Author Archives: Robson Valdez

About Robson Valdez

Internacionalista, Pesquisador da FEE. International Affairs Researcher at the FEE.

Is the global flexibilization of labor relations a generalized trend? A brief analysis of the situation of East Asia

Over the last few decades, especially after the great global economic crisis in the late 2000s, the deterioration of labor relations has been noticed and discussed, with particular interest in the European Union and the United States. In 2013, the International Labor Review, a publication related to the International Labor Organization (ILO), devoted an entire issue to the situation of labor relations in Europe, with mostly pessimistic conclusions. This scenario shares similarities with those of the United States and some Latin American countries, including Brazil. Indeed, it is possible to infer a correlation between the economic globalization and the decay in labor relations, at least in the most developed regions. However, what is happening in other parts of the world? This text debates the situation in East Asia, where a great deal of attention is being drawn to the best public policy practices, given the recent quick development of markets in that region.

Before proceeding to the question itself, one should note that the national systems of labor regulations appear to be in a more favorable situation for workers in Europe, North America and even in some of the most industrialized countries in Latin America than in other parts of the world. However, it is necessary to ponder not only the static situation of these systems, but also the recent trend in both groups. As most of the recent studies have assessed the problematic in Europe and Latin America and identified a considerable worsening trend in those places, this paper emphasizes the recent evolution in labor relations in Eastern Asia, by selecting three among the most representative emerging economies in the region: China, India and South Korea.

The Chinese case seems to be quite elucidative. Although Chinese regulations still remain far tougher than their analogues in Europe, in terms of wage levels and access to basic rights, such as retirement, the central government has acted to improve labor policy. The basis of current national-level labor laws is relatively recent (in force since 1995), having been complemented by the Collective Contracts Regulation of 2004. As Wu and Sun (2014) stated, a government-led system of mediation and arbitration between workers and employers is in force. This arrangement gives the government the prerogative to impose conditions and limits on wages and working hours and impells the parties to negotiate, among other things. The policy of rights granting might be understood as a response of national leaders to the growing agitation among Chinese workers in recent times and to the upsurge in the number of cases of labor judicial disputes all over the country, initiated in mid-1990s. In 1992, there were around 18,000 labor disputes, while in 2008 this number increased by 90 times. Chinese labor legislation, in addition to being more restrictive in comparison with the ones of its Western counterparts, remains based on an individualized logic which prohibits the right to strike and the creation of independent trade unions, as the authors point. However, as previously noted in this publication, the relative improvement of workers’ welfare, especially in large cities, can also be interpreted as part of a broader plan of the Chinese Communist Party to switch the prevailing export-led model of development to another one based on the domestic market, given the persisting turbulence in the global economy. The expansion of labor rights, therefore, features a significant propositional and even strategic nature.

India, the second most populous country in the world after China and with an increasingly prominent participation in global politics and economy, offers a significantly different picture. On the one hand, around 84% of Indian workers had informal occupations in 2012, according to ILO data, a proportion that is larger than that of other developing countries. On the other hand, this percentage has decreased over the last few decades, albeit in a rather slow pace. Since the early 2010s, the Indian government has been promoting changes to guarantee labor rights which focus on specific groups, such as the Sexual Harassment of Women at Workplace Act, of 2013, and the National Policy for Domestic Workers, of 2011, as reported in a recent publication of ILO’s Decent Work Program. It should be noted, however, that the government of Narendra Modi has publicly favored flexibilization in labor standards.

Another interesting regional case is that of South Korea. Despite the rapid economic advance in the last few decades, which has promoted the nation to the group of the Asian Tigers, its economy was hit by the great global crisis of 2008, after having been hit even more severely by the East Asian crisis of 1997. During the crisis of the 1990s, the country suffered a major shortage of foreign currency that had an impact on its macroeconomic indicators. Like what other neighboring countries did, the South Korean government requested a bailout from the International Monetary Fund, which, in response, imposed the granting of assistance to the implementation of fiscal policies, which had great impact on labor relations. After a rapid hike in unemployment rates (from around 2.5% in the last quarter of 1997 to 8.5% one year later), the austerity measures were gradually replaced by a differentiated approach, known at that time as the Social Agreement for Overcoming the Economic Crisis. This policy combined pro-market elements with the expansion of the social security net for workers. On the capital side, it sought to stabilize price and wage levels and to facilitate the practice of shutdowns; on the labor side, it boosted the policy of job creation, enhanced unemployment insurance and empowered labor unions. The maintenance of this compromise solution helped to soften the damages of the global crisis in the second half of 2008, considering that the employment rate was practically unharmed throughout that period. In recent times, there have been diverging political pressures, either by large business groups or by trade unions, to change the existing labor standards. In 2017, the election of the center-left Democratic Party encouraged unions to demand policies that tackled the high proportion of part-time workers and reduce the number of working hours, which is one of the highest averages among the members of the Economic Cooperation and Development (OECD).

