Doha backlash and intangibles

It looks like the first piece of fallout from the breakdown of the Doha Round is about to hit. According to the Financial Times, Brazil is preparing to go ahead with both retaliatory sanctions in the WTO cotton case and prepare new cases against the US on other agricultural products. In the cotton case, the WTO found that the US subsidies violated trade rules. That decision was upheld on appeal in late June of this year. According to the FT story, Brazil had been holding off any action to see if a deal on agriculture could be reached. With the collapse of Doha, it looks like the Brazilians are moving ahead.

This action is also in part a direct response to this year's farm bill, which in the Brazilian's (and WTO's) eyes made matters worse. Thus it is likely to set up a confrontation with the Congress over the issue of whether WTO rules can override US law. Technically, the answer is no; the only thing Brazil can do is impose retaliatory sanctions. But the impact may be the same since the idea is to increase the pain in order to get the offending party to change their laws/policies.

The action has special significance for intangibles trade: the WTO authorized retaliatory sanctions are on services and intellectual property. In other words, Brazil could retaliate by ignoring certain US patents. In an earlier test (on offshore gambling), the US partly settled by keeping the US law but opening up certain services in the US to the foreign firms as compensation. That settlement, however, did not include the original complainants, Antigua and Barbuda, who were subsequently also given the right to retaliate on intellectual property (see earlier posting).

The US has steadily maintained that the retaliatory sanctions do not override a country's obligations to enforce intellectual property rights (see earlier USTR statement on internet gambling). That stance may now be put to the test.

It might also create a complicated political dynamic in the US – pitting IPR-intensive and service-intensive industries against agricultural interests.

By the way, the FT is also reporting another fight:

After two months of negotiations, Washington and Brussels have been unable to settle their fight over the interpretation of the Information Technology Agreement, a decade-old 70-nation pact that prohibits countries from imposing tariffs on many high-tech products.

This is not a good sign, given that the ITA was supposed to be the model of future sector specific negotiations (see earlier posting).