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Will Chinese trade pressures break the G20? The Brazilian case

Rodrigo Cintra

Chinese products are all around the world and due to their low prices and high quantity they are affecting the production of some countries in a negative way. If that situation continues without at least a perception that will change in the near future, the affected countries will probably take some measures on that.

 That is certainly the case of Brazil, which has already taken a few actions and will impose some safety measures for those Chinese products that are affecting the Brazilian industry. In a meeting between Camex (a Brazilian governmental chamber for foreign commercial negotiations) and president Lula in May, the Brazilian government decided to use safety measures (valid until 2013) for Chinese products and with a special focus on textiles. Those safety measures should be activated  sometime between July and August of the current year.

One of the most important issues here is the emergence of FIESP (Federation of Industries of the State of São Paulo) as an important player in Brazilian commercial foreign policy. FIESP wants to discuss both the impacts that Chinese products have in the Brazilian domestic market and over its export capacity. The debates promoted by the government, are being particularly influenced by FIESP, especially those conducted by the Brazilian Senate.

On the other hand, the impacts of this commercial battle can be deeper than they appear at a first glance. The threat to use commercial safety measures is not coming only from Brazil, but also from Europe and the United States. Facing those possibilities, China is adopting a harder position in the negotiations for agricultural liberalization, especially in multilateral forums as WTO.

If China really hardens its stance, negotiations taken into and by G-20 run the risk of being jeopardized. As an important member in this group, when China takes a position that goes against the one that the group is traditionally assuming, this will result in a weaker position of the group in international negotiations. For Brazil, one of the leaders of G-20 group, the Chinese position may destroy most of the diplomatic efforts developed during the negotiations of the Doha Round.

At the same time, a commercial relation between Brazil and China has other important issues at stake. The most problematic is related to soybean because it is the most important product in the Brazilian export portfolio, if we are talking about agricultural products. From the total amount of soybean exported by Brazil, 30% is destined to China. That situation gives China a huge power when negotiating with Brazil, mainly because China can take measures to slow down Brazilian exports at any time, and soybean is one of the most important products exported by Brazil.

The Brazilian government is aware of all those impacts and is handling this situation extremely carefully. The question that emerges now is for how long Brazil will be able to handle domestic pressure and at the same time a reasonable good relationship with China. The result of this will probably show how the Brazilian government will conduct foreign commercial policy in the remaining years of President Lula.