A framework for trade policy

It makes sense for Brazil to embrace a reform of its trade policy designed to revert the trend of concentration of income that characterized its industrialization process in the past. Protection to local industry – in the form of high tariffs, subsidies or otherwise – which amounts to potentially disputable trade restrictions and discrimination against trade partners should give place to a gradual agenda of tariff reduction so as to make Brazil’s economy more competitive. That would also, ultimately, satisfy the needs of its population more efficiently.

As a country which is self-sufficient with respect to those assets that are truly essential–namely, energy and food – Brazil does not, unlike most industrial powers, depend on imports to tackle the most essential needs of its population. Brazil is an agro-environmental power – as defined by Ambassador Roberto Jaguaribe – which requires inputs and intermediate goods to increase the productivity of its industrial sector; heavy investments for its infra-structure; as well as imports of industrialized goods that can be manufactured more competitively abroad so as to meet the requirements of low-income consumers.

Brazil’s agenda for trade reform must be coupled with an effort aimed at ensuring enhanced access to markets for agricultural goods in order to avert trade imbalances that would necessarily result from unilateral trade concessions; in particular with respect to processed goods, which are subject to trade restrictions that do not apply to goods in natura.

At the same time, the G-20 has now conferred upon the World Trade Organization a mandate to reform the multilateral trade system around bases that allow for the permanence of its current members. This amounts to a valuable opportunity to resume efforts aimed at including the agricultural sector within the rules-based system that was agreed to multilaterally.

The main challenge at stake is to accommodate, if partially, the tensions between the two main trade powers. However, the endeavor should not fail to resolve an unjustifiable feature of the trade system, which is discrimination against an entire productive sector – namely, agriculture.

It would be counterproductive, to say the least, to attempt at enhanced trade relations with the numerous countries that purchase our goods and services while, at the same time, issuing political and/or diplomatic statements which are controversial or indeed run contrary to commitments that Brazil has entered; as well as to established constitutional principles.

What Brazil should pursue is a strategy aimed at ensuring the country’s autonomy and integration to the global community. This would be undermined by the pursuit of any automatic alignment which, by definition, runs contrary to the neutrality that is consistent with, and instrumental to, international trade transactions.

Regardless of the state of, and prospects for, the world economyin early 2019, Brazil’s incoming administration ought to pursue those reforms that enable the resumption of sustainable economic development – which is a pre-condition for the reduction of poverty and inequality. The pursuit of growth in trade flows under multilateral rules is bound to be a central ingredient in this endeavor.

L&S Authors

José A. Graça Lima

José A. Graça Lima

Of Counsel

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