Memorandum on Soybean Product Exports From Brazil

Memorandum for the United States Trade Representative
Subject: Memorandum of Determination Under Section 301 of the Trade Act of 1974

Pursuant to Section 301(a)(1) of the Trade Act of 1974, as amended (19 U.S.C. 2411(a)(1)), I have determined that the action described below is appropriate and feasible to enforce United States rights under the Agreement on the Interpretation and Application of Articles VI, XVI and XXIII of the General Agreement on Tariffs and Trade (the Subsidies Code) with respect to the subsidy practices of the Government of Brazil concerning exports of soybean oil and meal. With a view toward eliminating or reducing the harmful effects of the Brazilian subsidies on soybean oil and meal exports, I am directing the United States Trade Representative to pursue the dispute settlement procedures which have already been initiated under the Subsidies Code.

This determination, together with the Statement of Reasons, shall be published in the Federal Register.

RONALD REAGAN

Statement of Reasons

The United States Trade Representative (USTR) initiated an investigation under Section 301 on May 23, 1983 (48 FR 23947), on the basis of a petition filed by the National Soybean Processors Association. The petitioner alleged that Brazil has acted inconsistently with its obligations under the Subsidies Code by granting subsidies on the production and exportation of soybean oil and meal. These subsidies include: 1) the provision of preferential loans to oil and meal exporters for operating funds and for the purchase of raw materials to be processed and exported; 2) the partial exemption from income tax of profits from oil exports; and 3) the exemption from tax of gains from foreign hedging operations. The petitioner further alleged that as a result of the Brazilian subsidy programs, Brazilian exports of oil and meal have increased and have displaced United States exports in third country markets.

In an effort to resolve this problem, the United States held consultations with Brazil on November 21, 1983. Those consultations focussed on the United States complaint and on a subsequent Brazilian complaint against United States programs as they relate to the production and export of soybean oil and meal. During the consultation process it was learned that Brazil had suspended the application of two of its subsidy programs to soybean products. Both parties agreed to a further exchange of information regarding their respective programs which is scheduled to occur within the next month. If a resolution to the problem is not reached through consultations, the United States will continue the dispute settlement process as set forth in the Subsidies Code.

While it is disappointing that the dispute settlement process has not moved more expeditiously, I believe that the process is moving smoothly and that United States interests would be best served by following that process to its conclusion. I expect the USTR to pursue a resolution of this issue in a diligent and expeditious manner.

[Filed with the Office of the Federal Register, 2:06 p.m., February 14, 1984]