Bridges Weekly Trade News Digest • Volume 8 • Number 42 • 8th December 2004
WTO Reviews Brazil’s Trade Policies
The central role of agriculture in Brazil’s trade policy despite the dynamism of its manufacturing and services sectors was highlighted by the WTO Trade Policy Review (TPR) of Brazil, held on 29 November and 1 December. Members appreciated Brazil’s active participation in the WTO and in the Doha talks in particular, but took note of its non-participation in the negotiations on the Information Technology Agreement (whereby Members undertook to reduce tariffs on Information Technology products to zero on an MFN basis) and non-ratification of the General Agreement on Trade in Services (GATS) protocols for telecommunications and financial services.
TPR Body Chair Thai Ambassador Puangrat Asavapisit’s concluding remarks also drew attention to concerns about the range and complexity of non-tariff charges on imports into Brazil, both at the state and at the federal levels. In addition, Members invited Brazil to exercise restraint in its use of contingency measures such as anti-dumping duties.
The Secretariat’s report (WT/TPR/S/140, available at http://docsonline.wto.org) noted that while trade, particularly exports, had already come to play an increasingly important role in Brazil’s economy, further liberalisation would promote greater competition and efficiency and help ensure sustainable growth. The TPR noted that Brazil’s tariff structure protected a number of manufacturing activities while implicitly taxing agriculture and mining.
The report noted that Brazil, as a major agricultural exporter, has much to gain from reducing distortions in world agricultural markets. Notably, the report said that though Brazil’s ethanol fuel industry has been largely liberalised, the Brazilian government continues to finance ethanol fuel stocks for energy security reasons. Ethanol is a by-product of Brazil’s sugarcane farming.
The report noted that although the agriculture sector only made up 8.2 percent of Brazil’s GDP in 2002, it accounted for a massive 42 percent of its exports in 2003, amounting to US$30.6 billion. The major export destinations were the US, EU and Japan. In value terms, soybeans are Brazil’s largest export, followed by wood and wood-derived products, meat, leather, sugar, and coffee, with exports of the latter two showing an upward trend. In 2002, agriculture employed 12.5 million people, or 18.8 percent of total employment in South America’s largest country.
Brazilian average agricultural tariffs lower than industrial ones
One of the few WTO Members who levy lower tariffs on agricultural products than on industrial goods, Brazil maintained an average nominal MFN tariff for the agriculture sector (WTO definition) of 10.2 percent in 2004, compared with an overall average tariff of 10.4%. All tariffs were bound, and Brazil applied Mercosur’s (Brazil, Argentina, Uruguay and Paraguay) Common External Tariff (CET), albeit with a number of exceptions.
The modest levels of agricultural support in Brazil largely go to low-income farmers and small producers, in the form of minimum price support and preferential rural credit complemented by marketing schemes and market-oriented price and stabilisation mechanisms. Option contracts are a relatively recent innovation. Although the private sector plays the key role in rural credit, the government intervenes by setting minimum credit requirements for banks, regulating interest rates and assuming risk coverage. Brazil has been notifying its export subsidy commitments to the WTO Committee on Agriculture since 1995, and did not grant any export subsidies before 2001.
The TPR cites a 2002 study that shows that agricultural market liberalisation through the Doha negotiations would significantly expand production in Brazil, partly due to substantial price increases in meat, dairy products and soybeans. It also cites two other studies that point to potential gains from Brazil from the FTAA (Free Trade Area of the Americas) liberalisation process; Brazilian farm products faced average tariffs of up to 30 percent in the Americans — the highest in the Western hemisphere.
"Brazil Continues to Liberalize; Further Steps Would Benefit the Economy and World Trade," WTO NEWS, 29 November 2004.