April 10, 2021

Brazil will not feel short-term impacts from ceasing to be a developing country



The decision of the United States to withdraw the status of Brazil and another twenty countries as “developing” nations will not have immediate negative impacts for the South American giant, although experts evaluate that the measure could curb some advantages that this condition brings, such as subsidy protection.

The protectionist decision on the part of the Government of Donald Trump looks mainly at China, in the middle of the commercial war between the two major economic powers of the world, although it could splash less thriving markets, as is the case in Brazil.

The United States action opens the way for the Government to investigate cases of subsidized exports in other countries, which obey some specific laws.

However, Brazil has no cause against it in terms of subsidies on Brazilian products, so the decision “does not imply any immediate impact for Brazil,” according to sources from the Foreign Ministry of the South American country.

The Ministry of Foreign Affairs pointed out that the objective of the measure announced by the US is “to limit the set of developing countries that have a more favorable treatment in decisions derived from subsidy investigations”.

He also considers that Brazil “has been modernizing its economy, in order to strengthen market forces,” so subsidy policies do not have to be a source of conflict.

OPPOSITION OF BRAZILIAN INDUSTRIALS

However, the National Confederation of Industry of Brazil (CNI) described the measure as “illegal” and “negative”, as it was taken “unilaterally, without taking into account the rules of the World Trade Organization (WTO)” .

“It is always a risk when trade disputes are resolved in isolation from a single country. For the Brazilian industry it is essential that the WTO remains strong and active,” said Carlos Abijaodi, director of Industrial Development of the CNI, in a note .

In March 2019, Brazilian President Jair Bolsonaro met in Washington with his American counterpart, Donald Trump, and requested support for Brazil’s entry into the Organization for Economic Cooperation and Development (OECD).

In return, the US president said that Brazil should abdicate its preferential treatment as a developing country in the World Trade Organization (WTO).

Also, since the arrival of the far-right Jair Bolsonaro to power, on January 1, 2019, the country has aligned itself politically and economically with the Trump Government and has launched initiatives to promote economic reforms in the country and “approximate the standards of the OECD. “

EXCLUSION OF SOCIAL INDICATORS

According to the statement released by the Trump Government, the change took into account aspects such as the development of a country and its participation in international trade, although social development factors, such as life expectancy, rate of life, were not considered for the decision. illiteracy or infant mortality.

The main consequence of the loss of the classification of a developing country could be, in effect, the way in which the WTO classifies Brazil.

According to the criteria adopted by the agency, it is the countries themselves that choose to declare themselves “in development”, which implies the granting of some commercial advantages, such as those related to terms and rates.

In that regard, the Brazilian Government reported that the country did not “renounce its status as a developing country,” but indicated that it would begin to renounce special and differential treatment in future WTO negotiations.

“The decision reflects the understanding that economic and commercial realities are dynamic. It is understood that this position favors the WTO and the continuity of its central role for global trade and economic development,” said a Foreign Ministry source.

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