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Brazils Aspirations to Join the World Trade Organization
The purpose of the World Trade Organization is to help each member state promote free-market relations and attain a better level of economic development. Historically, Brazils aspirations to join the WTO faced a certain resistance on behalf of the countrys left-wing politicians who feared that the membership would destroy the competitive potential of local firms (Daemmrich & Musacchio, 2011). However, the government insisted on the course, believing that better tariffs and international relations would help Brazilian manufacturers attain a comfortable position on the global market. The 2002 dispute initiated by Brazil within the WTO framework appears to pursue the countrys long-term economic interests. In this regard, the actions of the United States appeared to promote its position in the global cotton market.
Through the unfair subsidies, American manufacturers were able to lower their prices and distort the worlds trade landscape in the industry. Being one of the worlds largest cotton producers, Brazil naturally wanted to protect its manufacturers. The country hardly could channel the same amount of subsidies to preserve its market share, and the U.S. actions were likely to undermine Brazils position in these terms. Thus, the WTO actions of the Brazilian government sought to ensure the subsequent development of the nation as an active part of the global trade system with its natural rules and specific regulations.
In the case of the compulsory licensing issue between Brazil and Merck, each side was right in its own capacity. Today, most of the worlds economic activities are defined by market relations. In the capitalist environment, all companies are to remain profitable in order to maintain sustained growth. Mercks interest in this situation is clear, as the pharmaceutical company wanted to extend its profits. From one perspective, the official stance of Merck appears valid. Research of new methods of complicated condition treatment is a costly endeavor, and a companys internal resources are limited. In this regard, Merck had to seek a new way of generating revenues for its research and development activities.
On the other hand, the government of Brazil was rightfully offended by Mercks position on the matter at hand. The country was virtually proclaimed an uninformed donor for the research of new medications. Brazilian taxpayers had to provide Merck with these additional sums as the means of survival to gain access to the expensive drug. The company reported that its policy implied higher rates for mid-income countries to support poorer nations. At the same time, Brazil is still a developing economy itself. It can hardly be compared to the wealthiest nations of the West, which is why using its citizens as the source of research funds was not particularly responsible. As important as global aid and research are, the Brazilian government is, first of all, concerned about its countrys residents, and rightfully so. Ultimately, a compromise was needed that would meet the expectations of both parties.
In the WTO cotton dispute, Brazils main argument may be related to the distortion of the global cotton market as the result of the United States actions. The influx of American products, promoted by increased subsidies, led to overproduction and the worldwide decrease of prices. As a result, less resilient countries with a high dependency on the cotton trade experienced a major economic impact. In other words, the actions of the U.S. violated the principles of fair international trade and endangered other, less fortunate states.
On the other hand, the U.S. could protect its stance by proving that the nations actions did not lead to any market turbulence, nor did they violate the WTO principles. In this situation, the best tactic would be to rely on Article 13 of the AoA, as done by the U.S. representatives. More specifically, the 2004 allowance provided the country with more time to cut its subsidies before the expiration date. Thus, the U.S. response should be legally based rather than economy-centered to have a chance of swaying the dispute committee in their favor.
Reference
Daemmrich, A. A, & Musacchio, A. (2011). Brazil: Leading the BRICS? Harvard Business School.
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