardoso de Mello.

"We believe Brazil made the right decision to rely on tariffs, rather than quotas. By so doing, it gives its import regime more certainty and predictability. It also establishes an important precedent," said Mrs. Hills in a statement.

Ms. Cardoso de Mello told reporters after her meeting with Mrs. Hills that the U.S. action was evidence that the Brazilian economy had undergone major economic reform that resulted in a more open trade policy.

Another Brazilian official said the announcement by Mrs. Hills underscored the improving relationship between the two countries since Mr. Collor took office in March.

"This is one more step in the continuation of an increasingly constructive relationship," the official said.

A senior Bush administration official said that while tariffs are onerous to U.S. exporters, they are easier to reduce through negotiations. He said the United States would seek to lower those duties in the ongoing Uruguay Round of multilateral trade talks under the General Agreement on Tariffs and Trade, the Geneva-based body that oversees most world trade in goods.

"Tariffs are GATT-legal, and we can deal with them in the context of the Uruguay Round," he said.

The official downplayed concerns in the business community that the Brazilians would be slow in implementing the new open market policy.

"We are confident that the practices cited have been lifted," the official said. "We see no evidence that the Brazilians will not follow through. Clearly, the government is moving in the right direction and moving quickly. You cannot investigate a case where the practices cited have disappeared."