Show Brazil the Sanctions

Earlier this month, the U.S. Trade Representative granted Brazil a huge economic reprieve by extending the deadline for the country to get off a special trade violation watch list.  The dominant South American economy has been on the verge of losing its preferred trade status with the United States for several years because of inadequate intellectual property protection.  But now Brazil has another five months to prove it can successfully combat piracy and police counterfeits, and the same amount of time to continue exporting billions of dollars of products to America duty-free — even if Brazil can’t or won’t protect intellectual property rights.

Indeed, it’s little more than a fool’s hope for the U.S. Trade Representative to believe that Brazil will start protecting intellectual property in the next five months.  All evidence indicates just the opposite.  Violating intellectual property rights in Brazil goes all the way to the top.  After all, not only is the Brazilian government failing to police its citizens and prosecute the offenders, it wants to engage in piracy itself.

Even before the United States extended Brazil’s preferred trade status, President Luiz Inacio Lula da Silva threatened to steal the patents on several anti-retroviral drugs used to treat HIV/AIDS.  That’s during the same time the U.S. Trade Representative observed “a promising change in Brazil’s commitment to address long-standing piracy and enforcement concerns.”

Nothing has changed since Brazil got its temporary free trade pass.  Just a week after the announcement, Brazil’s health ministry spokesman told the Associated Press that the government was still deciding whether to break the patents on the HIV/AIDS drugs so that Brazil could make its own generic versions at a much lower cost.

In fact, Brazil’s record on intellectual property rights has been exceptionally consistent — and abysmal.  “Over the past three years, Brazil has repeatedly threatened to break patents as a way to negotiate price reductions with mostly international pharmaceutical companies,” the Financial Times reported last December.  And, facing the government-imposed theft of their costly and valuable intellectual property, the drug companies have capitulated in order to save their patents.

The Swiss health care company Roche “reduced its price by 73 percent since it began supplying the Brazilian government several years ago,” the Financial Times story noted.  And, according to the Associated Press, Merck “has lowered the price for Efavirenz” — one of the HIV/AIDS drugs on Brazil’s hit list — “four times.”  But the Brazilian “government now says the price cuts have not been enough to contain rising costs.”  In other words, Brazil never had any intention of protecting intellectual property rights as long as doing so would hurt the country’s bottom line.

This position shouldn’t have come as a surprise to anyone.  Leaving aside what our high-level diplomats and negotiators should have understood on their own, Brazilian officials said as much to The New York Times months before the U.S. Trade Representative agreed to keep Brazil’s preferred trade status intact.

“Brazilian officials say they are as interested as the United States in enforcing intellectual property rights, citing the effect that piracy has on Brazil’s own economy,” The Times reported.  “[C]ounterfeiting and smuggling cost the country the equivalent of close to $10 billion a year in lost tax revenue.”  The story went on to quote Brazil’s under secretary for economic affairs, who said, “But in a country like Brazil, which has major budget constraints and a serious problem with public security, you have to understand that intellectual property crimes have to be weighed against other issues that are more urgent.”

It doesn’t take a degree from Georgetown University’s School of Foreign Service to understand this diplomatic double-speak.  The principle guiding intellectual property policy in Brazil is, in essence, the mantra from the movie “Jerry Maguire”: “Show me the money!”

Such a position should make the U.S. Trade Representative’s now-extended review of Brazil’s preferred trade status quite simple.  Brazil will always have the incentive to steal intellectual property, so it’s time to show the world’s 10th largest economy the trade sanctions.  Only with that weight on the other side of the scale will Brazil begin to understand that intellectual property isn’t free.