The speed with which alliances are occurring between other blocks is intense and we can be isolated. Example is the Free Trade Agreement between China and Switzerland.
By Ingo Ploger
The Brazilian businessmen have claimed for some time a more effective position from the government with regard to trade agreements with other countries. The election was confirmed recently with a letter from the Institute for Studies in Industrial Development (Iedi) sent to the presidency and with the disclosure of External Integration Agenda of the Federation of Industries of the State of São Paulo (Fiesp). However, even with all the arguments and figures explained in both documents, no action was taken.
Brazil is far behind other nations with regard to preferential trade agreements. While Chile has closed 62 partnerships, Colombia 60 and Peru 52, Brazil remains trading internationally through 22 preferences, and in the last twenty years we celebrate only three: Israel, Palestine and Egypt. Now, the need for greater attention to this agenda is shown with the celebration of the Alliance for the Pacific, agreement which encompasses Chile, Peru, Mexico and Colombia and consensus has been reached with already 90% of the items. Such an agreement, to which Brazil is just watching, not only facilitates the integration among the countries involved but also with the European Union and the U.S., blocks which we have no access.
We need urgently to change our agendas because the speed with which alliances are occurring is intense and can isolate Brazil with respect to international trade. An example is the recent and unprecedented Free Trade Agreement between China and Switzerland.
However, the Alliance for the Pacific is just one of many Preferential Trade Agreements that have been closed in recent years. According to the World Trade Organization (WTO), by January 2013 were performed 543 bilateral agreements worldwide, of which more than half were traded in the last ten years and 354 are in force. This proliferation creates a new worldwide trade, mainly due to the impasse of the Doha Round negotiations and the lack of update of WTO rules. In this sense, it is important that Brazil set what its interests are and establish principles to secure a position in this scenario, at the risk of suffering an isolation that substantially affect our industry.
Currently, our international operations is almost entirely done by Mercosur, which had its competitive and comparative advantages for many years, but with the current situations in Argentina and Venezuela is struggling to position themselves in relation to important blocks. Today, being the largest economy in the block, the more sustainable, with the lowest rates of inflation and higher growth, Brazil carries a very high weight trying to get all the other partners to a common denominator. Recalling that the recent agreements concluded by our neighbors overlap tariff preferences we've gained and this makes us progressively lose the expression on the continent. What we are little, we need more.
Therefore, we sought urgently that Brazil takes the lead of this block to force a faster pace on these issues and regain the space lost in closer to the dynamics observed in other Latin American countries. In this context, we suggest two outputs. One would be Brazil stand out against the other members and offer to the European Union, for example, a much bolder proposal to accelerate the negotiation that is already underway. The other is to insert ourselves in a larger context in relation to the Pacific Alliance, an agreement that is occurring in our neighborhood and with which we would lose space for both the U.S. and China, the market of high relevance especially in relation to processed products.
In addition, there is a strong imbalance between what we are and what we can offer absorbing world trade. While we intensely increase our importing agenda of processed benefited products especially from Asia, but also the U.S. and the European Union, our exports have greatly advanced the issue of commodities, mainly represented by agro commodities, agro industrials, minerals and energy. That's good, but not enough. In the current context, there is also a replacement of the traditional goods produced entirely in one country by a global production chain involving a trade in tasks, since APCs reduce transaction costs and eliminate barriers to production internationally. With the limited number of agreements, Brazil is out of the chain and substantially compromises its global insertion. In this sense, we need partnerships with regions that can integrate our businesses, ie, sources of investment and technology, such as Europe, Japan and North America.
Anyway, back to say that if we do not seek preferences through trade agreements we will lose even more space and opportunities not only in the categories of products, but also supply chains. We believe that a closer relationship with the international economy brings many challenges and the low competitiveness of our industry is a significant obstacle, but also highlight that isolation is not an option for our country. Whereas negotiations of this kind are complex and slow, we need urgently to change our guidelines and daring, because the speed with which alliances are occurring between other blocks is intense and can isolate Brazil regarding to international trade. An example is the Free Trade Agreement between China and Switzerland, signed recently, which is considered a historic agreement, the first of its kind signed between Beijing and one Western European country.
We need substantial changes to achieve Brazilian strategies and, to this end, daring and urgency are necessary from the leaderships related to foreign trade.
Ingo Ploger is president of the Brazil Business Council of Latin America (CEAL)