Brazil’s How-Not-To Guide on Trade
Faced with globalization’s potential impact on local production, Brazil maintains a crony and closed economy, when a more efficient adaptation to increased trade would be a relatively open economy while implementing policies to compensate for job losses and other negative impacts of increased international competition. That is what said Rodrigo Zeidan in a provocative article published in the site of the Americas Quarterly on Tuesday (Nov.29).
Brazil continues to be one of the world’s least open economies to international trade (trade flow around 18 percent of its GDP). Lower ratios trade-to-GDP may be a feature of rich countries with big internal markets, but in middle-income countries like Brazil and Argentina, it is a barrier to development. In Zeidan’s view instead of opening up to trade – what would increase productivigy and help the contry escape the middle-income trap, where the country is firmly stuck – Brazil opted for unilateral protection to local firms, what “is politically appealing and a powerful tool in the pre-election year”.
The author goes deep in explaining to his workers how Brazilian ethanol producers sough government protection from American exports. He says that what these producers want is import tariffs and quotas that would further close the market: “Their argument has been around since the 19th century: these barriers were needed to protect national workers against the evils of unbridled globalization.” The proposed tariffs would likely transfer income from all of society to ethanol producers. Worse, the measures could make renewables relatively more expensive than fossil fuels, acting in effect as a fossil fuel subsidy – which is the world’s dumbest policy