Imports From China Threaten Brazil Manufacturers as Bilateral Trade Grows

Brazil’s growing reliance on imported Chinese manufactured goods is threatening producers in Latin America’s biggest economy, said James Bacchus, a former U.S. congressman and World Trade Organization official.

Chinese demand for Brazilian raw materials such as iron ore and soybeans enabled the Asian nation to overtake the U.S. as Brazil’s biggest trading partner in 2009. Imports from China are accelerating in 2011, climbing 47 percent in the first two months of the year to $4.7 billion, or almost 16 percent of all Brazil’s purchases, compared with 14 percent in the same period last year, Trade Ministry data show.

“There is increasing concern about the potential of deindustrialization,” Bacchus, who now serves as legal counsel for Brazil on trade disputes at the WTO, said this week at the Bloomberg Brazil Economic Summit in Sao Paulo. “We are going to see this be part of the debate within Brazil about trade and about how to deal with trade with China.”

Brazil lags behind China and India in terms of trade as a percentage of gross domestic product and needs to improve its position, Bacchus said at the March 29 summit. Brazil and the U.S. could show closer cooperation with China and Europe to help reach an accord to remove global trade barriers as “compromises are going to be needed by all concerned,” he said.

Doha Round

Trade ministers representing 25 countries pledged in January to conclude a deal in the Doha round of trade talks by July, 10 years after negotiations started. The ministers agreed to finalize negotiating texts by April, with a plan for an overall agreement by July and the conclusion of the legal texts and schedules over the course of this year.

The current round of discussions focuses on the needs of developing countries and aims to revise agricultural subsidies and improve access to global markets and service industries.

“The U.S. and Brazil should work together to conclude a multilateral trade agreement because a number of the bilateral issues that are most significant between the U.S. and Brazil cannot be solved on a bilateral basis, especially about agricultural subsidies,” said Bacchus, a member of the House of Representatives in the early 1990s from Florida.

Bacchus, a 61-year-old lawyer for international law firm Greenberg Traurig LLP, said a conclusion of the Doha round is less likely than Brazil making progress in winning a seat on the United Nations Securities Council, which he expects will take several years.

Growing Trade
Brazil’s trade with China jumped 53 percent to $56 billion in 2010 from the previous year, compared with a 30 percent rise to $45 billion for the U.S., according to Brazil’s Trade Ministry. Imports from China jumped 61 percent to $25.6 billion in 2010 from the previous year, and made up 14 percent of all imports by Brazil last year, compared with 12.5 percent in 2009, ministry data show.

Exports to China rose 70 percent in the first two months of 2011 from the same period last year. Sales to China made up almost 15 percent of total Brazilian exports last year, compared with 13 percent in 2010.

“Brazil has been exporting raw materials, commodities, iron ore, other basic ingredients of civilization, and China has been putting some of those things together and shipping them back here,” said Bacchus. “The challenge going forward is the composition of that trade on a bilateral basis.”