Investing in Trade Diplomacy and in Trade Facilitation: The Growth of Brazil’s Exports ()
1. Introduction
In 2014, the Trade Facilitation Agreement was approved at the General Council and at the Ministerial Conference of the World Trade Organization (WTO). This agreement was the first to be an amendment to the Marrakesh Agreement of 1995 and it had been negotiated since the Singapore meeting of 1996. What can be inferred from international diplomatic history is that some important diplomats planted this seed of trade facilitation in 1996, but since then they have been negotiating a common paper. Even though there was willingness among trade-facilitator representatives, there was not even consensus between the United States and Great Britain in 1996.
There is the famous phrase attributed to Antoine Lavoisier that nothing comes out of nowhere, but everything is transformed. Diplomatic historians have the same tendency to value continuity, so there is always room for historical background on international relations before discussing the most recent achievement at the WTO. From the Bretton Woods conference until today, there has been a well-planned initiative to build an economic international order. The creation of a complex organization, the WTO, fifty years later, is a symbol of an ongoing process for international regulation.
After the political failure of the International Trade Organization (ITO) initiative, there was an effort to informally continue trade regulation. Annex IV of the Havana Charter (1948) was primarily made as a provisory mechanism, but the General Agreement of Trade and Tariffs (GATT) has lasted for a long time. In its first structure, the discussions were ruled by plurilateralism and by the “grandfather clause”. By those terms, countries could only be bound by the decisions they chose, and pre-existing legislation could remain in force even if it were incompatible with GATT rules. The project’s main goals were to reduce tariffs internationally (Wang, 2014).
From 1947-1957, there were six very important events. There was progressive liberalization of protectionism worldwide, significantly reducing import tariffs among the countries which were participating. In the 1960s, there was the need for more institutional regulation so that the GATT would have an organized system of dialogue. Then, there was the creation of the Council of Representatives; of positive consensus; of specific committees; and of more varied discussions, such as on development.
In the 1990s, discussions began to be more complex, and that increased divergences among countries. Tariffs on industrialized and agricultural goods, non-tariff barriers and special rules for developing countries were under discussion. Then, the big economies decided to negotiate bilateral deals and the rounds under the GATT system took longer than usual. The Blair-House deal and the Uruguay Round were important for reshuffling the international system.
At the same time, developing countries were aligning their expectations for the future in informal groups. They had different interests and perspectives, but chiefs of State understood that it was important for developing countries to have strong international alliances. Diplomacy was increasingly decisive for economic achievements. Brazil attributed great importance to its foreign ministry. Through diplomacy, this country had conquered its political independence, its long borders and a peaceful South America. When it came to the economy, its export sector was always of great significance, first with sugar, then with many other products.
Today, South-South dialogue and cooperation has guaranteed Brazil a prominent seat at international negotiation tables. As developing countries are responsible for an increasingly large share of global GDP, their impacts on international discussions have grown correspondingly. In this article, the objective is to explore Brazil’s diplomatic history in order to answer the question of how it has impacted Brazil’s exports. With the use of the deductive method, there will be a discussion of how the majority of the authors studied for this article have understood Brazil’s current economy to be the result of many right and wrong decisions taken according to past documents and speeches.
The author’s criterion to measure Brazil’s diplomatic acts as successes or as failures is their economic outcome. If there was an increase in exports, it is a positive indication of diplomatic achievements. Establishing this chronological history of public acts is essential for understanding Brazil’s export sector and also the expectations related to it for the future. This explains the disposition of the arguments for this article. Respectively, Brazil’s diplomatic investment at the WTO and its export prosperity have occurred thanks to Brazil’s position as a developing country and to the constant effort of Brazilian diplomacy towards achieving national economic prosperity.
From time to time, there are administrative reshuffles within Brazil’s governmental structure. As part of the Executive Power, the Ministry of Foreign Affairs (Itamaraty) has undergone different reforms. In the 1960s and in the 1990s, Itamaraty gained more support from the presidency to raise its financial and labor investments at the WTO. These initiatives increased Brazil’s diplomatic power in tariff reductions and in agricultural liberalization. At the same time, these diplomatic acts advocated in favor of Brazil’s exporters against other countries’ intentions to transform the international economy into free trade for industrialized goods. Supporting the cause of developing countries towards social-economic development, some important trade agreements were signed that were favorable to those economies.
