Changing the Course of Trade

Fixing Petista’s (the Workers’ Party) mistakes and foolishness regarding trade diplomacy is one of the most important topics on the agenda of the new minister of development, industry and foreign trade, Armando Monteiro. He does not use that language, but his visit to the United States to discuss trade issues — limited but important — is a clear negation of the “third-worldism” put into place in the 2003 government, the start of President Luiz Inacio Lula da Silva’s administration. Taking care to avoid conflicts with the PT, Monteiro has insisted on a much more comprehensive and pragmatic agenda than what has been in place for the last 12 years. Even in Latin America it is possible and necessary to pursue a different policy, seeking a better understanding with Pacific Rim countries. Additionally, it is necessary to finish negotiations on an agreement between Mercosur and the European Union, begun in the ’90s and long since paralyzed.

The minister explicitly mentioned Mexico, Chile, Peru and Colombia in an interview at the start of January, when speaking about the possibility of agreements with other blocs. The four countries were the core of the Pacific Alliance. Last year in Davos, Switzerland, the Mexican president, Enrique Pena Nieto, commented on the possibility of an agreement with the Mercosur countries. One condition, according to him, would be greater openness of those markets. President Dilma Roussef rejected the idea of greater openness in an interview a day later in the same location. The size of the market, according to her, is one of Brazil’s most important assets. Upon making that statement, she allowed herself a clever grin.

Chile, Colombia and Mexico, as well as Canada, have free trade agreements with the United States, the largest economy in the world. Peru has a trade promotion agreement. Central American countries also have free trade relations with the number one power, as well as South Korea, Singapore and Australia. Brazil is still not a member of this club. The decision was made by President Lula when he resolved to, with his Argentinian colleague Nestor Kirchner, block the formation of the Free Trade Area of the Americas (FTAA). Without Mercosur, Washington headed the formation of a partial but very active FTAA, with the majority of the countries in the Americas.

President Lula’s mistake, inspired by the triumphal incompetence of his international relations advisers, excluded Brazil from gaining preferential access to the American market. Other Latin American leaders have had this advantage, as well as more dynamic partners from Asia. Even without that preferential status, China has continued to gain ground among America’s suppliers. The risk represented by China had been mentioned by the main American negotiator, Ambassador Robert Zoellick, who was snubbed by Lula in a spectacle of disinformation as the “sub-sub-sub official.”

As a consequence of the Petista government’s rank third-worldism, Brazil ended up depending on Argentina and a few neighbors to export manufactured goods and on China to absorb its commodities in exchange for manufactured goods. Between 2003 and 2014, exports to the Chinese market increased 795 percent and reached $40.62 billion, but sales of industrialized goods reached a very modest $6.29 billion, $1.62 billion in manufactured goods included. Exports of manufactured goods to the United States in 2014 reached $13.67 billion and exports of industrialized goods, $19.03 billion. Besides the never-ending crisis, Argentine protectionism has also imposed huge costs on Brazil. Furthermore, the failed Mercosur has even become a hindrance, as none of its members can negotiate a free trade agreement alone.

If the country can free itself of this inheritance of incompetence, the new minister will do a great job. Then former President Lula will have a reason to complain, as he’s already done, about the abandonment of his legacy of diplomacy. Brazil will be able to celebrate.