1. Why WTO matters for emerging countries? A Brazilian perspective WTO Public Forum Geneva, October 2 nd, 2014

2. Structure of the presentation 1.International trade system: changing landscape 2.Domestic factors conditioning Brazil’s strategies 3.Main challenges for Brazil in the WTS 4.Components of a Brazilian agenda for the WTO 5.Why the WTO matters for Brazil?

3. 1. International trade system: changing landscape Changing landscape in the world trade system  Two main drivers: 1.fragmentation of the production process 2.consumers’ empowerment  Two main implications 1.new-old priorities for trade negotiation agendas 2.private standards and its impacts on trade rules

4. 1.1 Changing production process  Phase I (1960s): national industries vertically integrated  Phase II (1970s): global dispersion through FDI  Phase III (1980s ): geographic and organizational fragmentation: outsourcing and offshoring  Phase IV (1990s): market consolidation, global sourcing and China’s emergence  Phase V (2000s): services offshoring, re-localization of R&D, innovation and design  Phase VI (2008-2010): new wave of market consolidation and controlled protectionism  Phase VII?: maturation of the fragmentation process, new trade and industrial policies (productive development policies?)

5. 1.2 Consumers’ empowerment: private standards  Economic development leads to consumer empowerment  Demand for choice, transparency, precaution  Food safety, animal and plant health  Concerns linked to security issues: food, energy, climate change  Labor and social regulations  Proliferation of rules: different rules in the similar markets affected by culture values Irreversible trend: precaution demand will continue to grow and private standards to proliferate

6. 1.3 Changing landscape: implications for the WTO 1. Implications of the fragmentation evolution  Phase VII of the fragmentation process: old agenda with a new emphasis (trade facilitation, standards, services, IPRs…, tariffs(?))  Global chains with heavy regional components regionals and megarregionals  Emphasis on the reduction of transaction costs and regulatory convergence 2. Implications of consumers’ empowerment  Fears that regulatory harmonization promote a “race to the bottom”  Mix of public and private fragmented standards Traditional trade-offs in trade negotiations loosing sense Multiple negotiating tables: regional, megarregional, multilateral and thematic

7. 2.1. Domestic factors conditioning Brazil’s strategies: structural factors Sectorial concentration:  relevance of agricultural products in the Brazilian exports composition  industrial base diversified and vertically integrated  few but relevant technology intensive industries (Embraer) Small global player:  small share of the world trade (1,25% of world exports; 16 th position)  diversified geographic composition of foreign trade  Americas 33%; European Union (20%); Asia (33%)  outsider in the world of preferential agreements Political dimension:  appraisal for multilateralism  aspiration for active role and recognition in multilateral fora

8. 2.2 Domestic factors conditioning Brazil’s strategies: changing context Main drivers:  increasing weight of sectors intensive in natural resources  de-industrialization  increasing relevance of the services sector Main concerns:  deepening of de-industrialization trend  ever increasing domestic costs: impacts on competitiveness  being left behind in the GVCs and regional trade agreements waves Alternative scenario – path to internationalization  transformation of industry structure: less diversified but more competitive  consolidation of internationalized competitive segments in services sectors  continuity of the recent trend in Brazilian FDI

9. 3. Challenges for Brazil in a context of fragmentation the world trade system Some examples 1.Brazilian exports are concentrated in products intensive in natural resources and sensitive to private and public standards  Challenges - proliferation and fragmentation of rules setting ­megarregionals as new rules setting fora 2. Brazil is one of the most competitive producers of agricultural products  Challenges - food security agenda (subsidies, standards, SPS…) ­environmental and climate change agenda ­social and indigenous populations agenda 3. Airplane industry is an icon in Brazil and is sensitive to subsidies and rules  Challenges - competition through subsidies ( countries with larger fiscal capacity) ­rules setting in other fora

10. 4. Facing the challenges: Components of a Brazilian agenda for the WTO (1)  Monitoring preferential agreements: mechanisms for monitoring PTAs with emphasis in disciplines for preferential rules such as RoO, TBT, SPS  Plurilaterals: Brazil has traditionally been opposed to it, but plurilaterals with conditional MFN may be necessary to allow progress  Industrial subsidies: strengthening the disciplines applicable to subsidies and the reintroduction of a broadened concept of non-actionable subsidies  Agricultural subsidies : progressive convergence of the treatments accorded to industry and agriculture  State-owned companies: setting of disciplines that promote transparency in the shareholding control of the companies

11. 4. Facing the challenges: Components of a Brazilian agenda for the WTO (2)  Private norms and standards: this issue introduces a new challenge to the traditional limits of the WTO. This discussion should be incorporated into the WTO agenda as such  Investment: This could be an appropriate moment for reconsidering the traditional Brazilian stance regarding agreements on investments protection (growth of Brazil’s outward FDI)  Services: This issue is brought to the Brazilian agenda of priorities due to the need to increase productivity and competitiveness in the services sector as the industry undergoes a productive transformation  Climate and Trade: The agenda should incorporate rules for BCAs and for subsidies and enforcement of the disciplines applicable to technical norms

12. 5. Why the WTO matters for Brazil? The main characteristics of multilateralism that fits Brazil’s interests:  consolidation and improvement of the existing rules  gradual incorporation of new issues into the agenda The main drivers:  economic and political importance of multilateralism for Brazil's international strategy  changing landscape in world trade system: fragmentation of production process + consumers’ empowerment impacts on rules setting  productive transformation of the Brazilian economy with increasingly importance of sector sensitive to rules (natural resources, services, tech)