In 1973, The Tokyo Round negotiations marked the first discussions about development at the WTO. From then on, developing countries had more space to uphold their own interests at the institution. It does not mean that divergences among developing countries themselves and against developed economies were over. One example of those disagreements were the long-lasting negotiations about technical cooperation and special deadlines for developing countries in the Trade Facilitation Agreement (TFA).
In the 20th century, Brazil’s diplomatic history has proved to be progressively independent and incisive, in contrast to the initiatives that would only benefit developed countries. Government investments in the Ministry of Foreign Affairs (Itamaraty) were decisive to Itamaraty’s international action, especially within the international financial system. As exporters in Brazil were always eager to find more international influence, the country’s diplomats have always tried to attain more political and economic prominence.
Moreover, there are many factors that influence Brazil’s foreign policy, and international trade is of course fluid and unpredictable. Nevertheless, a determined objective in Foreign Policy is essential for it to last. Public decisions taken by a government take time to develop and to produce results. For diplomacy, it is no different. Brazilian diplomats started to negotiate the liberalization of non-tariff barriers in 1996, but it was only in 2015 that the Trade Facilitation Agreement was approved at the WTO.
2. Technical Investments in Brazilian Diplomats at the WTO
Since the WTO was founded, Brazil has invested efforts in strengthening its participation at the entity. Amid domestic economic instability, Secretary of State Celso Amorim called on a group of diplomats to dedicate their work and research to the global economy. It was not the first time that a Brazilian foreign minister had created a study group so as to add value to Brazil’s international interests, but it was a landmark in Brazil’s role at the WTO. There was a sequence of diplomatic decisions that led the Trade Facilitation Agreement (TFA) in 2015 to turn out to be very close to Brazilian diplomats had hoped and worked for.
Diplomacy is not about signing international treaties at any price; rather, advantages to Brazil are the pillars of any diplomatic negotiation. The representatives cannot sell the country’s autonomy in a bid to plan economic policies domestically or to control the national economy. Among the challenges for Brazilian representatives at the WTO are the obligations of the single-undertaking regime. Brazil has different social, economic and political realities from the other WTO members, and therefore its diplomatic representatives have to keep the country’s needs in mind at multilateral meetings and not just go with the majority (Funag, 2010).
As global trade and international capital became more essential to Brazil’s economy, its foreign policy was planned around a new financial policy. Before the 1990s, Brazil’s international relations had been more reactive, but this characteristic changed after the economic boost in the last decade of the 20th century. As a provider of capital internationally, Brazil’s diplomatic representatives embraced the position of intermediaries between developed countries and developing countries. Brazilian diplomats had the mission of adapting the global agenda to national interests (Leite, 2016).
The majority of goods sold by Brazil only became part of international discussions at the Uruguay Round (1986-1994). In the 1980s, agriculture was so controversial that any negotiation would take place at the GATT meetings. Brazil had just changed its strategies about international trade on agriculture. It joined the Cairns Group in favor of trade liberalization. In 1994, the Agreement on Agriculture was signed as part of annex 1A. It was only possible because the United States and the European Community had signed the Blair House Agreement so as to align their expectations on the trade of agricultural commodities. Japan and Canada also discussed the topic in 1993 (Bento & Alfieri, 2023).
Amid intense divergence on the liberalization of industrial or agricultural goods, the Cairns Group could not support only free trade for the commodities that those countries exported without creating divergence at the WTO. Hence, the group argued that the countries which were so dependent on food imports needed the liberalization of that issue in order to achieve food security. This same split between developing countries and developed countries continued during the Doha Round in the 2000s (Watson, 2016).
During the Doha Round, Brazil was facing the most significant macroeconomic upheaval in its economic history. Therefore, it was difficult to think of one organized foreign policy when there was a chaotic economic situation domestically (Souto, 2024).
Even though Market Access for Non-Agricultural Products was being officially discussed in the Doha Round, Japan and other countries could impose some restrictions on the export of those goods as non-tariff barriers. Moreover, in 2008, the international crisis raised the price of commodities to high levels, and export restrictions were again on negotiating tables. However, for Brazil, developed countries were going beyond the meeting’s official subjects (Bento & Alfieri, 2023).
