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Brazil and the free trade.
by Claudio Brandao
www.brazilcenter.blog.com
Feb-2-2010
Brazil and the Doha Round 2010
Brazil and the free trade.
We all know that Brazil has become an important player on global arena and it will host the Summer Olympic Games in 2016, the United Nations Sustainable Development Summit in 2012, and the Soccer World Cup in 2014, among other international events covering many sectors. We also know that these events are the results of its economical and political success. What many people don’t know is that Brazil has become an important defender of international trade liberalization and that this country is at the negotiation table to allow entrance of new players into its market.
Brazilian economy is the 9th biggest in the world and will be the 5th by 2020. Although it has a strong economy, a huge population of 191 million, Brazil only participates in 1.2% of the world trade. Using the multilateral institutions like international Monetary Fund, the World Trade Organization and others, the Brazilian market opening has been seen as a strategic asset to bargain its political ambitions in the international marketplace.
Brazilian society understands that competition among economic agents is one of the key components to relief poverty, reduce inflation and boost the domestic market. Using a heterodox approach on inflation and supply, the end of monopolies and the import and export tariffs, Brazilian policymakers and society embraced the competition among companies, goods and services. Inflation and monopolies are understood as the main enemy for the poor. And these enemies can be beaten through the most competitive supplier sector reducing price and better allocating the economic resources. As a society based on the service sector (68% of its GDP), Brazilian society absorbed the idea of competition and free tax barriers as some essential inputs for its business environment.
When one talks about free trade, it seems like there is only an interest in exporting its goods and services. But more than reaching international markets and being part of the global supply chain, Brazil is interested in improving its domestic market and making it competitive. Free trade is a crucial instrument to lower inflation and keep market growth increasing "side by side".
More than 30 million people have reached the middle class level and Brazilian economy is expected to grow more than 5% in 2010. Now the 100 million Brazilian consumers have the opportunity to enhance their purchase basket with the first-time purchase of houses, computers and flex fuel cars. This vivid domestic market offers a great opportunity for joint-ventures and commercial partnerships among small and medium-size businesses.
The negotiations on free trade, international monetary regulations and environment are being held within the multilateral institutions considering the poor countries, the developed and developing nations’ characteristics and their needs. The forum to negotiate trade agreements in the global multilateral level is the World Trade Organization.
Doha Round: the global balance in the multi-polar world.
The Doha Round is the current multilateral negotiation at World Trade Organization (WTO) that started in 2001. These negotiations have as its object the General Agreement on Trade in Goods, Service and Intellectual Property between all the 153 WTO members. This negotiation seeks to further liberalize markets thru the services, agriculture and intellectual property.
The Doha Round is about to complete 9 years of negotiations in November 2010. The same long-running negotiation occurred in the 1980s with the Uruguay Round. Back then, the need to institutionalize the international trade after the collapse of the Soviet Union was the main power force to move negotiations forward. The world needed clear rules to guide Globalization . Furthermore, the presence of big corporations from Europe and United States helped to liberalize international market results. The Uruguay Round was concluded in 1994. To better understand, this agreement was so important that it created World Trade Organization itself.
Nowadays, those players in the Uruguay Round seem absent in this new free trade effort; today the governments, consumers and small businesses (from developed, under-developing and poor nations) are the main force pushing for its conclusion.
One of the main components to understand the current status of the negotiation is to observe the shift among the actors at the negotiation table and their needs.
As the Peterson Institute of International Economics observed, there is a “new agenda” on global trade. Previously the presence of large company’s interest drove the multilateral negotiations. Now this new agenda brings a new set of actors to the negotiation table. According to the Peterson Institute, the consumers and small businesses are the main parties interested in the Doha Round.
New actors: Focus on Small Businesses and Consumers
Today the imperative to conclude Doha Round and further liberalize international trade comes from the need of economic security. The economic security concern was brought by the population worried about environmental and financial insecurity better observed during the first’s years of this current decade.
This new agenda has the focus on concerns of consumers (food and energy security); the concerns of workers, small and mid-size companies (concerned with credit and currency security). Brazilian government is recognized worldwide as one of the most active defenders of this "new agenda" and specifically the one concerned with free trade as one of the main answers to that demand.