From the analysis of the three largest economies in East Asia, one should resume the initial interrogation. This text suggest that, although labor laws in the three Asian nations remain much stricter than those in Europe and North America, they have neither clearly incorporated the tendency of flexibilization in labor relations nor undergone significant changes in their content. The main innovations can be identified in India, where the legislation has been changed to improve the situation of women in the workplace. However, it is in political disputes that relative gains for workers can be better noticed. In South Korea, workers have been granted important benefits, such as the policy of job protection and the relative strengthening of trade unions. In China, general improvements in the welfare of workers respond to both the fears of a widespread social upheaval and the purpose of altering Chinese pattern of export-led growth.

It should be stressed that workers in these nations are not in a comfortable position. Firstly, as stated, their situation remains highly precarious, notoriously in India. Secondly, it is not possible to conclude that improvements will remain unscathed, once the rise in the bargaining power of workers might lead to the reaction of business sectors in these same countries. This picture can already be seen in India, where calls for flexibilization have gained ground in public discourse. With this brief exposition, it is worth concluding that labor relations in the most significant emerging markets of East Asia have been witnessing a distinct process from those of Europe, North America and even parts of Latin America. However, it is too early to assert that this sui generis Eastern experience will be permanent.

Realities, utopias and the global climate change agenda

This edition of Panorama Internacional FEE addresses the environmental debate on a global level. In this sense, the authors’objective is to discuss the multilateral articulation efforts that aim at the construction of an international regime for facing the adverse effects of climate change on life in general and on the ways societies are organized. The main challenges concern the dilemmas related to the conciliation of agendas linked to the promotion of the countries’ economic development and the preservation of the environment.

Despite the repercussions of the unilateral decision of the United States to withdraw from the Paris Agreement, some other countries have stated that the international community is, to some extent, committed to a common environmental agenda. However, in this scenario, Brazil has given demonstrations that cast doubt on its real alignment with the global efforts in the environmental area. In this perspective, the recent decision of the Brazilian Federal Court to suspend the action against the mining company Samarco, responsible for the biggest environmental disaster in the country’s history, calls everyone’s attention. Moreover, in August, the Federal Government authorized, through a presidential decree, the extinction of a national reserve in the Amazon, the National Reserve of Copper and Associates (Renca), so as to enable mining activity in an area as big as Denmark.

At the state level, the situation is alarming. Regarding the state’s water issue, the geography researcher at the Economics and Statistics Foundation (FEE) Mariana Pessoa observes that: “The State collects only 31.2% of the waste produced and treats less than 13% of it, for this reason, it hosts three of the 10 most polluted rivers in the country — Sinos, Gravataí and Caí —, all located in the Metropolitan Area of Porto Alegre (RMPA), supplying water for more than 1.5 million people.” Although agriculture accounts for about 10% of the state’s Gross Domestic Product (GDP), the researcher notes that the sector uses 78% of the water available in the state. It is necessary to emphasize that the impact of the use of pesticides in the state’s crops is devastating for the maintenance of the soil, the water sources and the whole ecosystem. In addition to reinforcing the centrality of the water issue in various inter-state conflicts and in policies for the development of societies, the researcher points out some of the main challenges related to water management at the federal and state levels. Thus, her discussion tackles the evaluation of the 20^th anniversary of the promulgation of Law No. 9,433/1997, also known as the Water Law, which instituted the National Water Resources Policy (PNRH) and the National System for Water Resources Management.

Bruno Jubran, international relations researcher, provides an overview of the main debates regarding the multilateral coordination of the countries in tackling the adverse effects of climate change. Based on the Stockholm Conference (1972) and the United Nations Conference on Environment and Development (1992), the author highlights three main global regimes for monitoring and addressing climate change: the United Nations Framework Convention on Climate Change (UNFCCC), the Kyoto Protocol and the Paris Agreement. In light of the United States’ unilateral exit from the Paris Agreement, Jubran also discusses the contradictions inherent in the complex conciliation of agendas for sustainable development involving countries with marked economic and social asymmetries.

In this perspective, researcher Tarson Nuñes specifically evaluates the unilateral decision of the United States to withdraw from the Paris Agreement. In addition to the personal impressions of President Donald Trump on climate change, the political scientist discusses the impact of the position of the current US government on the public opinion of the country in relation to the global environmental issue. In this sense, the researcher highlights the strong divide between the lobby of traditional mining and fossil fuel industries — in support of the Government’s stance — and the influential movements of civil society and technology-intensive industries that oppose the country’s withdrawal from the Paris Agreement.

