Brazil should seek global integration – 07/07/2023 – Deborah Bizarria

The divergence between the presidents of Brazil and Argentina with the president of Uruguay during the 62nd Mercosur Summit highlights a crucial debate: isolationism versus integration. Disagreements on specific points of the Mercosur agreement and the European Union are just a consequence of different worldviews.

The agreement between Mercosur and the European Union, announced in 2019, is one of the largest in the world in relation to the combined GDP of its participants, and provides for the elimination of tariffs for various products and services, in addition to facilitating access to public markets, cooperation regulatory and environmental protection. However, the agreement has not yet entered into force, as it depends on ratification by the parliaments of the countries involved, which has involved intense negotiation.

Lacalle Pou defends greater commercial openness and a relaxation of the bloc’s rules to allow bilateral agreements with other countries. Lula and Fernández, on the other hand, adopt a protectionist stance, defending, for example, that government purchases favor local suppliers and tariffs that protect industry in the region.

Considering the long history of Brazilian protectionism, if this last thesis were correct, we should not only have an extremely thriving and competitive industry, but also a large number of exporting companies. The reality is the opposite: sectors of the industry are looking for subsidies to survive (for example, vehicle manufacturers) and less than 1% of Brazilian companies are exporters. This number is low even when controlling for GDP per capita, according to the survey by Otaviano Canuto and other authors.

As I discussed in another column, the academic literature on the benefits of open trade is plentiful and comprehensive. Even so, the idea prevails among Mercosur members that integration should be mainly regional and that trade agreements should be punctual and limited.

This idea is wrong and harmful for sustainable development and regional integration. The agreement between Mercosur and the European Union represents an opportunity for the insertion of the region in the global economy. It would be possible to take advantage of the comparative advantages of its products and services, diversify its markets, attract investment, stimulate innovation, reduce costs and increase consumer well-being.

The Brazilian government would greatly benefit not only from the agreement, but also from following Uruguay’s stance regarding trade openness and global inclusion, with greater flexibility in Mercosur rules, in order to allow bilateral agreements with other countries, Brazil could pursue its interests by negotiating with more and more partners. However, Lula prefers to stick to the old protectionist mentality, shared by Fernández.

In this context, the agreement between Mercosur and the European Union could be a significant opportunity for the bloc to position itself in a more open and globalized way. In addition to trade benefits, the agreement encompasses political dialogue and cooperation, providing a platform for entering the global economy and taking advantage of trade gains. It is essential to look to the future and open up to the world, taking advantage of opportunities. Regional integration from Mercosur cannot be an obstacle to the integration of its members with the rest of the world.

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