Brazil will join the World Trade Organization’s agreement on trade in civil aircraft. With this, it will cease to be the last relevant aircraft producer outside this understanding that eliminates import tariffs in the segment.
The decision to join was confirmed by Lucas Ferraz, foreign trade secretary of the Economy Ministry, who is in Geneva in meetings with partner countries. Now the mandate for the negotiation must be approved by the Commerce Strategy Council, in a cabinet meeting headed by President Jair Bolsonaro.
The agreement entered into force in 1980 and has 33 signatory countries. Most WTO agreements are multilateral, meaning that all 164 member countries participate. This understanding is part of plurilateral agreements, signed by a restricted number of countries.
It provides for the elimination of import tariffs levied on civil aircraft and products in the sector, such as aircraft engines, their parts and components, flight simulators, and so on.
Embraer always wanted Brazil’s participation in this agreement, the secretary said. In the aeronautical sector, there is a strong insertion of global value chains, as 90% of the value of an airplane is typically imported content.
Brazilian exports and imports in this sector total $40 billion, Mr. Ferraz said. The import duties involved are virtually zero in Mercosur.
“It is important for Brazil to participate because, besides having access to other markets with zero tariffs on exports, it gives legal security for the opening of its market,” Mr. Ferraz said.
On the other hand, the secretary confirmed that joining the Information Technology Agreement (ITA), which eliminates tariffs on covered products and can reduce prices for consumers, remains on the radar. Yet, this topic involves changes in Mercosur’s Common External Tariff (TEC). “The conditions are not yet given for joining, but it is in our plans,” he said.
Last year, Laos became the first least developed country to join this plurilateral agreement.
At the time, a representative of the European Union (EU), Hiddo Houben, highlighted that Laos made the right choice and used Brazil as an example in the other direction.
He cited “academic evidence that countries that join the ITA agreement increase their market share of Information Technology products.” And added: “Brazil, for example, has not joined the ITA and its share of the world market for IT products has declined since 1994, 1995. So joining the ITA is a good thing in order to become competitive in manufacturing the products that are covered by the agreement.”
Source: Valor International