Although the causes of global warming are a point of contention among experts, economics researcher Jaques Bensussan argues that there is a consolidated understanding that we are actually living on a warmer planet whose levels of carbon dioxide (CO₂) are 30% higher than those of late 19th century. Thus, based on the definition of the opposite fields of this debate, on the traditional fossil fuel industry and on the emerging renewable energy sector, the researcher analyzes and compares the energy matrixes of the countries that are in the center of this debate: the United States, China and Brazil.

As a way of discussing and deepening the themes covered throughout the texts, the Panorama International FEE interviewed Dr. Catherine Tinker, Associate Professor at the School of Diplomacy and International Relations at Seton Hall University, New Jersey, where she teaches international law and international environmental law. Dr. Tinker is the founder and representative of the Tinker Institute on International Law and Organizations (TIILO) at the United Nations Headquarters, New York City. TIILO is a non-governmental organization accredited to the United Nations Economic and Social Council (ECOSOC) which is dedicated to research and education in the areas of international law, policies and organizations.

It is within this scenario of advances and setbacks in the field of combating the effects of climate change that the Panorama International FEE launches another series of thematic studies. This new edition marks the second anniversary of the publication, which has already addressed eight other international themes equally relevant to Brazil and the State of Rio Grande do Sul: exports, oil, the 25^th anniversary of the Common Market of the South (Mercosur), migratory flows, the United States, China, mega trade agreements and the free trade agreement between Mercosur and the European Union. Thus, in this spirit of celebration, we wish: long live Panorama International FEE and Rio Grande do Sul’s Foundation of Economics and Statistics!

Enjoy your reading!

The long Mercosur–European Union trade and investment agreement

In March this year, the XXVIIth round of the Mercosur-EU Bi-Regional Negotiating Committee took place in Buenos Aires, Argentina. In spite of the ups and downs of the South American economic bloc, since its creation, in December 1991, the Southern Common Market (Mercosur) has consolidated itself as one of the main axes of Brazil’s foreign policy and market for Brazilian products and services. Currently, as shown in Figure 1, Brazil’s trade proposals and agreements are linked to it. In addition to the country’s own relationship with the bloc, the implementation of a transatlantic trade agreement involving Mercosur and the European Union (EU) has consolidated itself as the most ambitious proposal of free trade for Brazil.

Two decades after signing the Framework Cooperation Agreement between Mercosur and the European Union, on December 15, 1995, the two regional economic blocs still have not been able to overcome their respective constraints and obstacles, in order to lead to the effective conclusion of a free-trade agreement. Signed on that date, the agreement came into force only in July 1999.¹ According to the document, the treaty sought to prepare the respective regions to establish the conditions for the creation of an interregional association involving trade, economy and cooperation.

In the commercial field, the agreement stipulates the promotion and diversification of trade in order to prepare the regions for a progressive liberalization which leads to the creation of a free trade area between the parties, considering issues that are delicate and in accordance with the World Trade Organization (WTO). Also according to the document, cooperation in the commercial area will take place without the exclusion of any sector, covering, in particular: (a) market access, trade liberalization (tariff and non-tariff barriers) and trade rules and regulations, such as restrictive trade practices, rules of origin, safeguards and special customs arrangements, for example; (b) the parties’ trade relations with third countries; (c) compatibility of trade liberalization with the rules of the General Agreement on Tariffs and Trade (GATT), of the WTO; (d) identification of sensitive products and priority products for the parties; (e) cooperation and exchange of information on services within the scope of their respective competences.

In the economic and cooperation fields, the agreement stipulates efforts to increase trade relations. In this sense, cooperation takes place in the business sphere, in the promotion of investments in energy, transport, environment protection, telecommunications and information technology, as well as in scientific and technological areas. Finally, institutional cooperation requires efforts in the areas of communication, information, culture, education and drug trafficking combat.

Since the Framework Cooperation Agreement was signed, in 1995, until it came into force, in 1999, the relations between the economic blocs went through a process of detachment. In this context, Mercosur’s great interest in consolidating itself as a customs union and increasing the productive integration of some sectors of Brazil’s economies within the bloc stands out. In addition, the role of the entire Free Trade Area of the Americas (FTAA) negotiation process should be highlighted within the international agenda of Brazil and the other Mercosur member countries. Across the Atlantic, the European Union was in the process of expanding its borders eastwards and sought to establish macroeconomic measures for the future implementation of the bloc’s single currency (CARVALHO, MIL, 2013)².

