TRADE POLICY REVIEW:
Concluding remarks by the Chairperson
- Trade Policy Review: Brazil
The seventh Trade Policy Review of Brazil has offered us a good opportunity to deepen our understanding of recent developments and challenges to the trade, economic, and investment policies of Brazil. As one of the most active Members of the WTO, the 9th largest economy in the world in 2016, and the biggest economy of Latin America, Brazil plays an important and valued role in the multilateral trading system. Indeed, the more than 900 advance written questions submitted by 27 Members and the 45 delegations that took the floor underline the importance attached to Brazil’s trade and investment policies and practices.
I would like to thank the Brazilian delegation, led by the Director of the Economic Department of the Ministry of Foreign Affairs, Mr. Pedro Miguel da Costa e Silva. Also, I would like to thank our discussant Ambassador Gennady Ovechko of the Russian Federation for his insightful remarks, and all the delegations that took the floor for their valuable contributions to this Review.
Since the time of its last TPR in 2013, Brazil has faced both internal and global headwinds. It recorded negative GDP growth of 3.8% and 3.5% in 2015 and 2016 respectively, and unemployment rose to 11.3% by 2016. Nevertheless, thanks to its sound fundamentals, Brazil continued to attract substantial foreign investment ranging between 2% and 3.3% of GDP throughout the review period, maintaining its position as the top destination of FDI in the Latin American Region. The country resumed economic growth in the first quarter of 2017 and, according to the authorities, unemployment is also falling. The Brazilian financial system has remained stable and inflation has been successfully contained. Members noted with appreciation that Brazil had stayed the course of fiscal responsibility.
Brazil has remained committed to the multilateral trading system striving to make it more open. Members commended Brazil for furthering its WTO commitments, for example, by ratifying the TFA and depositing its instrument of acceptance of the Fifth Protocol on Financial Services, and some of them reiterated their encouragement for Brazil to participate in the plurilateral GPA. Many Members commended Brazil’s active, constructive and engaged participation in all areas of WTO work, in particular negotiations on agriculture, fisheries subsidies, as well as discussions on investment facilitation and e-commerce. Members also referred to its commitment in the drive toward the expansion of MERCOSUR’s regional trade agreements, including outside the region, and the inclusion of GATS plus commitments, considered by some as a complement to the multilateral framework.
Members welcomed Brazil’s efforts to streamline customs procedures through its Single Window project and the upgrading of its Authorized Economic Operator programme. They noted with satisfaction the progress made towards enabling online submission of documents, and Brazil’s plans to implement fully digitalized export and import procedures by end-of 2017 and 2018, respectively.
With aggregate two-way trade in goods and services representing about 25% of GDP throughout the review period, the significance of trade vis-à-vis the size of the Brazilian economy remained relatively low. Mr. da Costa e Silva pointed out during the first day of the TPR and today that this ratio is similar to that of some other large economies in the world. Some Members raised questions about plans to raise the productivity and competitiveness of the economy so as to facilitate the integration of Brazilian companies into global value chains referring to Brazil’s current standing in indicators such as the Doing Business Report of the World Bank. While Members acknowledged Brazil’s robust performance in attracting foreign investment, they expressed concern over the level of complexity of its business environment and encouraged improvements in a number of areas, such as easing the regulatory burden. During this TPR, the Brazilian delegation shared information on recent and ongoing reforms in areas such as fiscal responsibility, the modernization of the labour law and the model for public concessions and privatisation in certain sectors to attract more investment. Mr. da Costa e Silva also referred to Brazil’s recent request to initiate accession procedures to the OECD as a signal of Brazil’s “commitment to change”.
Some Members flagged Brazil’s complex tax regime as a major obstacle to doing business and raised concerns about possible tax distortions between imported and domestic products. They also noted that the large gap between Brazil’s bound and applied tariffs was generally seen to undermine the predictability of its trade regime. Members also inquired about Brazil’s extensive use of non-automatic import licensing and anti-dumping measures as well as its continued reliance on local content and local production requirements, included in incentive schemes and in public procurement, noting that the latter had recently been relaxed in the hydrocarbons sector. Some Members expressed concern about support measures or programmes in certain manufacturing activities, such as INOVAR-Auto in the automotive sector, and expressed interest in following up the development of new programs such a as ROTA 2030.
Several Members referred to barriers affecting their exports to the Brazilian market due to operational aspects of Brazil’s TBT and SPS systems. They also encouraged Brazil to ensure longer periods for public consultations, and between publication and entry into force of these measures. Regarding intellectual property, although Members welcomed Brazil’s recent steps to reduce the significant backlog of applications for registration of IPR titles, notably patents and trademarks, they encouraged further efforts to address shortcomings in some areas of IPR protection and enforcement.
While acknowledging the relatively low level of Brazil’s domestic support in agriculture, several Members asked about some trade policy instruments and practices, for example, tariffs being higher than in manufacturing, SPS, rural credit and insurance. Several Members appreciated Brazil’s green energy policy and achievements, including reduction of state involvement in this sector. Recognizing the reforms undertaken, some Members noted the persisting influence of the state‑controlled PETROBRAS in the hydrocarbons market. Services were recognized as key drivers for future growth and some Members encouraged Brazil to increase productivity and competitiveness of the sector by, inter alia, reducing limitations in certain activities.
The above are some of the key issues that had emerged in our discussion. I hope that the Brazilian delegation will take into account and further reflect on the many constructive comments, both broad and detailed, that it has received during this Review. Finally, I would like to thank all those that participated in our discussion, and I look forward to receiving the answers to any outstanding questions within the next month, at which point the Review will be successfully concluded.