Brazil proposes lowering tariffs on industrial goods in exchange for agricultural market access

Mylena Fiori

Reporter - Agência Brasil

Hong Kong - Brazil is willing to reduce its tariffs on imported industrial goods in exchange for an improved offer by the European Union facilitating access to agricultural goods from developing countries. According to the minister of Foreign Relations, Celso Amorim, Brazil has already signaled its willingness, but the gesture fell flat. "I made a gesture and was misunderstood," the minister commented last night (12) in Hong Kong, on the eve of the 6th Ministerial Meeting of the World Trade Organization (WTO).

The Brazilian proposal was disclosed around two weeks ago by the minister at this year's final meeting of the Economic and Social Development Council and then spelled out in greater detail by the executive secretary of the Chamber of Foreign Trade (Camex), Mario Mugnaini.

Mugnaini explained that the Brazilian offer fits the so-called Switzerland 30 Formula and represents a 50% reduction in the consolidated tariff, the one authorized by the WTO but not necessarily applied across the board.

The maximum consolidated tariff applied by Brazil on industrial goods is 35%. The average consolidated tariff is 30%. According to Mugnaini, Brazil's "gesture" proposes lowering the average consolidated tariff to 14.7%. "If the average tariff drops from 30% to 15%, 2750 tariff categories [products] will suffer some cut in tariff rates," he explains.

In practice, however, the impact will vary greatly, according to the tariff effectively adopted in each industrial sector. The automobile sector, which currently has an effective tariff of 35% (equivalent to the maximum consolidated tariff), will see a substantial reduction. Textiles and shoes are other sectors mentioned by Mugnaini as liable to significant cuts if the Brazilian "gesture" is accepted, because their current tariff levels are also high.

"The majority of sectors will not suffer drastic reductions. The impact is not negative, contrary to what many people are saying," says the president of the Brazilian Industrial Development Association(ABDI), Alessandro Teixeira.

The Brazilian offer will only remain on the table if the European Unions reduces its tariffs on agricultural goods by 54%, as proposed by the G20 (the group of developing countries led by Brazil and China). The most recent European proposal, presented in October, offers a 39% cut.

Before arriving in Hong Kong, Mugnaini suggested that, given the impasse in the negotiations, the Ministerial Summit could discuss the adoption of sensitive lists, defining products that would be excluded from the general rule of tariff cuts and be eligible for smaller reductions. The European Union proposes that 8% of the so-called tariff categories [products] be considered sensitive. "If the European Union wants to maintain an 8% sensitivity, it is evident that the products in which we are interested will be on that list, in which case there will be no negotiations, as far as we are concerned," he emphasized.

Among the major Brazilian export products considered sensitive by the European Union are beef, chicken, and pork, sugar, ethanol, powdered milk, butter, bananas, corn, wheat, and rice.

Despite this, according to Mugnaini, Brazil is not interested in eliminating the sensitive lists altogether, because it also wants to protect domestic industrial sectors. In his assessment, the important thing is to negotiate different rules for developing and developed countries. "The developed countries will evidently have to make some additional concessions in comparison with the poor, relatively less developed countries."

Translation: David Silberstein