The dialogues are resumed at the European Union, Latin America and the Caribbean Summit, in June 1999, in Rio de Janeiro. It is at that point that the negotiations begin to be structured in committees and subcommittees, as well as in several working groups. In 2000, within the framework of the Bi-Regional Negotiations Committee, working groups were established to analyze issues related to goods, access to markets, customs procedures, investments, services, capital flows, intellectual property, government procurement, etc.

The Summit also took place in Madrid (2002), Guadalajara (2004), Vienna (2006), Lima (2008) and again in Madrid (2010). In the course of all these meetings, the major breakthroughs in the negotiations took place in 2001 and 2004. At the outset, the European Union presented a proposal for trade in goods, services and government procurement (CARVALHO, LEITE, 2013). In 2004, both sides submitted proposals for trade liberalization, covering up to 90% of goods and services in several sectors, with exceptions and observations pertinent to the agricultural sector. The discussions were resumed at the Madrid Summit, in 2010. On that occasion, an action plan for the activities of the 2010-12 period was established (CARVALHO, MIL, 2013). It is interesting to note that, similarly to the negotiations involving the United States and the European Union, a non-governmental forum was set up during this biennium to discuss the issues related to the creation of a free trade area between Latin America and the European Union: the European Union-Latin America and the Caribbean Foundation. It is noteworthy that it is within the framework of these meetings of organized interest groups of civil society that the consensus is sought about proposals that may be considered in the trade negotiations.

On January 26, 2013, the Mercosur-European Union Ministerial Meeting took place in Chile. In that meeting, a deadline was set for the blocs to prepare their respective proposals for an effective free trade agreement. In 2013, the convergence process of national offers within Mercosur began, aiming at consolidating a bloc joint offer, which was finally announced in 2014, in the Caracas Summit Communiqué. The exchange of offers should have taken place in the last quarter of 2015, as agreed at the Mercosur-EU Ministerial Meeting held in Brussels, in June of that year. Following the consent of the EU Council for the continuity of negotiations (November 2015), the exchanges finally happened on May 11 of the following year in the Belgian capital city. These negotiations dealt with trade in goods, government procurement, investments and services. In June 2016, the chief negotiators of the two blocs met in Montevideo, Uruguay, to discuss technical issues pertaining to the offers of the agreement. Five months later, in October, the first meeting was held in Brussels, after the blocs exchanged market access offers (BRASIL, 2017).³

Finally, in March 2017, the XXVIIth round of the Mercosur-EU Bi-Regional Negotiating Committee took place in Buenos Aires, Argentina.⁴ The working groups’ negotiations covered: trade in goods, rules of origin, trade and customs facilitation, technical barriers to trade, sanitary and phytosanitary measures, trade defense instruments, subsidies, dispute settlement, services, government procurement, intellectual property, trade and sustainable development, small and medium-sized enterprises and institutional matters.

The weight of the domestic market as a determinant variable of the Brazilian Gross Domestic Product (GDP) and the consolidation of not only Mercosur but also Latin America and the Caribbean as strategic areas for Brazil’s commercial insertion can be perceived as a challenge to the country’s interests in these negotiations. Graph 1 shows that over the last few years these regions have consolidated themselves as relevant markets for Brazilian foreign trade. In the last 16 years, the European Union has stood out as the main destination of Brazil’s exports, followed by China. The United States, which until 2009 was the second destination of Brazil’s exports, lost the position to the Asian giant and to Mercosur, which remained in the third position until 2014. Latin America and the Caribbean, excluding Mercosur, are important markets for Brazilian manufactured products and a potential target for the European bloc’s commercial strategy, which could be reached through a trade and investment agreement with Mercosur.

Although, singly, the trade flow of Mercosur member countries seems inexpressive, with the exception of Brazil, the aggregate data of the South American bloc draws attention. As can be seen in Table 1, in 2015, Brazil accounted for 69.91% of the bloc’s trade flow with the European Union. Argentina was the second economy. In the same year, Mercosur accounted for US$54.47 billion of the European bloc exports’ value. Out of this total, US$38.3 billion had Brazil as its destination.

In comparison with other destinations of the European Union’s exports, still in 2015, Mercosur consolidated itself as the 8th most important trade flow and 7th export market of the European bloc. Brazil, on the other hand, registered the 12th trade flow, the 15th export market and the 11th imports supplier. Table 2 shows, above all, the characteristics of the global triangular trade involving the European Union, the United States and Asia (especially China and Japan). In addition, the data illustrate the European Union’s trade strength as well as the challenges of Mercosur negotiations with the Europeans.

