U.S. Slaps Tariffs on Brazil for Computer Imports Ban

The White House, frustrated after years of fruitless negotiations, announced Friday that it will retaliate against Brazil for excluding foreign firms from its fledgling computer market.

President Reagan moved to impose $105 million in tariffs on some Brazilian imports to offset the estimated lost business for U.S. companies, and he slapped a largely symbolic embargo on computer products from Brazil. The action was triggered by Brazil’s refusal this fall to allow a leading U.S. software company to license its products for sale in South America’s major rising industrial power.

“Their software decision was a real slap in the face,” an Administration trade official said. “This response is the only way we can show the Brazilians that we are not just a paper tiger.”

Industry officials in the United States applauded the White House action, saying Brazil had reneged on its promise to allow greater access to its software market by U.S. companies. But some analysts, while generally supporting the move, noted that the retaliation might impede efforts to negotiate a resolution of Brazil’s huge foreign debt.

The Brazilian products that will be subject to tariffs will not be disclosed until next week, but the White House said all of them are available from other sources. The 100% tariffs will make them uncompetitive in the U.S. market. The embargo on Brazilian computer equipment will have little concrete effect because U.S. imports of such products are already negligible.

So far this year, Brazil has exported more than $6 billion in goods to the United States while importing about $2.9 billion worth.

For four years, the Reagan Administration has been trying to persuade Brazil to allow U.S. firms to compete in its tightly protected computer market. The White House, after winning a commitment from Brazil to be more “flexible, reasonable and just” in shielding its computer firms from foreign competition, agreed late last year to suspend restrictions that it was about to impose on Brazilian products.

Commitments Not Kept

“Recent developments in Brazil make it clear that these commitments are not being kept,” Reagan said in a written statement. “In particular, the Brazilian government has rejected efforts by an American software company to license its product in Brazil. . . . This decision establishes a precedent which effectively bans U.S. companies from the Brazilian software market.”

The White House said Reagan would lift the tariffs if Brazil reverses its decisions.

But Administration officials were not optimistic that Brazil would back down. “We have been getting absolutely zippo from Brazil so far,” one official conceded. “Maybe this will get their attention over the medium to long term, but I’m afraid that for the moment this will only add to the xenophobia that’s already raging in Brazil.”

A spokesman at Brazil’s embassy in Washington said only that the Brazilian government regrets the U.S. action.

U.S. retaliation was triggered by Brazil’s refusal to allow Microsoft Corp., the nation’s largest maker of software for personal computers, to license its MS-DOS operating system for IBM-compatible personal computers for sale to six Brazilian companies that had requested it.

‘Bureaucratic Mischief’

Reagan’s move was applauded by Ken Wasch, executive director of the Software Publishers Assn., who said Brazil’s computer policies have “been applied with bureaucratic mischief and have no place among the industrialized nations in the world.”

The U.S. computer industry had been divided in its approach to Brazil, but a spokeswoman for the Computer and Business Equipment Manufacturers Assn. said that her organization supports the White House action.

The action, which is similar to the trade sanctions imposed on Japan earlier this year during a dispute over computer memory chips, is also designed to help defuse support for protectionist trade legislation on Capitol Hill by demonstrating that Reagan is willing to retaliate on his own against other nations’ protectionist measures.

White House officials said they were particularly disappointed by Brazil’s actions because Reagan, by vetoing a proposed limit on footwear imports into the United States, had helped keep this market open to one of Brazil’s leading products.

Bankers Concerned

Banking industry officials expressed hope that Brazil would not respond by toughening its stance with commercial banks over renegotiating terms of its foreign debt. Brazil owes U.S. banks more than $24 billion out of its total foreign debt of at least $110 billion.

“These are separate matters, and we hope they remain separate,” said Jack Morris, an official at Morgan Guaranty Trust in New York.

But Alan Stoga, a specialist in international economics for Kissinger Associates in New York, said there is a danger that U.S. retaliation will “make it harder to put together interim agreements by contributing to the increasingly nationalist and anti-foreign mood in Brazil.”

Stoga, however, said he supports the White House step because the “Brazilians simply weren’t playing by the rules” of international trade negotiations. “This was a clear case, and at some point you have to be willing to act.”