More Trade Agreements

A study on tariff barriers, promoted by the National Confederation of Industry (CNI), shows that Brazilian exports are subject to import tariffs that cost, on average, twice as much as those applied to countries with similar geographical and economic characteristics to Brazil. According to the study, the average import tariff applied to Brazilian products abroad is 4.6%, while the average for other countries is 2.3%.

According to the study, among 18 selected countries, Brazil is subjected to the third-highest import tariff (4.6%) when accessing foreign markets, only behind Argentina (5.3%) and India (4.8%). In Latin America, with the exception of Argentina and Brazil, other countries stand out for their low average tariffs when exporting their products: Colombia (1.2%), Chile (1.2%), Peru (1.1%), and Mexico (0.4%).

In the group of BRICS nations, Brazil’s tariff is the second-highest, behind India but lower than the other economies: China (3.7%), South Africa (2.4%), and Russia (2.0%). The study also shows that, regarding manufactured products, Brazil has the fourth-highest tariff among the selected countries. The tariff is 3.3%, trailing only India (4.4%), Indonesia (3.8%), and China (3.6%).

It doesn’t take an expert in international trade to conclude what is obvious: the country is in this situation because over the years, under both conservative and left-leaning governments, its leaders have never been concerned with formalizing trade agreements with other countries or blocs with which they could negotiate more favorable tariffs. According to CNI data, the countries that have agreements with Brazil represent only 7% of world trade.

The only exception is Mercosur, created in 1991 by the Treaty of Asunción, which is currently at risk due to disagreements between the governments of Brazil and Uruguay, on one side, and Argentina on the other, regarding a possible opening that would allow each partner to negotiate individual agreements outside the bloc. If this possibility materializes, the idea of a bloc will collapse, and Mercosur is likely to wither away.

The remaining hope is that in 2022, the Mercosur-European Union (EU) agreement will be signed, provided that issues related to concessions are resolved after more than two decades of negotiations. If approved by the parliaments of both blocs’ countries, the agreement will represent 25% of the world economy. Furthermore, around 90% of the products from both blocs will no longer be subject to import taxes, as the most sensitive items will have to comply with a tariff reduction schedule, which, in some cases, will span 15 years.

In any case, the foreign trade policy cannot stop there because it constitutes a state policy, regardless of the party that wins the 2022 presidential elections. Mercosur must ratify the agreement with the European Free Trade Association (EFTA), which includes Switzerland, Norway, Iceland, and Liechtenstein, and advance in negotiations with Canada, the United Kingdom, South Africa, Mexico, and Central American countries. Without neglecting to deepen a dialogue agenda with the United States. All these partners represent opportunities for trade in high-value-added goods, services, and investments.

All of this could mean a counteraction to the deindustrialization process that the country has been going through since 2010, which does not imply any impediment to the growth of segments such as iron ore, soy, oil, cellulose, corn, sugar, beef, and poultry, which are in high demand in the international market. What needs to be taken into account is that manufactured products have higher added value and create more job opportunities, essential factors for the country’s domestic market to also thrive and overcome the crisis.

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Liana Lourenço Martinelli, lawyer, postgraduate in Business Management and International Trade, is the manager of institutional relations for the Fiorde Group, composed of Fiorde International Logistics, FTA Transport and Warehouses, and Barter International Trade. Email: fiorde@fiorde.com.br. Website: www.fiorde.com.br

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