What can be inferred from all this long negotiation process for the establishment of an area of free trade and investment between Mercosur and the European Union seems to be the fact that some kind of agreement will be entered into. One may observe that, even with all the political and economic crises on both sides of the Atlantic, the negotiations are advancing at their own pace. It is worth mentioning that, even if the agreement is signed, the negotiations establish different schedules for adaptation to the conformities of the most varied economic sectors, aiming at the full implementation of the agreement between the parties. Mercosur and the European Union expect an agreement to be signed between the parties in 2018. However, it is necessary to emphasize that stability, or its absence (in politics and economy), is a determining variable in this negotiation dynamics.

1 Acordo-quadro inter-regional de cooperação entre a comunidade europeia e os seus estados-membros e o Mercosul e os seus estados-partes. Retrieved from <http://dai-mre.serpro.gov.br/atos-internacionais/multilaterais/acordo-quadro-inter-regional-de-cooperacao-entre-a-comunidade-europeia-e-os-seus-estados-membros-e-o-mercosul-e-os-seus-estados-partes/> on 10 May 2017.

2 CARVALHO, F.A. T; LEITE, A. C. C. Acordo de associação inter-regional Mercosul-União Europeia: entraves à aprovação e perspectivas futuras. Século XXI, Porto Alegre, v. 4, n. 2, jul./dez. 2013. 2013. Retrieved from on 25 Apr. 2017.

3BRASIL. Ministério da Indústria, Comércio Exterior e Serviços. Negociações internacionais Mercosul/União Europeia. 2017. Retrieved from

<http://www.mdic.gov.br/index.php/comercio-exterior/negociacoes-internacionais/9-assuntos/categ-comercio-exterior/1566-mercosul-uniao-europeia > on 5 May 2017.

4The content of the topics dealt with in this last negotiation round is available on .

Brazil and China relations and the challenges imposed by fiscal adjustments

The international insertion of Brazil during President Lula’s two terms and, to a lesser extent, President Dilma Rousseff’s first term was marked by the diversification of its international relations without compromising its relationship with traditional partners such as the Americans, the Europeans and the Japanese. However, unlike the period under review, the current scenario of strong deterioration of the national economy and severe restraint of public expenditures, both at the federal and state levels, poses challenges to the country’s capacity to establish complementarity criteria in its relations with China.

While the major powers experienced the effects of the severe economic crisis of 2008, the first decade of the 2000s was marked by the leading role of emerging countries in the international scenario. Within the context of a sharp rise in the prices of their main exportable commodities, the emerging countries sought, with reasonable success, to implement policies capable of generating a certain domestic economic dynamism. In this scenario, Brazil, Russia and China stand out. The economic growth of these nations, along with that of South Africa and India, has projected them internationally granting them a certain power of articulation of their interests in international forums like the BRICS itself — Brazil, Russia, India, China, South Africa —, the financial G20, the commercial G20, the World Trade Organization (WTO), in addition to the various agencies within the United Nations (UN), such as the United Nations Conference on Trade and Development (UNCTAD) and the Food and Agriculture Organization of the United Nations (FAO).

In this process, besides being nuclear powers, China and Russia give a strategic weight to the emerging countries as a whole while defending their respective agendas in the UN Security Council, in which they have a permanent seat and veto power, elevating them to the category of players of the global geopolitics. However, in the economic field, China stands out from other countries, developed and developing ones, by the strength that results in impressive trade surpluses, levels of economic growth, international reserves and investment volumes worldwide.

Brazil resumed diplomatic relations with the People’s Republic of China (PRC) in 1974. Since then, the Asian country has increased its share up to the point of becoming the main destination of Brazil’s exports. In 1985, these exports reached US$817.5 million. Ten years later, this value reached US$1.2 billion, and the export agenda was composed mainly of manufactured and semi-manufactured products. From then on, the basic products have been consolidating themselves as the main items in the Brazilian export agenda to China. In 2005, the value of exports reached the sum of US$6.8 billion. Since 2009, China has been the main trading partner of Brazil, taking over the position that used to belong to the United States. That year, the Chinese imported US$21 billion. In 2013, this figure jumped to US$46 billion, as shown in Graph 1. Since then, China alone has been the main destination of Brazil’s exports, competing with the European Union, Latin America and the Caribbean.

Regarding direct investments, data from the Central Bank of Brazil show that, between 2010 and 2014, the distribution of direct investment stocks in Brazil (equity share) showed the accumulated average value of US$577.9 billion in the period. Out of this total, we have the following average percentage among the main investing countries: the United States (20%), Spain (12%), Belgium (8%), the United Kingdom (7%), France (6%), The Netherlands (5%), Japan (5%), Germany (4%), Italy (3%), Switzerland (3%) and China (2%).¹ Although in this area Brazil depends on the decision-making agendas of the United States, Europe and Japan, the bilateral relations between Brazil and China, which have become closer within this recent dynamics of construction of national development projects, have consolidated the Asian partner as a pragmatic and strategic alternative to attract foreign resources for investments in Brazil.

