A study released yesterday at the Federation of Industries of the State of
São Paulo (Fiesp) advises the Brazilian government to seek a revision in its
tariff agreement with Chile under the aegis of the Mercosur.
Fiesp wants the Chilean government to grant Brazil the same advantages it gave the United States in a recent bilateral agreement which went into effect this year.
The study suugests that the Chile/US accord may be harmful to Brazilian industrial exports, in consequence of the American strategy of concluding bilateral agreement with the Andean countries.
The study was conducted through a partnership between the Fiesp, the Institute of Trade Studies and International Negotiations (Icone), and the Rubens Barbosa & Associates consulting firm.
It focused on Brazil’s 70 most-exported products to the seven member countries of the Latin American Integration Association (LAIA) – Bolivia, Chile, Colombia, Ecuador, Mexico, Peru, and Venezuela.
It compared the results with the preferences granted by Mexico to its NAFTA partners (the United States and Canada) and those conceded by Chile in its agreement with the United States.
The exports include automobiles, auto parts, meat, cotton textiles, soybeans, medications, sugar, and coffee beans.
Brazil’s exports to the seven countries covered by the study represent only 10.1% of Brazil’s total exports. And there is a heavy concentration in non-agricultural products.
While Brazilian non-agricultural exports represent 71% of the country’s total exports, they account for 91.5% of what Brazil sells to these seven countries.
It is in this sense that the country has more to lose, commercially, if these countries favor imports from the United States and NAFTA through a broadening of preferential tariffs.
According to the study, while the preferential tariff granted by Chile to imports from the United States amounts to a discount of 96.3%, Brazil obtained a discount of only 68.5% in the context of the LAIA.
The United States currently supplies 17.2% of Chile’s imports, while Brazil is responsible for 9.8%. But, according to the Fiesp, as a result the separate agreement signed by Chile and the United States, Brazil’s participation is liable to plummet.
The study warns of the risks of a deterioration in the preferential tariffs granted to Brazil by the LAIA, due to the greater discounts offered by the Andean Community countries to the United States.
That is, Brazilian exports to the LAIA countries will decrease over time to the point where they no longer have economic significance, in consequence of the more generous tariff discounts granted to competitors.
Moreover, the experts concluded that a diversion of trade can occur for some products in which Brazil is more efficient than the United States.
The document cites orange juice, shoes, sugar, and steel as examples.
The study suggests that, to minimize or neutralize the negative trade consequences of bilateral agreements between the United States and Latin American trade partners, Brazil should negotiate better preferential tariffs within the LAIA and seek quicker approval of the Free Trade Area of the Americas (FTAA).
Translator: David Silberstein