AMERICAS SUMMIT: FTAA Offers Brazil No Advantages

By Mario Osava Reprint | | Print |

Mario Osava

RIO DE JANEIRO, Apr 9 1998 (IPS) - Brazil is, in the short term, not interested in the Free Trade Area of the Americas (FTAA), something which explains its ambiguous position – joining in the action but putting the brakes on the US steam-roller.

There are at least three “crystal clear” reasons behind Brazilian resistence in the current conditions, according to Gilberto Dupas, co-ordinator of the Area of International Affairs in the Higher Studies Institute of the University of Sao Paulo.

Brazil is a “global merchant” trading more with Europe and Asia than the United States. The FTAA would mean offering the North American bloc privileges which would not be extended to its main trading partners.

Probable reprisals from the preferred and vital markets would make the balance of trade, already facing an unsustainable deficit, “explode” said Dupas. Brazil had a trade deficit of 8.372 billion dollars last year and 818 million in the last month.

With the FTAA, Brazil would also lose direct investments which would be diverted via North America. With a zero tariff rate on the continent, the transnationals would prefer to set up shop in the United States, close to the frontier with Mexico, he said.

The transnationals would thus make the most of the “systemic” advantages of the United States, like infrastructure, technology and lower cost financing, at the same time using the cheaper Mexican workforce in production for a hemisphere market free of trade frontiers, he explained.

A third reason is that “Brazil stands to win nothing” with the removal of tariffs on trade with the United States, because the charges of the northern power are already very low, and reducing them to zero will not encourage Brazilian exports much, he added.

Brazil, which already registers an increasing deficit in its trade with the United States, will have to give up more than twice the amount of protective tariffs, as is also the case for the rest of the South American countries.

Meanwhile, “the US no-tariff policies work very well,” affecting important sectors of Latin American exports like meat and sugar, subject to quotas, and Brazilian orange juice which pays a high specific tax, said Dupas.

Given this situation, Brazilian diplomatic efforts aim at “maintaining relations with the United States and the North American Free Trade Agreement, in the long term, on a possible agreement in the distant future” while the country tries to improve its “systemic competitiveness,” he concluded.

Brazilian FTAA membership “is lacking in political and economic sense,” said the more radical economist, Maria Conceicao Tavares, deputy for the opposition Workers’ Party.

“Brazil has an industrial and agricultural not complementary to that of the United States and a substantially lower level of productive integration, technological development and production.” Hence it cannot compete with North American industry, said an article by Tavares.

Thus, the Brazilian government should abandon the FTAA project and concentrate its efforts on consolidating Mercosur and Latin American integration, she recommended.

But the reality of the situation is not so simple for the Brazilian diplomats, whose capacity and efficiency are widely recognised, even by the opposition. Nor can Brazil be imagined staying out of a process like that of the FTAA.

Isolating itself would mean refusing the option of international economic insertion, although the FTAA process goes against the strategy of concentric circles – of successive integration in increasingly broader blocs – which started with Mercosur and should extend to South America before going on to the hemisphere.

The important factor is to obtain the best possible conditions in negotiations which will end in 2005. If Brazilian industry does not manage to prepare itself for a gradual removal of tariffs by then “it never will,” said Foreign Minister Luiz Felipe Lampreia.

And Brazil would lose much more by staying out of FTAA and distancing itself from the increasing flows of trade, said Jose Botafogo Gonzalves, one of the main negotiators in the FTAA meetings, recently appointed as minister of trade and industry.

The perspective of less tariff protection within eight years has inspired the country to accelerate reforms to strengthen the economy and the companies to increase their competitiveness,” he explained.

Moreover, there are many other irons in the fire.

Advances in the FTAA could favour agreements between the European Union and Mercosur, which could broaden the access of Brazilian products to their main market, added Botafogo.