The recent wave of Chinese investments in Brazil calls people’s attention. According to data from the American Enterprise Institute and the Heritage Foundation², the Chinese invested US$51.7 billion in Brazil between 2005 and 2016. The investments involved the following sectors: real estate, energy, agriculture, chemicals, technology, metals, transport and finance. According to the data in Figure 1, the energy sector attracted the most investments. In this segment, Chinese companies invested a total of US$38.15 billion in the period. Next, there come metals (US$4.39 billion), finance (US$2.11 billion), agriculture (US$1.93 billion), transportation (US$1.81 billion), real estate (US$1.36 billion), chemicals (US$1.5 billion) and technology (US$450 million).

Graph 2 shows the contribution of Chinese investments in Brazil over the period 2005-16. Note that 2010 was the year in which the figures reached their highest values, US$13.89 billion. That year, the energy sector received most part of the investments, US$11.82 billion. In 2012, the reduction of these investments reached US$3.05 billion. From that point on, investments resumed the upward trend and reached US$12.1 billion in 2016. Again, the energy sector received the highest amount of investments, totaling US$10.3 billion.

It is necessary to emphasize that over the last 15 years, the effort made in the consolidation of strategic partnerships between the two countries has sought the complementarity of their national policies in the areas of economic development and international relations. In this sense, although during Dilma Rouseff’s term the domestic political and economic constraints relegated Brazilian foreign policy to a secondary level, the cooperation projects between the two nations, in the BRICS or in other international forums, were maintained. However, the aggravation of the country’s economic and political crisis in the last two years raises questions about the role that China is playing in President Michel Temer’s administration.

The alignment of the current government with economic orthodoxy based on a severe fiscal adjustment that will limit the ability of the federal government to implement policies of public investment in strategic areas for the national development for 20 years emphasizes the secondary role that Brazil must be playing in this new phase of its relationship with the Asian giant. Dismantling national content policies which enabled, for example, the emergence of Rio Grande naval hub, in the State of Rio Grande do Sul, shows the deconstruction of complementarity links that, until then, had characterized Brazil’s role in the construction of its bilateral relations, especially those within the South-South cooperation framework.

At the state level, Rio Grande do Sul emulates the current federal dynamics in its relations with China. Although direct foreign investments have a significant impact on the generation of employment and income, it is the long-term strategic complementarity projects that have the potential to produce lasting effects in the areas of economic development.

The fiscal adjustments made by the state government limits the ability of Rio Grande do Sul to establish long-term strategic partnership projects with China in the areas of economic development and also in the areas of culture, education, science and technology. The extinction of public research foundations restricts the possibilities of further strengthening of Rio Grande do Sul’s relations with China beyond the purely commercial approach. In the same way that the Brazilian Agricultural Research Enterprise (Embrapa) established cooperation agreements with the Chinese Academy of Agriculture Science (CAAS) in 2012, it is believed that similar agreements involving the state’s research foundations and the various research bodies of China could be consolidated as interfaces for the development of mutual interests involving the Chinese and the people of Rio Grande do Sul in their respective areas of knowledge.

In 2017, still in the context of the state’s adjustments of public accounts, the Chinese energy company, State Grid, started to take control of CPFL Energia and be in charge of two-thirds of the energy distribution in the State of Rio Grande do Sul. The company of the Asian country owns Rio Grande Energy (RGE) and Rio Grande Energy — South (RGE Sul). It is worth remembering that, in a context of attack on the quality of services provided by state-owned enterprises, State Grid is a Chinese firm 100% state-owned and a strong candidate to buy the electric power company of the State of Rio Grande do Sul (CEEE), in case the company is really privatized, as the state government wishes. In addition, there is still a possibility of privatization of the Mining Company of Rio Grande do Sul (CRM). The state owns 86% of the country’s coal deposits. In this case, the Chinese companies Zhejiang Electric Power Construction Co. (ZEPCC), State Grid and China Three Gorges (CTG) present themselves as potential buyers of the state’s mining company.

