Can Brazil's WTO Complaint on the Section 301 Tariffs Avoid Being Undermined by an "Appeal into the Void"?

Amidst the flurry of recent tariff news was a USTR notice of action earlier this month in the Section 301 investigation of Brazil’s Acts, Policies, and Practices Related to Digital Trade and Electronic Payment Services; Unfair, Preferential Tariffs; Anti-Corruption Enforcement; Intellectual Property Protection; Ethanol Market Access; and Illegal Deforestation. As USTR explained in a press release:

Today, Ambassador Jamieson Greer is taking final action, at President Trump’s direction, under Section 301 of the Trade Act of 1974 by imposing a 25% tariff on certain goods of Brazil.  This follows a yearlong investigation by USTR that determined that certain Brazilian measures related to digital trade and electronic payment services; unfair, preferential tariffs; anti-corruption interference; intellectual property protection; ethanol market access; and illegal deforestation are unreasonable and burden or restrict the commerce of American farmers, workers, innovators, and exporters. ...

Not surprisingly, Brazil was unhappy about this. One aspect of the Brazilian response was the filing of a WTO consultations request (which also includes a challenge to the Section 301 forced labor tariffs). In its request, Brazil alleges violations of GATT Article I:1 and Article II:1(a) and (b), as well as DSU Article 23.1 and Article 23.2(a).

If Brazil follows through with a panel request and the complaint is litigated, it will be interesting to see what arguments the U.S. presents as a defense in connection with the various substantive determinations USTR made in the two Section 301 investigations. Regardless of the U.S. legal response, though, based on what we know of the facts here, I think the likely outcome is that the panel will find violations of GATT Articles I and II and reject the U.S. defenses (I'm skeptical that Brazil will win the DSU claims though).

But then what happens? With the Appellate Body still not functioning, and the U.S. not a party to the MPIA, the U.S. will be able to appeal the panel report "into the void." This move would prevent Brazil from following the formal process under the DSU to get authorization for retaliation.

However, Brazil has a new law in place that could undermine the effectiveness of such a move. As Geraldo Vidigal and Melina Coelho explained in a piece last year:

During the Appellate Body era, Brazil’s regime for trade retaliation was intrinsically connected to multilateral dispute settlement. As a matter of domestic law, express trade retaliation could only be adopted following an authorisation by the WTO DSB. Once the Appellate Body’s inoperation seemed permanent, Brazil enacted a new retaliation regime — a ‘Revised WTO Retaliation Law’93 — under which domestic authorities could apply economic retaliatory measures even when a final decision had not been issued by the DSB in a dispute involving Brazil.

Under the Revised WTO Retaliation Law, the Brazilian Chamber of Foreign Trade is entitled to decide on the suspension of concessions or other obligations adopted by Brazil. This decision may derive from the authorisation by the WTO DSB, as per the previous law. But, under the Revised Law, the committee may adopt these measures without WTO authorisation, provided that four conditions are fulfilled: (i) a WTO panel report confirms, in whole or in part, the allegations presented by Brazil as the complaining party; (ii) there is an appeal by the WTO member, as the respondent; (iii) the appeal cannot be heard by the Appellate Body or the report cannot be approved by the WTO DSB; and (iv) sixty days elapse after Brazil notifies the respondent WTO member of its intention to suspend concessions or other obligations. The Revised WTO Retaliation law also incorporates the proportionality requirement, stating that “the suspension of concessions or other obligations shall not be greater than the nullification or the harm caused to the country’s trade benefits by the said WTO member.”94

Under Brazil’s Revised WTO Retaliation Law, therefore, the Executive Committee does not need to wait for a final authorisation by the DSB, considering its possible paralysis owing to an appeal ‘into the void’. The Executive Committee is authorised to proportionally retaliate against the other disputing party, including by suspending IPRs. The instrument further provides that, in the event that the Appellate Body reestablishes its activities and modifies the recommendations issued by the Panel (or the DSB revokes its authorisation), the retaliatory measures shall be withdrawn.95

In effect, this means Brazil has explicitly given itself the ability under its domestic law to overcome an "appeal into the void" and move forward with retaliation, even without authorization under the DSU. Of course, governments could always do something like this, but establishing a formal legal mechanism makes this easier to accomplish when they consider that the action is needed.

If it does happen, I can imagine the Trump administration will complain about it, arguing that it shows other governments are not as concerned with international law as they sometimes claim. And I know there is a debate about whether what Brazil would be doing here is permitted under international law. But putting aside the legalities, if Brazil does follow through on this, perhaps it shows that "the void" only exist if you allow it to, and it can be closed (filled in?) with appropriate actions.

What would be the practical impact if Brazil follows this approach? It may just be symbolic, as the litigation will take a while and retaliation might be implemented by Brazil even before a panel ruling. But symbolism can matter, and a ruling that these Section 301 tariffs violate WTO rules could have some relevance for the broader political arguments going on in trade, if not now than perhaps in the future.