As a result of their domestic political pressure the governments of the G-20 nations agreed during the last meeting in London on April 4th 2009 that the political leaders will be driving the negotiations. The conclusion of Doha Round has been seen as part of the solution.
Not only individuals are consumers. Small and medium-size companies are consumers as well. They benefit from reduction of import barriers for their inputs. These companies can boost productivity and their quality by importing and adding technology, know-how and services into their production.
As an example of this economic security concern, Brazilians are facing a shortage of high qualified workers in its labor market. Trade and service industries face an insufficient supply of high qualified workers to fill job vacancies like engineers for sectors like building construction, agribusiness and tourism. Both businesses and analysts fear a repetition of the 2008 “labor blackout,” which would limit growth in the Brazilian economy.
Even though Brazilian market is relatively closed due to tax barriers to industrialized products and services, government, business community and society understand that free trade is one of the main keys to sustainable growth. For this reason Brazil has been seen as a great supporters and an active actor in this multilateral free trade agreement.
Conclusion: A link to the market:
Today there is a huge opportunity for the service suppliers’ sector in the US to offer its products to those emerging markets like Brazil, Turkey, India, South Africa and Russia. American companies have the opportunity to supply its enormous demand for high qualified services especially in Brazil.
For the strategy to be updated with the new world reality these companies interested in the international market need to form alliances with companies and institutions abroad. These partnerships would bring know-how regarding the target market and that business scenario. This strategy would also allow these companies to offer their services and know-how to their counterparts in the international marketplace.
Considering the current negotiations on Doha Round and the new world agenda, the small and medium-size companies must look at the international scenario, the actors and the business opportunities abroad. The companies willing to be a part of the global economy must consider the Brazilian sophisticated and vibrant marketplace for their international market strategy because Brazil is already targeting the world. “Brazil's Lula: finish Doha round or face chaos”,
REUTERS, March 2009. (http://www.alertnet.org/thenews/newsdesk/N02409951.htm) Federation of Industries of Sao Paulo on the interruption of Doha Round,
http://www.fiesp.com.br/agencianoticias/2008/12/12/doha_interrupcao_negociacoes.ntc “The Fight against Protectionism”, World Trade Forum, January 2009. (http://www.weforum.org/en/knowledge/Events/KN_SESS_SUMM_26931) “Brazil GDP to Grow 5.2% in 2010 on Investment Rebound”. January 2010. (http://www.businessweek.com/news/2010-01-04/brazil-gdp-to-grow-5-2-in-2010-on-investment-rebound-update1-.html) “New promises on free trade”, International Centre for Trade and Sustainable Development (ICTSD) (http://ictsd.net/i/news/bridgesweekly/44813/) ”Trade officials urge G20 to accelerate Doha Round negotiations to combat crisis”, World economic Forum, January 2009. (http://www.weforum.org/en/media/Latest%20Press%20Releases/AM09_PR_Trade) “Multilateralism beyond Doha” Paterson Institute, 2008. (http://www.iie.com/publications/interstitial.cfm?ResearchID=1011) “Ministers Target 2010 for Doha Conclusion, but Gaps Remain.” International Centre for Trade and Sustainable Development (ICTSD),January 2010, (http://ictsd.org/i/wto/geneva/daily-updates-2009/geneva-2009-bridges-daily-updates/62867/) “País já enfrenta falta de mão de obra”. O Estado de Sao Paulo. January 25, 2010. (http://www.estadao.com.br/estadaodehoje/20100125/not_imp500818,0.php) “Brazil to dispute US subsidies.” Financial Times. August 2008.
(http://www.ft.com/cms/s/0/7928a77a-6183-11dd-af94-000077b07658.html?nclick_check=1) “America is losing the free world”, Financial Times, January 05,2010.
http://www.ft.com/cms/s/0/cd24b6ac-f999-11de-8085-00144feab49a.html "End of banana wars brings hope for Doha.” Financial Times, December 16, 2009.
(http://www.ft.com/cms/s/0/6a8e0ba4-e9e2-11de-ae43-00144feab49a.html
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