At the current juncture, both the federal and the state governments see Chinese investments as a short-term relief in the search for solutions to their respective challenges to adjust their public accounts. The partnership with the Chinese should be perceived and instrumentalized as a long-term bilateral and systemic cooperation strategy. Therefore, it must be stressed that international relations are first and foremost governed by national interests, and cooperation is the means by which the countries’ interests can be satisfactorily served. Thus, it is understood that, by overlapping the fragility of the public accounts with broad projects of cooperation with the Chinese, there is a risk of restricting a strategic bilateral relationship for the country to mere trade and investment agreements without major counterparts from China for the development of Brazil. Within this immediacy and subservient dynamics, China will have no incentives to cooperate and no constraints on maximizing the opportunities of investment in Brazil and in Rio Grande do Sul — these opportunities, taken as a whole, will consolidate themselves as a gold mine for the Chinese.

1CENTRAL BANK OF BRAZIL. Census of foreign capital in the country: results base years: 2010 to 2014. 2016. Retrieved from on Feb. 10, 2017.

2THE AMERICAN ENTERPRISE INSTITUTE AND THE HERITAGE FOUNDATION. China Global Investment Tracker. 2017. Retrieved from https://www.aei.org/china-global-investment-tracker/ on Feb. 10, 2017.

Brazil and the mega–trade agreements: principles, history and challenges

Non-discrimination is the basic principle of international trade. Under the World Trade Organization (WTO), non-discrimination gives rise to two important pillars, national treatment and the most-favored-nation clause. This clause requires that any commercial advantage offered to any country, member or not of the WTO, be also offered to other nations of that organization. The national treatment principle, on the other hand, ensures that imported products must receive the same treatment given to domestic products. Based on these principles, which seek to prevent discrimination on the origin and between products, the WTO aims to promote trade liberalization globally. Moreover, the WTO offers its members a number of trade defense measures against dumping (anti-dumping measures), against subsidy (countervailing measures) and against import surges (safeguards).

However, the international trade complexities and disparities that hinder the process of trade liberalization led the 1979 Tokyo Round of the Organization to establish the enabling clause. This clause aims to create a legal framework, parallel to the multilateral negotiations, to promote the gradual advance of free trade through trade preference systems: the Generalized System of Preferences (GSP) and the Global System of Trade Preferences (GSTP).

Both the GSP and the GSTP are ruled by the United Nations Conference on Trade and Development (UNCTAD). While the GSP deals with unilateral tariff concessions from developed to developing countries without the need for extending them to other WTO member states, the GSTP regulates tariff concessions between developing nations. Thus, both the GSP and the GSTP have consolidated themselves as exceptions to the basic principle of non-discrimination.

Regarding the recent historical dimension of the trade agreements, it is possible to identify three great waves of trade regionalism.[1] The first one was marked by the beginning of the process of unification of Europe through the creation of the European Coal and Steel Community (ECSC) in 1951, followed by the formation of the European Economic Community (EEC) in 1957. These experiments influenced, for example, the creation of the Latin American Free Trade Association (LAFTA) in 1960.

During the second wave, more countries joined the EEC, which, in 1993, with the signing of the Maastricht Treaty, was renamed the European Community (EC). The EC progress towards the countries of Eastern Europe (satellites of the former Soviet Union) led the United States to abandon its traditional appreciation for multilateral negotiations under the General Agreement on Tariffs and Trade (GATT), of the WTO, and to sign a bilateral agreement with Canada (1988), which was then extended to Mexico in 1990, thus consummating the creation of the North American Free Trade Agreement (NAFTA). In the same period, the Southern Common Market (Mercosur) and the Andean Community were created in South America, while in Africa and Asia many other similar agreements were signed.

Finally, the third stage has been characterized by the influence of the United States and the European Union. However, the peculiarity of this present moment lies precisely in the participation of the Asian countries, traditional supporters of the multilateral trade negotiations under the WTO. In addition to the 1997 financial crisis and the failure of the 1999 WTO negotiations in Seattle (USA), the proliferation of regional agreements in Asia was also due to the intense productive integration process that has taken place in the region in recent years.

The multilateral WTO agreements are characterized by their amplitude, by their binding effects and for incorporating complex issues, such as the service sector, foreign investment and intellectual property. This scope is a result of the global productive system rearrangement in recent decades, which demands an increasingly more open and less discriminatory trade.

With regard to market access, the Preferential Trade Agreements (PTAs) aim at the reduction and/or elimination of import tariffs and the elimination of nontariff barriers. As for the regulation of international trade, it deals with the incorporation of international trade rules under the WTO (WTO-in), the deepening of these very same rules (WTO-plus) and the incorporation of rules not yet covered by the WTO (WTO-extra). This way, it is possible to perceive the regulatory dimension of the PTAs as a necessary condition or even as a deliberate strategy for the countries’ integration into the global production chain.[2]

In this context, the WTO’s World Trade Report 2011 points out that the Regional Trade Agreements involving two or more countries from different geographical regions have become known as Preferential Trade Agreements. This is due to the fact that the unilateral preference systems (GSP and GSTP) and other nonreciprocal agreements fall within the concept of Preferential Trade Agreements. In February 2016, the WTO registered 284 trade agreements on goods and services involving countries from different regions of the world.

