Brazil blasts the uneven playing field of trade tariffs. But the developing world is not united

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The Independent Online

Words are almost insufficient when it comes to describing the vast, sprawling metropolis of Sao Paulo. The Brazilian city is home to around 20 million people, many of whom live cheek by jowl in the high-rise towers that stretch across the horizon, or in the slums - known as favelas - dotted in between.

The traffic-clogged streets ensure the humid air has a noxious tang and turn the shortest trip into an epic journey; those who can afford it use helicopters to get across town.

It is a world away from Western nations, and poverty is everywhere. But Brazil believes its development is being held back by other countries and is beginning to fight for its rights on the global stage.

The World Trade Organisation convenes in Hong Kong on Tuesday for six days of talks and one of the biggest issues is tariffs, with the European Union, the US and emerging nations such as Brazil jostling for position.

Brazil, with a population of 170 million, is an agricultural powerhouse, particularly in sugar, soya and beef. It is the world's largest producer of sugar, and converts it into various other products such as fuel and alcohol. But tariffs restrict its global trade. The EU, for example, allows preferential market access to the African, Caribbean and Pacific (ACP) countries - a throwback to its colonial past.

"From an economic perspective, the purist would say that tariffs are a bad thing because they result in a misallocation of resources," says Philip Shaw, chief economist at South African banking group Investec. "So sugar producers, such as those in Brazil, produce less than they should because they don't have entry to markets in Europe."

Mr Shaw argues that tariffs should be scrapped: "The rule of thumb is that they are good for domestic producers but bad for domestic consumers." But he has a caveat: "You're speaking to an economist; a politician would have a more realistic assessment because there's a need to protect some groups."

And therein lies one of the biggest problems. Despite countries such as Brazil fighting to have tariffs lifted, many organisations, such as the World Development Movement, prefer them to stay.

"We want developing nations to have the right to decide if tariffs are right for their level of development," says a spokesman for the fair trade campaign group. "It's not a question of tariffs being bad. If you look at which countries have developed and which have done badly, those that have done well - like Indonesia and Thailand - have retained the right to retain or lower them at a pace that suits them.

"There's no evidence that says if you cut out tariffs and open up your market then you're going to see results."

This is not a view, however, shared by many Brazilians. Vinicius Prianti, the chairman of Brazilian operations for Anglo-Dutch consumer giant Unilever, says the general feeling in the country is that Western countries are protecting their own interests at the cost of places such as Brazil. "It's simply not fair."

What is particularly galling is that while the EU and US are prepared to look at reducing their grip on global industry, they want developing countries to slash their own tariffs in return. Countries such as Brazil believe this will put them at a disadvantage, as it would open their markets to cheap Western goods, damaging domestic economies and hurting local producers.

Certainly, these countries are important to overseas companies. Unilever has been in Brazil since 1929, but growth has rocketed in recent years and the country is now its seventh-biggest market. Unilever's European markets have stagnated in recent years - the group issued its first profit warning 15 months ago - so developing and emerging (D&E) countries are a vital part of the company's long-term strategy.

"D&E is going to be the most competitive area going forward," says Unilever's chief executive, Patrick Cescau. "All the population growth is going to come from D&E. In purchasing power it's already bigger [than in developed countries] and in 10 years the gap will have increased."

While sales in Europe fell in the third quarter, D&E markets were growing at an annual rate of 8 to 9 per cent, Mr Cescau says, and boasted similar profit margins. D&E accounts for 37 per cent of Unilever's sales, with Brazil alone contributing €1.7bn (£1.1bn) last year.

Developing countries are home to some of the world's poorest people, but companies such as Unilever are able to turn a profit from selling across society to all classes. And should potential powerhouse economies such as Brazil - the other tigers-in-waiting are India, Russia and China - be allowed access to global markets, the wealth of the people is expected to improve.

The Brazilian Minister of Agriculture, Livestock and Food Supply, Roberto Rodrigues, recently said there were markets across the world from which Brazil could benefit if tariffs were lifted. Speaking at the National Foreign Trade Meeting in Rio de Janeiro, attended by businessmen from around the world, he said: "If the European Union reduces its production of subsidised sugar, this will open space to other producers and we will be able to sell to other countries that they sell to. The Arab countries would be a good option."

Around 62 million hectares are used for arable farming in Brazil, with another 200 million given over to grazing. But the authorities believe more land could be used for farming. "For this reason, we have an immense growth potential on the foreign market," Mr Rodrigues said. Brazil believes international sales could soar by up to $700m (£400m) if EU subsidies were removed.

The EU countries, collectively the world's second-largest sugar producer after Brazil, currently buy sugar from their own producers at three times the world price. But progress is being made. Ministers recently agreed to phase in a 36 per cent cut in the EU's guaranteed sugar price over four years (the original plan was to reduce it by 39 per cent across two years but some member states vetoed this). Inefficient European producers are expected to halt production but a compensation scheme is planned.

The decision came after Brazil, with Thailand and Australia, challenged the EU's hold over the sugar market at the WTO. But the EU remains under pressure to allow more farm exports - and Brazil is leading the battle. In addition, a recent report by Oxfam said that EU subsidies worth a total of $13bn for a range of goods, including wine, fruit and butter, could be legally challenged at the WTO.

Yet while Brazil is fighting for its right to sell its sugar globally, supported farmers in the ACP countries are angry about the EU's sugar reform and have denounced the compensation programme. They warn that it could devastate their economies - indeed, most accept that, if tariffs were lifted, we would all buy cheaper Brazilian sugar.

And therein lies another problem. For the inhabitants of the Sao Paulo favelas, a removal of tariffs - which would allow Brazil to take its place on the global economic stage and bolster its domestic wealth - can only be good news.

But as countries jostle to protect their own positions, the key is ensuring that the slums are eradicated - and not simply moved on to another country.

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