Interview: Brazil should extend its network of trade agreements, says Marcos Galvão

Marcos Galvão, the Brazilian Deputy Foreign Minister, describes a rare moment of consensus among Brazilian society regarding the need to open Brazil to the world economy. Despite the rise of protectionist rhetoric in other nations, he remains confident that Brazil can take advantage of this moment to craft effective deals with its trading partners.

The following is a translation of an interview given to Adriana Nicácio of the Brazilian CNI News Agency.

CNI NEWS AGENCY: You were chosen for your experience in trade affairs. How is Brazil repositioning itself in the international economy?

MARCOS GALVÃO: There is a consensus both within Brazilian society and between its various economic actors that to resume growth requires greater presence, interaction, and integration to the international economy. Rarely in the past was this idea so widely agreed upon, that we need to energize, update and modernize our productive investment and trade ties to the global economy. Even the most defensive sectors recognize and openly admit that Brazil needs to be more strongly integrated into the international economy.

CNI NEWS AGENCY: Does this consensus make your work easier?

MARCOS GALVÃO: It provides the backdrop. In Brazil, contrary to what is happening in other places, I don’t see anyone at any point along the classic political spectrum, from left to right, asking for protectionism. I have not seen any openly protectionist rhetoric in Brazil. What I see is a consensus regarding the fact that we need to be more present, more effective and more competitive in the international economy.

CNI NEWS AGENCY: Does the very protectionist rhetoric of the U.S. President, Donald Trump, favor Brazil in negotiations with Mexico, for example?

MARCOS GALVÃO: Let’s just say, results are not a given. And we don’t want to exaggerate by saying that problems on one front necessarily generate movements on another front.  Importantly, we don’t want to rely on problems between other countries to levarage our own negotiations.  Independent of the direction that the relationship between Mexico and the United States takes, we would like our own negotiations to be auspicious from a political perspective while also assuring an ambitious and relevant agreement. But, yes, the moment is favorable for the relationship between Brazil and Mexico and for us to work together.

CNI NEWS AGENCY: And how is our relationship with the United States? It seems we’re staying a bit outside of President Trump’s line of sight.

MARCOS GALVÃO: The United States is the largest economy in the world and we have important trade with them, above all in manufactured and industrial goods. It’s a relationship with many areas of cooperation and significant potential to move forward. The viewpoint from our side in relation to the U.S., and from the U.S. in relation to Brazil, from the messages we are receiving, is to seek pragmatic advances.

CNI NEWS AGENCY: Where can we move forward in our relationship with the United States?

MARCOS GALVÃO: We want to identify those areas that bring perceptible returns for the economic actors and societies of both countries. We believe that by achieving and demonstrating results in relevant areas, even though they might not be large in number, we will generate confidence on both sides that we are able to work together and advance. And we’ve already begun this process.

CNI NEWS AGENCY: And the technological safeguards agreement regarding exploration from the Alcântara Launch Center, is that on the list of short-term deliverables?

MARCOS GALVÃO: Yes, the safeguards agreement is among that realm of priorities. The government is working on an alternative text proposal.

CNI NEWS AGENCY: The agreement was signed in 2000, but the Brazilian Congress didn’t approve it. What’s going to change?

MARCOS GALVÃO: There have been discussions regarding the transfer and protection of technology. But Brazil has a commercial interest in having the Alcântara Launch Center in operation. And more than that, we have an interest in the positive impact that this would generate for the Brazilian Space Program. In the aerospace industry, almost all rockets contain American components. We know that in order to advance in this area, we need an agreement with the United States, and that they have an interest in safeguarding American technology, whether for the technology itself or because satellite launching technologies have both civilian and military uses. Therefore, there are military and strategic considerations as well. We understand this and we are willing to move forward.

CNI NEWS AGENCY: On what other fronts has Itamaraty (the Ministry of Foreign Affairs) advanced?    

MARCOS GALVÃO: There are two obvious fronts. In international negotiations, Itamaraty has a responsibility to sit at the table and negotiate. Of course, before engaging in discussions we want to secure the support of, for example, the Ministry of Industry, International Trade and Services (MDIC) and the Ministry of Agriculture (MAPA). And Itamaraty has another important dimension, reinforced under this administration, which is to be an instrument for trade promotion.  This activity, traditionally conducted by our trade promotion network coordinated by the Department of Trade Promotion in Brasília, has been strengthened by the incorporation of the Brazilian Agency for the Promotion of Exports and Investments (Apex-Brasil).

CNI NEWS AGENCY: How is our international negotiation agenda?

