Brazil's Trade Policy in the Doha Round
A Discussion on “Brazil's Trade Policy in the Doha Round”
with Ambassador Clodoaldo Hugueney Filho (Brazilian Mission to the UN)
Feb 23rd, 2006. In a public discussion held at the Carnegie Endowment for International Peace, Brazilian Ambassador Filho spoke about some of the cornerstones of Brazilian trade policy in the Doha Round.
Generally speaking, Filho underlined that commitments in the three fields of domestic support, market access in agriculture, and NAMA have to be evenly balanced in order to reach results. He said finding a balanced formula was essential. He called “absurd” a proposition by EU's trade commissioner Peter Mandelsohn to cut non-agricultural barriers in developing countries by 75%, while conceding not more than 39% cuts in agricultural barriers by developed countries.
1.Brazil's policy on Agriculture
Filho emphasized that he considered market opening to be essential essential for growth, and that Brazil would keep on moving in terms of agricultural reform. He said he considered domestic support reduction as “absolutely central” in this trade round and to be more important than the issue of market access, since market access issues could mainly be talked about on a bilateral basis.
He said Brazil is looking for significant cuts in the overall level of trade-distorting domestic support, and for substantial improvements in monitoring and surveillance of cuts and disciplines. He emphasized that Brazil is interested in an “ambitious proposal” and substantial outcomes of the Doha round, for this is where gains in development would come from.
He said he considered G20 proposals concerning trade barrier reduction to be a good middle ground proposal and stressed that the main contributions must be made by the EU. Filho said he sees room for compromise in the field of sensitive products.
The audience appreciatively took up his report on discussions among the G20. He said there were differences among G20 nations on agricultural trade issues, and that the G20-proposal was the result of long and tedious negotiations among heterogeneous parties. Therefore, the proposal does not necessarily reflect the exact interests of each of the members when it comes to issues such as special safeguard measures. Yet he said Brazil acknowledges upfront that even though positions are very different, every effort to converge has to be made. Otherwise the future of WTO negotiations would be at risk.
When asked about his appraisal of current American stands in trade policy Filho stated that he was critical of box-shifting attempts towards the blue box. He conceded that it was still better to move support from amber box to blue box status than to do nothing at all, but expressed skepticism about beneficial outcomes. Filho welcomed the fact that the EU and Japan were clearly moving in the question of domstic support, commiting themselves to decoupling of payments and other agricultural reforms. (Although they were not doing anything more concerning trade commitments than they would be doing anyway in the context of agricultural reform.)
Filho stated that a clear signal from the US was lacking and said “it's up to the US to reform”. He warned that if the US didn't send a signal of willingness to reform their agricultural sector (namely through a farm bill), the EU would be likely to blame the US alone for a failure of the trade round.
Filho said that if substantial results are to be reached, all countries will have to move. He said he stated a change in negotiators' attitudes. Negotiators are now trying hard to focus on the central issues, he said. He is confident that some results will be reached by April, the rest would then fall into place.
2.Brazil's policy on NAMA (non-agriculture market access)
Again, Ambassador Filho emphasized Brazil's interest in open and liberalized markets. Accordingly, he stated Brazil's offensive interest in the elimination of tariff escalations and the reducing of bound tariff rates. However, he admitted that Brazil does have defensive interests in the protection of certain industrial sectors that are not competitive so far.
In this context, Filho suggested economists should pay more attention on real impacts of trade liberalization on poverty reduction (implying that those impacts were far less beneficial than officially assumed). He expressed doubts about the validity of studies like the one recently published by the World Bank.
Filho directed attention to the huge amounts of “water” in Japanese, European and American amber boxes. He said Brazil is prepared to cut overall non-agricultural trade barriers by 1%, amounting to as much as 12 billion Dollars. Asked by a representative of the National Foreign Trade Council whether a 1% reduction could really be considered to be the “art of the possible”, Filho called calls for higher cuts “totally unjustifiable”.
He reiterated the G20-proposal of 54% Ag cuts in developed countries for a 54% cut in NAMA by developing countries.
When asked about the possibility of sectoral negotiations, he expressed doubts as to their effectiveness. He indicated that due to the fragility of the respective Brazilian industries, Brazil preferred high technology, automotives and chemical sector not to be subject to sectoral talks.
In what appeared to be an interesting aside of his talk, Filho touched the issue of biofuels. He said that Brazil was already experiencing strong impacts from the growing international demand for ethanol. He said the US and Brazil shared major interests in the field of biofuels and should therefore develop common strategies in this sector.
An interesting remark by Jean-Francois Boittin of the French Embassy conveyed that France would increasingly be willing to accommodate in the dispute over trade distorting measures in agriculture, since it considers the importance of its agricultural trade to be diminishing anyway.
3.Brazil's policy on Services
Ambassador Filho did not devote much time on the topic of services, since he deemed it to be of minor importance for the outcome of this trade round. He said he did not “see services as a cause of failure” of this trade round.
He said that in general, Brazil would be willing to negotiate questions of trade in services in a multilateral setting and thus remain faithful to its Hong Kong commitments. However, public sectors would be excluded from this offer.
Filho stated that the Brazilian service sector was mostly open, as could easily be seen by looking at who operated Brazilian services in finances, telecommunication, computers etc.
The main problem Brazil sees is that the service sector is mostly under-regulated in the developing world. Thus there is a perceived need to regulate and a resistance to bind to trade agreements that prohibit regulations. As an example for such resistance, Filho mentioned the strong Brazilian opposition to deregulate the insurance sector. As a consequence, agreements on services would have to include high implementation flexibilities, provisional clauses, safeguard measures, technical assistance and peace clauses (allowing for sufficient transition times).
with Ambassador Clodoaldo Hugueney Filho (Brazilian Mission to the UN)
Feb 23rd, 2006. In a public discussion held at the Carnegie Endowment for International Peace, Brazilian Ambassador Filho spoke about some of the cornerstones of Brazilian trade policy in the Doha Round.
