RESULTS OF MAY 15 EPC MEETING

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP88G01117R000602200001-0
• Release Decision: RIPPUB
• Original Classification: C
• Document Page Count: 4
• Document Creation Date: December 22, 2016
• Document Release Date: June 23, 2011
• Sequence Number: 1
• Publication Date: May 16, 1986
• Content Type: MEMO

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ROUTING AND RECORD SHEET
Results of May 15 EPC Meeting
Acting NI0 for Economics
TO: (Officer designation, room number, and
building)
VC/NIC
3.
A/C/NIC
T
ER
XDCI
13.
COMMENTS (Number each comment to show from whom
to whom. Draw a line across column after each comment.)
16 MAY 1986
OFFICER'S
INITIALS
f\~
FORM 61 0 USE PREVIOUS
1-79
(A4.C'W )
7V
225X1
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ENTIAL
The Director of, Central Intelligence
Washington, D.C. 20505
National Intelligence Council
NIC #02426-86
16 May 1986
MEMORANDUM FOR: Director of Central Intelligence
Deputy Director of Central Intelligence
Acting NIO for Economics
SUBJECT: Results of May 15 EPC Meeting
1. The EPC agreed to draw up a list+of retaliatory measures against
Brazil for its policy on "informatics" in;order to force some headway in the
negotiations. Brazil's informatics policy limits U.S. sales of computers,
software, etc. in areas which may compete with Brazilian firms. At issue is
the broad interpretation of the law which effectively precludes sales of
personal computers and allows piracy of software. Commerce estimates that the
U.S. lost a total of $1.5 billion in potential sales over the 1980-84 period;
hence, the retaliatory list could be extensive.
2. No one spoke against threatening,; retaliation. Indeed, State (Wallis)
was the toughest, arguing that the Brazilians were not serious about
negotiating and that Brazil has opposed us at every turn on multilateral trade
issues.
3. The decision was passed on to the press and appeared in this
morning's major papers. (see attached)
25X1
Attachments:
A. U.S. to Prepare Trade Action Against Brazil
B. U.S. Preparing to Restrict Imports From Brazilians
CL BY SIGNER
DECL OADR
C ENTIAL
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i ttaciin enz x
The IJashington Post - -Thursday, iiay '15` A
de Action Against
Braz o rebra
se Council. orders Move Following Refusal to Ease Import Restrictions
ite Hou
7 also is interested in battling unfair trade prac-
By David Hoffman :. I
Wmhiwon Pau Stdf writer
;ahinet-level committee yesterday :ordered
reparation of retaliatory trade actions di-
d at Brazil in response to Brazilian refusal
se restrictions on the import of computers
,elated technology, a. senior White House
al said.
a move designed in part to respond to the
on,Capitol Hill for restrictive trade legis-
l
i, the White House Economic Policy Council
imously ordered a trade working group
up with retaliatory actions against Brazil
me 25.
elks with Brazil over the trade barriers were
ig nowhere,- said the senior official, who
asked. not to be identified. The policy cuunc~ ,
whose chairman is Treasury Secretary James A. tices.
has been mounting pressure from the
Baker 111, was told that U.S. computer and in- administration against Brazil's 1984 law,
$1.5 bi li tn ales b wennf 199880 sb.an 1998 8 have
a as a as a tthaatbans all imports of small computers for eight
result in sales between 1 years. The Brazilian restrictions were among
result t of Brazilian trsuc restrictions. . those targeted by Reagan last September in a
The official said such diverse participants d :Series of actions under section 301 of the trade,
the policy council as the State Department and act.
the Council of Economic Advisers agreed on the Brazilian President Jose Barney has mam-
h fa strong action against Brazil. "That's tamed the law is sovereign and cannot be altered
how mad d wa we are," he said.
acted because of external political pressures. He oon- ,
The policy preparing to council aethe House Democrats trate firmed this recently by approving long-term pol-
were prepads to she floor a major trade icy guidelines for the industry's growth based on
administration has labeled as the tbarriers:
policy bill that t the take
protectionist. White House officials said they see trade
BrazUn Foreign Minister Roberto de Abreu
little hope of blocking the bill, but wanted to
160 OOMPLIM 14, CoL 1
t Reagan
th
a
stress, with the Brazilian action,
- ? ? ? matica, that intends to begin' oper-
r Against ra~aliThe agreement is seen as a test
of Eves Trade Actions of Brazil's willingness to grant
case
concessions and is feared by nation-
s
in
ficials-in a complaint that was re-
COMPUTERS, From El newed at yesterday's cabinet council
odre said May $ he was seeking 'meeting-say Brazil has been block-
dka on the matter with Secretary ing foreign investment in industry.
