Safeguards against China

Of the volume of soybeans exported by Brazil, 30% heads to China. The invasion of Chinese products on the world market has harmed several countries, who are now threatening to impose protectionist barriers if the volume of exports does not change. This is the case in Brazil, that must regulate, in the next few days, the imposition of safeguards on Chinese products that threaten the national industry. In a meeting between Camex members and Lula last month, it was decided that the president would sign two decrees, one regulating safeguards for products in general (lasting up to 2013) and another exclusive for textiles (lasting up to 2008).

A public hearing at the Senate Foreign Relations and National Defense Committee, last week, had as its agenda Fiesp's proposal to discuss the recognition of China as a market economy. Lack of quorum, due to the CPI dos Correios meeting, caused the meeting to be postponed until the beginning of the next semester.

Even with this postponement, litigation is gaining prominence in the private sector and in the government. The objective of Fiesp and the senators, with this audience, was to discuss the real consequences that Chinese exports have for both national production and Brazilian exports.

The possible impacts of this litigation can be more serious than a simple commercial battle. The threat of imposing barriers does not come only from Brazil, also seen in the USA and Europe. A China, in its turn, counters with the hardening of its position for the liberalization of agricultural products, mainly in multilateral trade forums, as in the WTO.

If China confirms this tougher stance, the G-20 negotiations will be very compromised. Being an important member of the bloc, by adopting a position contrary to what was being defended, will show a weakening of the group's position in international negotiations. To Brazil, block leader, this retaliation would weaken all the diplomatic effort that has been applied in the Doha Round with great success.

however, the most sensitive point in trade relations between China and Brazil is the supply of soybeans, today the main export commodity of Brazilian agribusiness. The relationship of dependence between the two countries with regard to the purchase and sale of soybeans allows China to have in its imports a bargaining chip for trade negotiations., economic and political. Of the total volume of soybeans exported by Brazil, 30% goes to China.

It is important to consider the possible impacts on soybean that will result from the imposition of safeguards on imports of Chinese products, especially textiles. The importance of this commodity for the trade balance prevents its commercialization from being put at risk or traded as a bargaining chip.; the maintenance of the current economic policy also depends on the permanence or growth of grain exports.

The decrease in shipments of Brazilian soy to China, fruit of American and Argentine super-harvests, may be aggravated by the imposition of safeguards. The large market offer will enable China to negotiate in a favorable position with Brazil, both in commercial and political aspects. It is enough to know which country the country is most willing to give in to..

The imposition of the barrier will be cautious. Brazil seeks to signal to China that safeguarding will only be adopted as a last resort and after negotiations. With this, the government seeks to calm the sectors of the economy harmed by Chinese exports and those that could be affected by possible retaliations from the country., the maximum example of soy.

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* Rodrigo Cintra is Director and Mariana Ricci is a consultant at Focus R. I. – advisory & Consulting International Relations.