TRADE: WTO Gives Brazil’s Liberalisation its Seal of Approval

By Gustavo Capdevila Reprint | | Print |

Gustavo Capdevila

GENEVA, Nov 2 2000 (IPS) - Brazil’s progress report on the liberalisation of its economy won the approval of most of World Trade Organisation (WTO) member countries, but not of the United States.

Brazil successfully passed this week’s exams of its trade policies, which the WTO conducts periodically of all its members. Its highest mark was received in recognition of the country’s recovery from the financial crisis of 1997 and 1998.

Its strength was due in large part to healthy macroeconomic policies and the liberalisation measures applied throughout the course of the decade, ruled the WTO.

Brazil’s undersecretary of Foreign Trade and Integration, Jose de Graça Lima, emphasised that the process included the privatisation of 24 state enterprises between 1996 and 1999.

The US delegation at the WTO observed that the Brazilian government still dominates certain sectors of the economy and wondered about its plans for further privatisations, particularly in the petroleum and electrical energy sectors.

The United STates acknowledged that Brazil had opened up its telecommunications, but criticised the persistence of certain restrictions on foreign ownership in that sector.

In their report, the members of the WTO, meanwhile, recognise that Brazil unequivocally abandoned the industrialisation model based on import substitution.

On this point, however, discrepancies with the United States were particularly evident, as the North American country’s delegation complained that “the legacy of Brazil’s longstanding import substitution and inward-looking policies often remains a heavy burden on doing business there.”

Brazil and the United States are home to the two largest economies of the western hemisphere, with bilateral trade reaching 24 billion dollars in 1999, and US investment in Brazil totalling 35 billion dollars over the last five years.

“In general, Brazil’s tariffs remain high, increasing sharply the price of both inputs and finished products,” stated the US representation.

“There are other forms of barriers to market access as well,” claimed the United States, for example, “imports and exports continue to move at a slow pace through customs, destroying the productivity gained through electronic trade.”

Poor implementation of control measures contributes to this problem. They also hamper Brazil’s competitiveness and limit Brazilian access to the most advantageous products and modern technology, points out the United States, and the climate for doing business in Brazil is not what it should be.

US criticism also focussed on “the lack of transparency in administrative procedures and an arbitrary application of regulations, which creates uncertainty and discourages both trade and investment.”

Other WTO members expressed similar concerns about the proliferation of trade regulations in Brazil.

The frequent utilisation of provisional arrangements, such as decrees, constitutes one of the chief difficulties in that area, according to one complaint.

Mercosur (Southern Cone Common Market), made up of Brazil, Argentina, Paraguay and Uruguay, also merited comment during the three-day discussions of the WTO Trade Policy Review Body.

Several delegations requested more detailed information on the South American bloc’s trade regime. Hong Kong expressed alarm about supposed trade distortions that would arise once the Mercosur accord was fully operational.

De Graça Lima affirmed that Mercosur would eliminate by year- end the three-percent increase of its common external tariff, introduced as a temporary measure Jan 1, 1998.

The tariff hike, which triggered criticism from trade partners outside the South American bloc, was established in order to dampen the effects of the 1997 and 1998 foreign economic crises on Mercosur, explained the Brazilian diplomat.

The WTO report conceded that Brazilian governmental support for the agricultural sector is modest, especially when compared to government subsidy levels in other regions.

But, though it is limited, such backing could distort the global agricultural market in which Brazil is among the leading suppliers, especially in sugar and alcohol, said the multilateral trade institution.