TRADE-BRAZIL: Attack the Best Method of Defence

By Mario Osava Reprint | | Print |

Mario Osava

RIO DE JANEIRO, Dec 4 1996 (IPS) - Brazil – under fire for protectionist measures in its home industries, particularly in the automobile sector – has begun attacking agricultural subsidies and barriers erected by wealthier trade blocs in the west.

Trade sources said the Brazilian tactics will be part of the campaign by the Southern Common Market (Mercosur) countries – Brazil, Argentina, Paraguay and Uruguay – and exporters of raw materials at next week’s meeting of the World Trade Organisation (WTO) in Singapore.

Chief targets of Brazil’s aggressive demands for greater trade liberalisation in the field of agriculture awould be the European Union and the United States, said Foreign Minister Luiz Felipe Lampreia.

Without such barriers abroad, Brazil could increase the value of exports of basic products export by four billion to five billion dollars a year – equivalent to nearly 10 percent of Brazil’s current export total, he said.

Brazil, however, wass opposed to submitting its own industry to any new neoliberal shock programmes, which would destroy some sectors while generating unemployment, warned Lampreia. He pointed out that since 1989, Brazil had slashed the average tariff from 58 percent to 12.5 percent.

The automobile sector, which in June 1995 raised the tariff on vehicles from outside the Mercosur to 70 percent, and which offers incentives to companies who establish plants in Brazil, has ignored an outcry from the United States, Europe, Japan and South Korea.

Similar protective measures favouring the national toy sector have been implemented since June. A 70 percent tariff adopted in the face of suspicions of dumping by Asian exporters is to expire on Dec. 31, but the government aims to extend it for three more years.

In the face of pressure from the local toy industry, the department of foreign commerce concluded a study that recommends maintaining provisional protective measures. Only in the year 2000 would the tariff return to the normal level of 20 percent.

Without the protective tariff, toys from China would destroy local manuafcturing, said Minister of Industry and Commerce Francisco Dornelles. A large increase in toy imports in 1995 led to the sacking of 9,700 of the 25,000 people employed by the sector, according to the association of toy producers.

Brazil’s plans to prolong protective measures were not shaken by the hard-hitting criticism of Chinese Prime Minister Li Peng during his visit here in early November.

Economic reforms, introduced since 1990, have caused havoc among some branches of industry that lost overnight the comfortable exclusivity of the national market. Textiles, footwear and cars from abroad flooded the local market, forcing cost-cutting, lay-offs and technological upgrading.

The simultaneous process of a rapid slashing of trade tariffs, the opening of borders to free trade in the Mercosur and an economic stabilisation programme, with devaluation of the currency and raising of domestic interest rates, brought serious problems to some sectors.

The government, bowing to manufacturers demands, made concessions to motor car and toy makers and the auto parts industry obtained assistance last month – which it considered ‘token.’ The tariff for car parts was doubled to 4.8 percent and will climb to 7.2 percent in 1997 and 9.6 percent over the two following years. The industry had hoped for at least 2.4 percent more each year.

The government also launched its offensive against against obstacles to Brazilian exports in wealthy countries, from where the pressure is strongest against its own protective measures.

The United States taxes Brazilian orange juice at 480 dollars a tonne – close to 48 percent of the product’s total price – and has set tough health restrictions on fruit and annual quotas on sugar and tobacco. The US also has banned beef imports.

The European Union, additional to the subsidies that affect agriculture in the entire world, limits access to its markets to all Brazilian meat and some fruit products through health standards. It also sets greater taxes on certain products, like coffee, to favour African or Latin American producers of illegal drugs.

The Brazilian offensive in favour of its agricultural exports and against industrial imports is spurred by the current trade deficit, which totalled 2.9 billion dollars from January to October – and is growing.