The European Union has launched a case against Brazil at the World Trade Organisation over import taxes – covering everything from cars to computers.
Brussels believes the import tariffs are unfair and break global trade rules.
Brazil imposes a 30 percent tax on imported motor vehicles as it seeks to build up a local car industry.
Carmakers are offered tax breaks if they invest there, which has prompted European companies – including BMW, Volkswagen and Jaguar Land Rover – to build plants in Brazil.
A German lawmaker in the European Parliament, Daniel Caspary, says EU car exports to Brazil fell by more than 11 percent this year partly because of the taxes.
Brazil insisted it is “complying with international trade rules”.
The 30 percent import levies which also apply to goods ranging from computers to smartphones and semiconductors, have also angered Japan, the United States and other big trading nations, which could join the dispute.
Brussels stressed the dispute should have no bearing on delicate free-trade talks with Mercosur, which brings together Brazil, Argentina, Uruguay, Paraguay and Venezuela.
Brazil would be a major beneficiary of that far-reaching trade accord, but without a deal, it will lose its favourable access to the European Union next year because it is no longer considered a poor developing nation but an upper-middle income one.
After 10 rounds of talks and several meetings in Geneva, home to the WTO, the two sides have failed to resolve the long-running row over the import taxes.
“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. “We have had many bilateral meetings but Brazil has taken no concrete steps.”