Bridges Weekly Trade News Digest • Volume 10 • Number 41 • 6th December 2006
Brazil To Grant Duty And Quota Free Market Access To LDC Exports
The Brazilian government plans to start granting duty- and quota-free market access to exports from 32 of the world poorest countries in early 2007, according to officials in Brasilia.
The move would make Brazil the first developing country to accord unimpeded access to goods from the 32 least-developed country (LDC) Members of the WTO — not to mention put it ahead of several developed countries, including the US.
A spokesperson for Itamaraty, the Brazilian Ministry of Foreign Affairs, confirmed a 1 December report in business newspaper Valor Economico stating that Brazil would lift all barriers to LDC exports early next year. He said that Brasilia had not yet developed a specific timetable for doing so, but was aiming for the first half of 2007.
At the WTO’s Hong Kong Ministerial Conference in December 2005, governments agreed that "developed-country Members shall, and developing-country Members declaring themselves in a position to do so should…provide duty-free and quota-free market access" to LDC exports. It came with a caveat: countries were permitted to shield up to 3 percent of product types (tariff lines) from the duty- and quota- free obligation. Critics pointed out at the time that this exemption could potentially be enough to cover the handful of products that LDCs can export competitively.
The unrestricted market access was to enter into effect no later than the start of the Doha Round implementation period. With the Doha Round in limbo, however, Members have not been obliged to implement the Hong Kong decision.
International charity Oxfam congratulated Brazil for deciding to provide duty- and quota-free exports to LDC exports, calling on it to "implement the system as soon as possible, with minimal exceptions." "As a developing country Brazil was not obliged to make this move. They have done so, ahead of any deadline set by the World Trade Organization, and before other countries in a much stronger position," said Celine Charveriat, head of Oxfam’s Make Trade Fair campaign. "The US, Japan, and other countries in a position to do so, should follow Brazil’s example immediately and put forward unconditional 100 percent duty-free, quota-free offers of their own," she urged.
In its press release, Oxfam cited a 2006 study by the International Food Policy Research Institute (IFPRI) that projected that LDCs, along with eight other low-income countries, would see a USD 7 billion rise in real income if all OECD countries extended them duty- and quota-free access for all of their exports. Oxfam criticised the US in particular for maintaining "significant restrictions on key imports."
Washington is widely believed to be reluctant to open its politically sensitive textiles sector to competition from all LDCs, fearing a flood of low-cost imports, especially from Bangladesh.
Brazilian manufacturers raise concerns
Some Brazilian business groups, too, are anxious about the effects of fully liberalising all imports from all LDCs. According to the analysis in Valor, companies from the textile, electronics, chemical, and machine equipment sectors are most worried. Industry representatives have asked for some 1300 products to be designated as sensitive, while the government wants to accept no more than 900.
A major concern among Brazilian industry groups is that LDCs might become a conduit for Chinese exports to be assembled and exported duty-free to Brazil. Valor reports that they are lobbying the government to toughen the rules of origin requirements for the scheme, calling for at least 50 percent of the value of an eligible product to be added in an LDC, compared to the government’s proposal of 40 percent. LDCs complain that tight rules of origin requirements have left them unable to take full advantage of many other preferential market access schemes.
The Itamaraty press officer downplayed these concerns, pointing out that LDCs accounted for a minute fraction of the country’s imports — USD 500 million out of a total of USD 75 billion, of which close to 70 percent was accounted for by oil imports from Angola alone. He added that the countries in question were very poor and unlikely to emerge as major export platforms.
Nevertheless, he did not rule out the possibility of exempting textiles from the removal of duties and quotas in response to industry demands, although he said that the government’s "intention is to give preferential treatment to all products." Brazilian textiles manufacturers are complaining that Brazil has little to gain by giving duty-free access to their Bangladeshi counterparts. The Brazilian government is continuing to meet with industry to discuss its concerns about the initiative.
Oxfam’s Charveriat, for her part, insisted that manufacturers in a relatively advanced country such as Brazil had little to fear from LDC exports. She stressed that special interests should not be allowed to derail the implementation of duty- and quota-free access. "With simple and transparent rules of origin, and a functioning customs system, abuse of the concessions can be easily avoided," she said.
ICTSD reporting; "Brasil dará isenção de tarifas às 50 nações mais pobres do mundo," VALOR ECONOMICO, 1 December 2006.