WORLD TRADE WT/GC(97)/ST/5
16December 1997
ORGANIZATION(97-5511)
Original: English General Council
10December 1997
BRAZIL
Statement byMr.Carlos Antonio daRocha Paranhos
Minister Counsellor, Deputy Permanent Representative
Brazil wishes tothank theDirector General forthepresentation oftheAnnual Report onthe
Overview ofDevelopments intheInternational Trading Environment. Thisvaluable document raises
anumber ofissues ofgreatinterest toMembers, allofwhich deserve careful consideration andanalysis.
Onthisoccasion, mydelegation would liketobriefly address some ofthese issues, namely therecent
serious developments inthefinancial sector inanumber ofMember countries ofthisOrganization,
asreflected inparagraph 7oftheDirector-General 'sreport, andthequestions ofmarket access and
oftheinter-relationship ofregional andmultilateral activities, mentioned inparagraphs 14,12and
16,respectively.
Inparagraph 7,thereport rightfully indicates that"recent serious developments inthefinancial
sector inanumber ofAsian countries willcontinue toposepolicy challenges toallgovernments in
themonths ahead. Itisstilldifficult topredict howstrong andprolonged theimpact ofthese
developments oneconomic growth willbe.Thelength andstrength ofthedownturn willbealleviated
above allbyaforthright approach todealing withstructural problems intheeconomies, particularly
inthefinancialsector,anddeterminedsupportofstructuraladjustmentwithappropriatemacro-economic
management".
While wefullyagree thatitisdifficult topredict howstrong andprolonged theimpact ofthese
developments oneconomic growth willbe(andespecially indeveloping countries 'growth), itis
conceivable thatthe"financial crisis" willhaveanimpact ontrade scenarios andsuchanimpact may
affect thepositive trend oftrade liberalization. Exchange ratesmisalignments, highstocks inlower
growth economies andshifts from internal consumption toexports inAsiamaysuddenly unbalance
tradeflows andproduce atraderelated contagion effect, thecharacteristics ofwhich arestillunknown.
Therefore, itseems ofutmost importance thatwedevelop acollective exercise ofreflection onthe
question ofthecontribution oftheWorld Trade Organization toachieving greater coherence inglobal
economic policy making and,within thiscontext, ontheimpact interms ofthepursuance ofsustained
tradeliberalization policies ofthedevastating effects ofshort-term capital movements intheeconomies
ofdeveloping countries.
Inarecent State visittotheUK,President Fernando Henrique Cardoso saidthatinvestors
inhedge funds should begiven more information tobemade aware oftherisks ofmaking such
investments. Hedge funds -andother leveraged investments funds -borrow money atcheap ratesand
invest itinhigher-yielding instruments. Thisopens themtoaccusation ofbeing "footloose" when the
market goesintoadownturn.
AsPresident Cardoso said,"thisisnotamatter ofdefending there-regulation ofglobal finance
butmerely ofpointing outtheneedforgovernments andsocieties tobeabletoavoid damage thatcan
becausedbyperiodsofturbulenceintheinternationalmarkets".PrudentialregulationsoncapitalinflowsWT/GC(97)/ST/5
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are,inourview, anessential toolavailable tocountries. Moreover, weshould create thebasistoallow
markets tounderstand better individual countries 'realities andhavetherightelements toassess the
gains andrisksinherent incountries 'policy options.
Inparagraph 14ofthereport, market access ischaracterized asa"long-standing areaofconcern"
thatstill"presents challenges" because ofthepermanence ofhightariffs andtariffpeaks intheso-called
"classic areas".
These "classic areas" --which include agricultural products, textile andclothing products,
footwear, leather andtheautomotive sector-- encompass many oftheproducts inwhich Brazil, and
other developing countries, havebothcompetitiveness andanexport interest.
Theissue ofhightariffs inagricultural trade isofparticular interest toBrazil. Even afterthe
fullimplementation ofthereform program oftheUruguay Round, theaccess ofagricultural products
tomany markets willstillfaceunreasonably hightariffs. Although minimum andcurrent access quotas
werecreated totrytocompensate forsuchlackofmarket expansion, these measures werecertainly
notenough. Other sensitive issues form theBrazilian perspective mentioned inparagraph 14ofthe
report arethose oftariffescalation between rawandprocessed products oftheagricultural sector, and
thelackoftransparency often resulting from theapplication ofspecific ratesinstead ofadvalorem
ratesforagricultural products. Weshalldefinitely belooking forward tothenegotiations foreseen in
Article 20oftheAgreement onAgriculture which willcertainly tackle suchproblems.
Insum, thepicture thatemerges isverysimilar totheonethatBrazil hadalready identified
initsownanalysis oftherecent evolution ofmarket access forBrazilian products: inrealterms, access
forproducts ofourexport interest hasnotincreased, andthetariff barriers thatwereinplace remain
unchanged.
Paragraph 16ofdocument WT/TPR/OV/3 addresses theinter-relationship between regional
andmultilateral activities. Itexpresses theviewthatquestions oftradeingoods, suchasthemultiplicity
ofrulesoforigin, havetobeaddressed. Itrefers totheriskstoworld trade inservices deriving from
amultiplication ofregional arrangements. Italsomentions theriskofthemultiplication ofregional
activities andthetimetheyrequire from governments andadministrators. Finally, itconcludes that
themultilateral system should beatleastasambitious astheregional initiatives.
Mydelegation doesnotshare suchviewabout regional initiatives. Brazil recognizes theprimacy
ofthemultilateraltradingsystembutalsobelievesthattheregionalinitiativescanandmustbenecessarily
more ambitious thanthemultilateral trading system. Aregional integration scheme canenvisage as
ambitious initiatives as,forexample, thecreation ofasingle currency, anunthinkable ideaatthe
multilateral level. Provided thattheregional initiatives haveanopenform, theycancontribute positively
totrade liberalization andserve asbuilding block toworld trade expansion.
Inthesecond indent ofparagraph 12itisaffirmed thatliberalization inLatin America has
become more complex asanautonomous process hasgiven wayincreasingly toregionally-oriented
tradeliberalization. Itisalsosaidthatconcern hasbeenexpressed overrecent increases insome tariffs.
Wehavedifficulties withsuchconclusions, because theydonotcorrespond toanaccurate description
offactsoccurred intheregion.
LatinAmerica'seffortstocreateregionaltradeliberalizationarenotrecent.In1960,thecountries
oftheregion formed theLatin American FreeTrade Association- LAFTA. In1980, theLatin American
Integration Association- LAIA replaced LAFTA. In1991, thefourcountries oftheSouthern Common
Market-MERCOSULsignedtheTreatyofAsuncionandfouryearlaterestablishedaCommonExternal
Tariff, allwithin LAIA 'sframework.WT/GC(97)/ST/5
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Regional integration, therefore, hasnotreplaced anyautonomous process. Ithasfollowed its
course foralmost fourdecades now. Theformation ofMERCOSUL in1991coincided withunilateral
trade liberalization decisions taken byitsmembers. Suchdecisions werenotreplaced bythecreation
ofthecustoms union. Thesignificant increase ofimports fromexternal sources bytheMERCOSUL
countries isaclearevidence ofthepositive contribution made byMERCOSUL toanincrease ofworld
trade. Exporters havefound theadvantages ofselling toanenlarged market andaremaking clearuse
ofsuchadvantage.