Brazil’s most influential industry lobby is preparing to ask the government to slap tariffs on cheap Chinese imports of textiles, toys and other products.
The Sao Paulo State Industry Federation, or FIESP, is making the move as part of a growing struggle against contraband, pirated and undertaxed goods in Brazil. FIESP’s efforts to seek tariffs come only a few months after Brazil pledged to recognize China as a market economy, which could make it tougher to charge the Asian manufacturing powerhouse with dumping, or selling goods at artificially low prices, in the future.
“China is more tolerant than anyone else (in the world) of unfair competition practices, whether it’s dumping or whether it’s subsidies,” the head of FIESP’s international commerce department, Roberto Giannetti, told Dow Jones Newswires this week. He cited manufacturers of toys, textiles, shoes and eyewear as some of the victims of Chinese imports.
FIESP aims to deliver its tariff petition to Brazil’s Trade Ministry within two to three weeks, Giannetti said.
The petition may signal a shift in the winds of global trade alliances blowing in Brazil. China, with its fast rise to prominence on the world stage, is suddenly making Brazil - itself one of the world’s biggest developing economies - feel more sanguine toward the kind of trade rules and intellectual property rights that once seemed to stand in the way of its own domestic manufacturers.
A few weeks ago, FIESP invited Brazil’s top global commerce official, Trade Minister Luiz Furlan, to speak at a conference that stressed intellectual property rights as a crucial way to fight piracy and informal economies.
“Brazil finally recognizes the importance of addressing the piracy issue,” said Furlan, seated on a panel alongside US Senator Norm Coleman (R-MN) and US Ambassador to Brazil John Danilovic.
The US, which threatened to revoke Brazil’s preferred trading partner status unless piracy was addressed, decided last week to give Brazil six more months on the A-list. The preferential status is worth billions in reduced tariffs to exporters.
Ironically, FIESP’s efforts to impugn Chinese imports come just months after visiting Chinese officials pledged to invest billions in Brazil and Brazil pledged to recognize China as a market economy. If enough other members of the World Trade Organization recognize China as such, it will become more difficult to successfully lodge antidumping complaints against the Asian nation.
Emerson Kapaz, a former Brazilian congressman who now heads an anti-piracy lobby known as ETCO, estimated that more than half the goods traded in Brazil’s informal economy come from China, although he admits it’s hard to be sure. Contraband cigarettes, for example, were making their way across the border from Paraguay decades before China gained entrance to the WTO in 2001.
A study completed by the McKinsey consulting group found that about 40% of Brazil’s economy to be informal, meaning it deals in trade of contraband, pirated or undertaxed goods. The same study concluded that governments at all levels lose some 160 billion reals ($1=BRL2.6) per year as a result.
That’s a staggering sum, equal to roughly 10% of Brazil’s gross domestic product. Last year, Brazil worked hard to post a primary budget surplus of only half that size - BRL81 billion - or 4.6% of GDP. The hope is that budget surpluses will help pay down debts, eventually leading to lower interest rates and more growth.
But even if Brazil’s informal economy was thriving long before Chinese goods flooded the market, the Asian nation is increasingly at the center of the trade and piracy debates as its industries overshadow smaller local manufacturers in Brazil.
“This isn’t just a problem with China, but it’s like the elephant in the china shop. It’s so big it can’t move without everyone noticing,” said ETCO’s Kapaz.
As a result, some domestic manufacturers are unhappy about growing trade with China. Brazil’s chemicals industry lobby Abiquim, for example, says China