U.S. Moves to Curb Imports From Brazil

The Reagan Administration, declaring that the United States “cannot tolerate the piracy of its intellectual property,” initiated steps Friday to impose sanctions on up to $200-million worth of Brazilian imports in retaliation for Brazil’s failure to respect U.S. pharmaceutical patents.

President Reagan’s action, responding to a complaint by the American pharmaceutical industry, accuses Brazil of unfair trade practices. The moves represent what the Administration is portraying as stepped-up enforcement of trade laws during a period of increased political pressure for greater protection of U.S. industries and jobs.

White House spokesman Marlin Fitzwater, citing claims by the Pharmaceutical Manufacturers Assn., a trade organization, said Brazilian policies that infringe on U.S. companies’ patents have cost U.S. firms $36 million annually. Such costs result from lost export sales, additional research expenses, and lowered profit margins.

The announcement Friday does not necessarily mean that the United States will actually retaliate against Brazilian exports. Washington first must hold a formal hearing to determine what size penalty to impose. The Administration then would have to decide formally to invoke the sanctions.

Friday was the deadline to determine whether trade violations have occurred. One year ago, the Office of the U.S. Special Trade Representative accepted a petition filed by the Pharmaceutical Manufacturers Assn. seeking a U.S. investigation of allegations that Brazil failed to protect U.S. patents.

“Adequate patent protection is the cornerstone of a healthy pharmaceutical industry,” Fitzwater said, asserting that its denial allowed unauthorized copying in Brazil of U.S. pharmaceuticals.

Brazil reacted quickly to the U.S. announcement. A statment by President Jose Sarney, issued in Brasilia, called the threatened sanctions “unfair and outlandish” and accused the United States of pandering to the drug industry, Reuters news service reported. Brazil threatened to take action before the General Agreement on Tariffs and Trade (GATT), the body that regulates global commerce.

The conflict dates to a 1971 decision by Brazil declaring that pharmaceutical products are “nonpatentable” and, therefore, drug companies cannot collect royalties on them. Brazil had eliminated its patent protection for pharmaceuticals in 1945. Several other Latin American countries have similar policies.

Fitzwater said the toughened enforcement of trade laws has brought about strengthened patent laws in many foreign countries.

‘Stark Contrast’

“This progress stands in stark contrast to Brazil’s lack of action,” he said.

Reagan’s decision was announced at the end of the President’s weeklong vacation at his ranch northwest of Santa Barbara.

Earlier this year, top U.S. policy-makers voted to retaliate against Brazil for restricting imports of U.S.-made computer software, but Washington later decided to postpone any action pending a review of a new Brazilian counterproposal.

According to the White House, Brazil’s $2 billion in drug sales in 1985, the most recent year for which the White House has figures, placed it among the top 10 pharmaceutical markets in the world.

The action Friday was part of a longstanding Administration effort to prod developing countries into agreeing to a new international code governing the use of patents and other so-called intellectual property. The code is being negotiated under the auspices of GATT.

The Administration targeted Brazil because it has been leading the opposition in the GATT to adoption of a new, stricter code. The talks are part of the Uruguay Round, a four-year-long trade-liberalization discussion under way in Geneva.

It wasn’t immediately clear which products the Administration will seek to restrict if it retaliates.

Guns May Be Curbed

Although officials decline to comment publicly, the Administration is said to be considering limiting imports of Brazilian paper and paper products, pharmaceuticals, chemicals, air conditioners, microwave ovens, radio and TV broadcasting equipment, telephone answering machines, tape recorders, auto parts, pistols, jewelry and moccasins.

Although the White House charged Friday that patent infringements by Brazil over the years have cost U.S. pharmaceutical firms as much as $200 million--and that the value of the imports on the target list would be that great--officials said the Administration probably would limit any retaliation so as to affect only about $36 million in Brazilian imports to the United States.

Gerstenzang reported from Santa Barbara and Pine reported from Washington.