Generally speaking, Filho underlined that commitments in the three fields of domestic support, market access in agriculture, and NAMA have to be evenly balanced in order to reach results. He said finding a balanced formula was essential. He called “absurd” a proposition by EU's trade commissioner Peter Mandelsohn to cut non-agricultural barriers in developing countries by 75%, while conceding not more than 39% cuts in agricultural barriers by developed countries.
1.Brazil's policy on Agriculture
Filho emphasized that he considered market opening to be essential essential for growth, and that Brazil would keep on moving in terms of agricultural reform. He said he considered domestic support reduction as “absolutely central” in this trade round and to be more important than the issue of market access, since market access issues could mainly be talked about on a bilateral basis.
He said Brazil is looking for significant cuts in the overall level of trade-distorting domestic support, and for substantial improvements in monitoring and surveillance of cuts and disciplines. He emphasized that Brazil is interested in an “ambitious proposal” and substantial outcomes of the Doha round, for this is where gains in development would come from.
He said he considered G20 proposals concerning trade barrier reduction to be a good middle ground proposal and stressed that the main contributions must be made by the EU. Filho said he sees room for compromise in the field of sensitive products.
The audience appreciatively took up his report on discussions among the G20. He said there were differences among G20 nations on agricultural trade issues, and that the G20-proposal was the result of long and tedious negotiations among heterogeneous parties. Therefore, the proposal does not necessarily reflect the exact interests of each of the members when it comes to issues such as special safeguard measures. Yet he said Brazil acknowledges upfront that even though positions are very different, every effort to converge has to be made. Otherwise the future of WTO negotiations would be at risk.
When asked about his appraisal of current American stands in trade policy Filho stated that he was critical of box-shifting attempts towards the blue box. He conceded that it was still better to move support from amber box to blue box status than to do nothing at all, but expressed skepticism about beneficial outcomes. Filho welcomed the fact that the EU and Japan were clearly moving in the question of domstic support, commiting themselves to decoupling of payments and other agricultural reforms. (Although they were not doing anything more concerning trade commitments than they would be doing anyway in the context of agricultural reform.)
Filho stated that a clear signal from the US was lacking and said “it's up to the US to reform”. He warned that if the US didn't send a signal of willingness to reform their agricultural sector (namely through a farm bill), the EU would be likely to blame the US alone for a failure of the trade round.
Filho said that if substantial results are to be reached, all countries will have to move. He said he stated a change in negotiators' attitudes. Negotiators are now trying hard to focus on the central issues, he said. He is confident that some results will be reached by April, the rest would then fall into place.
2.Brazil's policy on NAMA (non-agriculture market access)
Again, Ambassador Filho emphasized Brazil's interest in open and liberalized markets. Accordingly, he stated Brazil's offensive interest in the elimination of tariff escalations and the reducing of bound tariff rates. However, he admitted that Brazil does have defensive interests in the protection of certain industrial sectors that are not competitive so far.
In this context, Filho suggested economists should pay more attention on real impacts of trade liberalization on poverty reduction (implying that those impacts were far less beneficial than officially assumed). He expressed doubts about the validity of studies like the one recently published by the World Bank.
Filho directed attention to the huge amounts of “water” in Japanese, European and American amber boxes. He said Brazil is prepared to cut overall non-agricultural trade barriers by 1%, amounting to as much as 12 billion Dollars. Asked by a representative of the National Foreign Trade Council whether a 1% reduction could really be considered to be the “art of the possible”, Filho called calls for higher cuts “totally unjustifiable”.
He reiterated the G20-proposal of 54% Ag cuts in developed countries for a 54% cut in NAMA by developing countries.
When asked about the possibility of sectoral negotiations, he expressed doubts as to their effectiveness. He indicated that due to the fragility of the respective Brazilian industries, Brazil preferred high technology, automotives and chemical sector not to be subject to sectoral talks.
In what appeared to be an interesting aside of his talk, Filho touched the issue of biofuels. He said that Brazil was already experiencing strong impacts from the growing international demand for ethanol. He said the US and Brazil shared major interests in the field of biofuels and should therefore develop common strategies in this sector.
An interesting remark by Jean-Francois Boittin of the French Embassy conveyed that France would increasingly be willing to accommodate in the dispute over trade distorting measures in agriculture, since it considers the importance of its agricultural trade to be diminishing anyway.
3.Brazil's policy on Services
Ambassador Filho did not devote much time on the topic of services, since he deemed it to be of minor importance for the outcome of this trade round. He said he did not “see services as a cause of failure” of this trade round.
He said that in general, Brazil would be willing to negotiate questions of trade in services in a multilateral setting and thus remain faithful to its Hong Kong commitments. However, public sectors would be excluded from this offer.
Filho stated that the Brazilian service sector was mostly open, as could easily be seen by looking at who operated Brazilian services in finances, telecommunication, computers etc.
The main problem Brazil sees is that the service sector is mostly under-regulated in the developing world. Thus there is a perceived need to regulate and a resistance to bind to trade agreements that prohibit regulations. As an example for such resistance, Filho mentioned the strong Brazilian opposition to deregulate the insurance sector. As a consequence, agreements on services would have to include high implementation flexibilities, provisional clauses, safeguard measures, technical assistance and peace clauses (allowing for sufficient transition times).
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