MARCOS GALVÃO: The Ministry of Industry, International Trade and Services has opened up public consultation on negotiations with Japan and South Korea, two of the world’s great industrial powers. We have also had initial talks with Canada. The fact is that, while we are interested in opening up new negotiation fronts, we know that opening those fronts doesn’t just depend on our will: it is not a unilateral decision. Take Garrincha’s motto that it is necessary to work with—I won’t say with the Russians—but with the other side. To negotiate, this willingness to cooperate is necessary from both sides.

CNI NEWS AGENCY: And who is willing to negotiate with Brazil?          

MARCOS GALVÃO: The fact is that in our world today there has been a retraction on the part of some actors regarding the launch of new negotiations. It would be great if we had more countries willing to negotiate. We have very advanced agriculture and industrial sectors that are able to compete, but we believe that we won’t be able to start negotiations before our counterparts warm a bit to the idea. We know that various actors have an interest in negotiating. There is a basic message that former Foreign Minister José Serra articulated and that Foreign Minister Aloysio Nunes Ferreira reiterated: the rule of the game is reciprocity, and there are no unilateral concessions. You make concessional moves in the areas where you may have a defensive interest as long as your wish list for foreign markets is also contemplated

CNI NEWS AGENCY: Is Brazil ready to make concessions? Are we able to lower tariffs in exchange for the reduction of non-tariff barriers?

MARCOS GALVÃO: Technical, sanitary and phytosanitary barriers are increasingly central issues in international negotiations, since the world is a world of low tariffs. In some cases, developed countries have lower tariffs, but they have tariff peaks [for specific goods], and they want concessions before modifying those tariffs.  Another claim that gets made, often without absolute precision, is that we are a closed economy.

CNI NEWS AGENCY: Is Brazil not a closed economy?

MARCOS GALVÃO: First of all, we are not a closed economy from an investment point of view. Brazilian industry is, in large part, a multinational industry. They say that Brazil is closed by looking at the relationship between international trade and Gross Domestic Product (GDP). It is said that Brazil’s international trade represents a lower percentage of GDP than the international average. It’s worth looking at the participation of international trade in the GDP of the United States and Japan. No one says that the United States is a closed economy, regardless of the fact that the participation of international trade in the U.S. GDP is much lower than in other developed countries. In general, countries with large territories and populations, given the strength of the domestic market in the economy, end up having a lower proportion of international trade to GDP than other economies of smaller demographic and territorial dimension.

CNI NEWS AGENCY: But there is a gap between Brazil’s GDP and its position within international trade. Brazil is the 10th largest economy in the world, but it is not within the 20 largest exporters.

MARCOS GALVÃO: That is something else. It’s one thing for you to be closed, and another for you to not occupy the space that you would like to have in global trade. We certainly recognize that Brazil should have a larger presence in the international market.

CNI NEWS AGENCY: Has Mercosur become a more attractive partner given the changes in government in both Brazil and Argentina?

MARCOS GALVÃO: These changes facilitate trade negotiations. The important thing is that there is no longer a contrast between Mercosur, allegedly protectionist, and the countries of the Pacific Alliance, which are more willing to integrate. Today there is a broad convergence between the countries of Mercosur and the Pacific Alliance.

CNI NEWS AGENCY: Then is it possible for us to talk about an expansion of the agreements?        

MARCOS GALVÃO: Exactly. Brazil already has a trade liberalization agreement with practically all of South America. Trade will be completely liberalized by 2018 and in a few cases by 2019. The remaining work is to extend the agreement with Mexico, which has coverage not quite commensurate with the dimensions of our two economies, and we are looking for other fronts. We have started exploratory conversations with the countries of the European Free Trade Agreement (a group of European countries not in the European Union). And before that, a while back, we started negotiations with the European Union that have now gained new impetus.

CNI NEWS AGENCY: And the negotiations with the European Union? Will we finish them in 2018?

MARCOS GALVÃO: The offers of both Mercosur and the European Union are on the table. There is a calendar that outlines the objective of finishing the technical portion of the negotiations by the end of the year. And, contrary to what you might imagine in an international environment where voices are defending protectionist positions, the negotiations with the EU have gained new impetus. We very well could be heading toward a possible conclusion of the deal in the coming year.

MARCOS GALVÃO, from video clip: “In many countries in the world today, in many societies, there exists the idea that foreign investment, imports, trade are sources of problems. In Brazil, we do not believe this. In Brazil today, we are not blaming any foreign source, any external factor for being the source of our problems. We assume voluntarily the idea that our problems are ours, that we in Brazil are the ones who have to solve them, and that we are tackling them including through the strengthening of Brazilian Institutions.”

To read the interview in the original Portuguese, click here.