Finally, it must be stressed that the PTAs are agreements that also occur in the legal framework of the WTO, thus counteracting the argument about a possible weakening of the Organization. Actually, the PTAs stand out as a world trade liberalization strategy that takes place along with the multilateral negotiations of the Doha Round. Thus, the WTO now offers two negotiation channels for international trade liberalization: a multilateral one, which grants greater bargaining power to developing countries (Doha Round); and a plurilateral one, which grants greater bargaining power to developed countries.

The current international trade scenario poses, then, a serious challenge to Brazil, to the extent that multilateral negotiations within the WTO, the traditional strategy for the Brazilian diplomacy, have been abandoned by some of the world’s major commercial powers: the United States, the European Union and Japan. In 2013, President Barack Obama argued for the creation of the Transatlantic Trade and Investment Partnership (TTIP), involving the United States and the European Union. Last year, 2015, the United States, Canada, Mexico, Chile, Peru, Japan, Vietnam, Brunei, Singapore, Malaysia, Australia and New Zealand signed the Trans-Pacific Partnership (TPP).

It is important to remember that even the negotiation over the TTIP between actors of the same relevance in terms of economic and social development, such as the United States and the European Union, has been quite complex. Regarding the TPP, the conditions are asymmetric. There are two major trading powers (NAFTA and Japan) negotiating a mega-trade agreement with countries whose domestic markets are reduced, with few alternatives from the point of view of their economic growth policies, except the production for foreign markets — a situation that is diametrically opposed to that of Brazil, which has a vast and coveted domestic market.

With regard to Brazil, its possible adherence to mega-trade agreements brings to the debate the discussion of the flexibility of its labor laws, the impact of international competition on the various industrial segments in Brazil and the loss of market for the Brazilian manufactured goods in Latin America, especially in South America. In addition, the exchange rate issue is a central — though little discussed — variable in this process. What would be the impact of an agreement of this magnitude on a context of overvaluation of the real on the national economy as a whole?

In this sense, the main question to be answered is whether the country is able to engage itself into international trade via adherence to mega-trade agreements. Further questions regard the national entrepreneurs’ cohesion around a national policy regarding the commercial insertion of Brazil, which traditionally includes, for example, federal subsidies, openly countered in international trade.

It is clear, therefore, that Brazil’s adherence to a wide range of trade agreements involves, among other arguments, the reevaluation of its domestic and external priorities. Domestically, the impact of these agreements on the country’s external accounts, on the political friction among different business groups with conflicting interests in the implementation of the country’s foreign policy and on the interests of workers and consumers is noteworthy. Internationally, Brazil seeks a compromise with Argentina in order to reach a trade agreement with the European Union without jeopardizing its goals related to Mercosur and South America, a strategic area of influence within its foreign affairs.

Countries with which Brazil maintains preferential trade agreements

COUNTRIES	INSTRUMENTS	SITUATION
Chile, Bolivia, Guiana, Suriname (rice), Mexico (including automotive sector), Peru, Ecuador, Colombia, Venezuela and Cuba	Mercosur Economic Complementation Agreements	In force
India, Israel and Southern Africa Customs Union (SACU) — South Africa, Namibia, Botswana, Lesotho and Swaziland	Mercosur Preferential Trade Agreements	In force
Palestine and Egypt	Mercosur Preferential Trade Agreements	In force
European Union	Mercosur Preferential Trade Agreements	Under negotiation

SOURCE: BRAZIL. Ministério do Desenvolvimento, Indústria e Comércio Exterior (MDIC). Acordos dos quais o Brasil é parte. Retrieved from < http://mdic.gov.br//sitio/interna/interna.php?area=5&menu=405 > on Mar. 30, 2016.

[1] ORGANIZACIÓN MUNDIAL DEL COMERCIO. La OMC y los acuerdos comerciales preferenciales: de la coexistencia a la coherencia. Informe sobre el Comercio Mundial 2011, Ginebra, 2011. Retrieved from <https://www.wto.org/spanish/res_s/booksp_s/anrep_s/world_trade_report11_s.pdf> on Mar. 9, 2016.

[2] THORTENSEN, V.; FERRAZ, L. O isolamento do Brasil em relação aos acordos e mega-acordos comerciais. Boletim de Economia e Política Internacional, Brasília, n. 16, p. 5-17, jan./abr. 2014. Retrieved from on Mar. 10, 2016.