Trade defense measures range from steel to lemon juice
12/05/2022
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Tatiana Prazeres — Foto: Carol Carquejeiro/Valor
Brazilian exports have increasingly become the target of trade defense measures in destination countries. Of the 87 measures currently in force, 57 were applied from 2020 to the last 30th. The volume is a little more than double the 28 measures put in place from 2017 to 2019. The number includes cases of extensions and includes antidumping duties, safeguards, and compensation for subsidies. The data signal a more intense use of trade defense mechanisms by all countries, with greater diversification of instruments. Thirteen countries or blocs maintain measures in force for Brazilian shipments.
The U.S. is the one that has the most defensive measures, with 17 in force, followed by Argentina, with 12 measures, and Indonesia, with 11 cases. Iron, cast iron, and steel and steel products add up to 34 measures in force. Although the Brazilian steel sector is the most frequent target, the defense mechanisms already affect a large number of segments, ranging from paper, plastics, machinery, clothing, fabrics, and even food, such as chicken, sugar, and lemon juice.
In total, 33 major sectors are affected, considering the chapters of the Harmonized System (HS) used as the standard for coding products in global trade. Of the 99 existing chapters, Brazil is the target of trade defense measures in one-third of them. The data are part of the Trade Defense Panel, a platform assembled by the Federation of Industries of the State of São Paulo (Fiesp/Ciesp).
“Brazil has become a more frequent target of trade defense measures and there is a diverse set of sectors affected. It is not a subject of interest of just a small group of companies,” says Tatiana Prazeres, director of international relations and foreign trade at Fiesp. “It is increasingly common for the businessman to receive a letter warning about an export investigation and be invited to answer a questionnaire.”
The intensification of defense measures is a global trend that can be explained by several factors, she says, such as economic difficulty, changing international circumstances, and concern about preventing illegal or unfair trade practices from harming domestic industry. “This has been affecting different origins, and Brazil does not escape this movement,” she said.
Data from the panel also shows that the number of trade defense measures notified to the World Trade Organization (WTO) jumped to 329 last year from 150 in 2020. In 2019 there were 193 notifications. Topping the rankings of the locations that have notified the most are the U.S., India, and Canada.
In 2022, until November 30th, 20 trade defense measures in force for Brazilian exports were applied or extended. There were 12 antidumping mechanisms, seven safeguards, and one case of compensatory measure for subsidy. The composition, Ms. Prazeres points out, shows a greater diversification of the instruments used. Before the antidumping duty used to be the most applied measure, now the safeguards are being applied more frequently, including by countries with more mature economies, she says.
Of the seven safeguard measures in force this year, two were from Turkey. The others came from Morocco, Philippines, United Kingdom, European Union (EU), and USA. Among the seven processes, there is an exclusion of surcharge for Brazil in six. The safeguards make it possible for developing countries, such as Brazil, to be free from its application, provided that requirements are met regarding the share of exports to the country of destination. The situation may be reviewed.
The EU safeguard extended in 2022 is emblematic. It has been in effect since 2019 and was revised in June of this year. Of the four product categories included in the measure, Brazil was excluded from two but is subject to surcharges in two others. In this safeguard, quotas were established that, if exceeded, subject exports to a 25% surcharge. The measure, recalls Fiesp’s technical team, was a reaction by the EU to the results of the surcharges that former U.S. President Donald Trump applied to imported steel in 2018. The Europeans claimed that the measure caused a shift of exports to other destinations, which led to a high volume of steel exports to the bloc.
Safeguards, Ms. Prazeres explains, are applicable when there is a sudden surge in imports of a certain item combined with damage to the domestic industry. “If this can be proven, the safeguard is the most effective remedy, because with a single measure it is possible to reach all origins, the various countries that caused the sudden import. The antidumping measure needs to be applied to each of the exporting countries.”
Lia Valls, a researcher at the Brazilian Institute of Economics of the Getulio Vargas Foundation (FGV Ibre), recalls that international trade related to iron and steel is a sensitive issue for the USA. According to her, as the Americans lead the defense mechanisms in force involving Brazilian exports, it is expected that the steel sector will be one of the main targets. Of the 17 American measures in force, ten involve the iron, cast iron, and steel sectors.
José Augusto de Castro, president of the Brazilian Foreign Trade Association (AEB), evaluates that the intensification of the measures is connected to the protectionist concern that several countries have been showing at the same time that there is a reorganization of the production chains and an attempt to bring industries to their territory or to regions considered friendly. In the case of Argentina, he says, the large number of defense measures can also be explained by the country’s economic crisis, which has established measures to restrict imports.
Welber Barral, partner at BMJ Consultants, highlights the significant number of defense measures from Indonesia, which is explained by the policy of that Southeast Asian country. Indonesia has safeguards for several products and, as the measure affects all origins, Brazil was affected. “The country historically has a very closed market and is opening up, but there is a lot of internal resistance. That is why Mercosur seeks an agreement with Indonesia and Vietnam,” he said.
*By Marta Watanabe — São Paulo
Source: Valor International