E State George P. Shultz. On a visit The senior White House official
> Portugal,, Sodre said, "We are : said the Brazilians were not being
eeking an immediate dialogue and, forthcoming in their approach to the
A here is a chance for this, there is issue. Discussions that began in Sep-
[so the possibility - of negotiations ; tember were stalled and. the Bra-
rithin the terms of the law," ac- zihans were using "promises and sub-
ording to Washington Post special terfuge- to avoid progress, he said.
orrespondeat Richard House in The official . also complained
iao Paulo. about what he described as Brazil's
In an earlier exchange of letters lack of copyright protections.
With Shultz, Sodre sought to seas- The White House officials did note
measures
t
li
ory
a
lure' .him that the closed-market: specify what reta
are ex- Secretariat of Informatics (S.E.L
t the
b
y
u
policy-in spirit similar to the im- would be drawn up,
0
port restrictions that have been pected to put limits on imports of - but IBM.already has signed a$20
used by' Japan-would not spread Brazilian products such as steel, million agreement with Brazilian
from data processing to other in- shoes, , aircraft. and agricultural. steel
a new company, GerdauiI Industries to
dustries such as biotechnology, fine items..
chemicals and pharmaceuticals, ,
where U.S. industry has a strong
presence in Brazil.
He also said Brazil is willing to
accept joint ventures with U.S. cor-
porations in areas where transfer of
technology is required. The law says
foreign companies can have a 30 per-'
cent stake in such ventures if they,
transfer technology and leave man-
'agement to Brazilians. But U.S. of-
g
s
Brazils fledgling data-proce
industry is strongly nationalist in alist sectors as an opening that would
tone, in part because it was fostered 'lead to the end of closed markets.
by, former military governments. S.E.I. already has expressed res-
Brazil currently enjoys a trade sur- ervations about' the IBM-Gerdau
plus of more than $5 billion with the . contract. Gerdau is buying out sec-
United States, but its refusal to al- tors of IBM's large Brazilian sub-
low' outsiders a share , of the - small- ` sidiary that are not restricted under
computer market has raised protec- the law. The new company will of-
tionist pressures.-There are no re- fer only data-processing services
strictions in the market for large and software and will not be per-
computers, which ' is dominated by mitted to assemble IBM's personal
International Business Machines computers, which have been widely
Corp copied in.Brazil.
has Despite President Sarney's de-
r
t
e
u
So far, no major joint ven
been approved by Brazil's Special . termination to stand behind the
ns that the
e si
h
g
ere ar
1984 law, t
nationalist tide could be receding as
Brazil seeks to avoid conflict with
its main trading partner, correspon-
'dent House reported.
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[,ttach!entt E
The Wall Street Journal. May 13, 1986..
U.S. Preparing
To Restrict Imports
From Brazilians
By ART PINE
Staff Reporter of THE WALL STREET JOURNAL
WASHINGTON-The Reagan adminis-
tration has started preparations to restrict
imports from Brazil in retaliation for that
country's refusal to remove barriers to :
U.S. computer exports.
The cabinet-level Economic Policy
Council ruled informally that the Brazilian
restrictions amount to an unfair trade
practice and .warrant U.S. retaliation.
The council ordered an interagency
task force to draft recommendations for
specific sanctions by June 25. President
Reagan is expected to make a final deci-
sion on the case by early July.
U.S. retaliation almost certainly would
spark a major political controversy in Bra-
zil and would sharpen growing U.S.-Brazi-
lian trade friction. Besides the computer
case, the U.S. has filed formal protests
about state subsidies for Brazil's aircraft
industry and Brasilia's failure to crack
down on product counterfeiting and patent
infringement.
Brazil also has angered the U.S. by be-
ing one of two opponents-the other is In-
dia a U.S. campaign to write new rules
for trade in services as part, of the coming
round of global trade-liberalization talks.
Brazil, on the other hand, has protested
tariffs that Washington imposed two years
ago on ethanol. Washington argued Brazil
was subsidizing its domestic producers.
The two-way trade between the two
countries totaled $11.2 billion in 1985. U.S.
imports from Brazil were $8.1.billion, while
its exports to that country totaled only $3.1
billion.
The Economic Policy Council's action
comes after seven months of fruitless ne-
gotiations between U.S. and Brazilian
trade officials. Brazil's restrictions stem
from a 1984 law that effectively bars U.S.-
made personal computers and software
from the Brazilian market.
The Reagan administration launched
unfair-trade practice proceedings against
Brazil last October, but Brasilia so far has
refused to change its law. Instead, the is-:
sue has become a matter of national pride,
and the government of President Jose Sar-
ney is under pressure to hold firm against
U.S. complaints.
It isn't immediately clear what Brazi-
lian products the U.S. might restrict. Be-
sides the high tariffs on Brazilian-produced
ethanol, Washington already has placed
some restrictions on Brazilian steel. There
has been pressure in the U.S. for Washing-
ton to limit the import of Brazilian shoes,
but President Reagan rejected that idea
last year.
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