EU launches WTO dispute against Brazil to challenge car taxes

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BRUSSELS (Reuters) -- The European Union launched a case against Brazil at the World Trade Organization over Brazil's taxes on imports ranging from cars to computers, but insisted the dispute should have no bearing on delicate free-trade talks.

The European Union is Brazil's biggest trading partner - accounting for a fifth of its total exports - and both sides are close to agreeing a far-reaching trade accord seen as crucial to the South American nation's emergence as a major world economy.

After 10 rounds of talks between Brussels and Brasilia and several meetings in Geneva, home to the WTO, neither side have managed to resolve a long running row over Brazilian import taxes that Europe says are unfair and break global trade rules.

"The protection of Brazil's domestic industry comes at the expense of Europe's imported goods and that is unacceptable," said an EU official close to the discussions on Thursday. "We have had many bilateral meetings but Brazil has taken no concrete steps."

The European Commission, which handles trade issues for the EU's 28 members, and the Brazilian government now have 60 days to try to end the dispute or face a legal process that could allow Brussels to impose sanctions, although that is years off.

Brazil's 30 percent tax on imported motor vehicles, as well as import levies on goods ranging from computers to smartphones and semiconductors, have also angered Japan, the United States and other big trading nations, which could joint the dispute.

But EU officials say there is no link between the WTO case and Europe's efforts to wrap up lengthy talks with the South American trade bloc Mercosur early next year.

If all goes to plan, that would see Brazil signing its first major free-trade agreement next year and gaining duty-free access to the European Union's market of 500 million consumers.

Brazil, which exports goods from chemicals to coffee, is already the fifth largest foreign investor in Europe and wants greater access to EU markets for its agricultural exports, especially beef.

"This WTO case is business as usual," said another official. "There is no link (between the trade talks and the WTO case)."

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