Memorandum on Determination Under Section 301 of the Trade Act of 1974

Memorandum for the United States Trade Representative

On October 6, 1986, under Section 301 of the Trade Act of 1974 (19 U.S.C. 2411), I determined that acts, policies, and practices of the Government of Brazil with respect to informatics (computer and computer-related) products are unreasonable and burden or restrict United States commerce (51 FR 35,993). I directed you as the United States Trade Representative to press forward with negotiations with the Government of Brazil to address our concerns regarding Brazilian restrictions on U.S. trade and investment in the informatics sector and the lack of adequate and effective protection for intellectual property, including computer software. I stated at that time that I would review the progress in the negotiations no later than December 31, 1986. Based on that review, I have determined to: (1) suspend that part of the investigation dealing with Brazilian administrative procedures; and (2) direct you as the U.S. Trade Representative to conduct further negotiations with Brazil toward achieving adequate and effective protection for intellectual property rights, particularly for computer software, and the elimination of barriers to U.S. investment in the Brazilian informatics sector.

Reasons for Determination

Since my determination of October 6, 1986, the Government of Brazil has undertaken administrative reforms that, if fully implemented, should reduce the adverse effect on United States commerce of the Brazilian informatics policy. The Government of Brazil has established an ad hoc group to review specific company complaints regarding the application of the informatics law to U.S. trade and investment. It recently announced certain other administrative reforms designed to speed and simplify the process of obtaining necessary licenses and to create an appeals process. Finally, it has defined and narrowed the scope of its import restrictions, subject to periodic revision. These developments signal sufficient progress to warrant suspending, but not terminating, that part of the investigation initiated under Section 302 of the Trade Act on September 16, 1985 (50 FR 37,608). If these improvements are properly implemented and have the expected effect of reducing the burdens or restrictions on U.S. commerce, then that part of the Section 301 investigation can be terminated.

To date, however, we have made insufficient progress in our negotiations with Brazil in two key areas: the currently ineffective and inadequate protection of intellectual property rights, especially computer software; and the restrictions on U.S. investment in the informatics sector. Nevertheless, in view of the reforms already made and the possibility of additional progress, I have determined that a final effort to negotiate a settlement of the software and investment issues is appropriate. Although I am fully prepared to act unilaterally to defend U.S. interests in the face of unfair foreign trade barriers, I believe that the preferable solution is to open foreign markets, not to close our own. Accordingly, I have directed the U.S. Trade Representative to make a final effort to negotiate an acceptable resolution of the software and investment issues. If no acceptable resolution is forthcoming in six months, I will determine the appropriate response of the United States.

This determination shall be published in the Federal Register.

RONALD REAGAN

THE WHITE HOUSE

Washington, December 30, 1986.