In 2022, the 100th meeting of the Committee on Agriculture (CoA) of the WTO was celebrated. Dividing the world into four informal regions (developed countries; Africa; Asia and Pacific; and Latin America and Caribbean), the presidency rotates around those four groups. From 2013-2014, the Brazilian diplomat Guilherme Bayer was its president. The CoA is competent to monitor and to review the founding agreement of 1944 and other legislation implemented at the WTO, such as the Doha Declaration (2001), the Bali Declaration (2013) about quotas, tariffs and food security and the Nairobi Declaration (2015) about export competition (Bento & Alfieri, 2023).
Brazil is the most active developing country at the CoA. However, most questions were asked in the 1990s and in the 2020s and directed to the European Union, the U.S and India about domestic support and access to markets. These topics are historically Brazil’s priorities in agricultural negotiations at the WTO. Despite bringing together a smaller number, Brazil also asks those countries about export competition and export restrictions because Brazil traditionally exports agricultural products (Bento & Alfieri, 2023).
The CoA is important because it creates an environment for Brazil to discuss the negative impact of agricultural subsidies and to call for an international legal reform of agriculture. In 2019, Brazil expanded its participation in meetings on agriculture at the WTO due to the creation of two new institutions: the Department of Agribusiness Promotion (DPAGRO) in the Ministry of Foreign Affairs and the Agribusiness Sector (SEAGRO) of Brazil’s delegation at the WTO (Bento & Alfieri, 2023). Therefore, Brazilian diplomacy became even more powerful at WTO discussions from then on. Despite exporting commodities as its most valuable products, Brazil’s role in the international system as an active member of international institutions has been a sign of a more complex foreign policy.
In the 2000s, Pascal Lamy was director-general at the WTO, before being succeeded in 2013 by the Brazilian diplomat Roberto Azevedo. Mr. Lamy remarked that the global value chains had changed greatly in the last twenty years, so global trade could not be explained by the usual trade theories any longer. According to the former director-general, the reality should be analyzed, especially to understand the new configuration of imports and exports for each country’s economic growth. In the 2010s, this argument was important in explaining Brazil’s possibilities at this time of selective liberalization in global trade. According to the Organization for Economic Co-operation and Development (OECD), Brazil had a participation of 24% in the products exported by other countries in the international system, much of this owing to the country’s exports of iron ore. At the same time, the country accounts for just 1.5% of global trade in value (Marques, 2016).
Brazil has an emerging presence as one of great exporters of crucial commodity products and increasing importance as exporter of high-technology goods, such as the aviation industry. At the beginning, the agricultural agenda was the one that received most attention from Brazil’s diplomatic team. However, service and investment facilitation, for example, were transferred to the center of discussions (Souto, 2024).
In 2013, during the Bali negotiations, Brazil’s financial policy at the WTO changed. The country’s representatives opted to avoid agricultural discussions in order to maintain minimal stability at the meeting. They knew the issue was a controversial one and would jeopardize negotiations on trade facilitation and multilateralism itself. This technical knowledge among Brazilian diplomats has had a great impact on creating concrete negotiating proposals (Souto, 2024).
Each country has its own trade interests. Diplomacy has been practiced, as it is known today, not to create an international system of exactly equal countries, but to find points of convergence. Even among developing countries it is impossible to fit Brazil and China into the same box. Nevertheless, together they can amplify the power of their common interests.
3. Brazilian Exporters as Beneficiaries of Developing-Country Specificities at WTO
The UN conventions on development in the 1960s drew everyone’s attention to the importance of international and technical cooperation among countries. The non-aligned countries, G77 and other coalitions helped those countries to achieve more political participation in international discussions, especially calling for anti-imperialism and anticolonialism. When it comes to the economy, it was only with the Tokyo round (from 1973-1979) that developing countries acquired an exception to the most favored nation clause. Moreover, it took more time for them to be on the same side of the GATT negotiations table.
At the beginning of the 21st century, Brazil’s domestic economy overcame a strong macroeconomic crisis. The country’s export figures clearly show a return to financial discussions at the WTO. With more autonomy for the Minister of Foreign Affairs to elaborate foreign policy, its diplomacy joined the liberalization wave and became progressively more intrinsic to the WTO system. This was a positive sign for Brazilian international trade, as seen in Figure 1 below, with rising values from 1996 to 2018 (Souto, 2024):
Figure 1. Brazilian exports and imports, annual value (million (US$)).
These data demonstrate a turning point in Brazil’s diplomatic participation at the WTO. As Brazil continued to be responsible for a large part of international trade, so it had more power to suggest structural changes at the WTO. However, Brazilian diplomacy had already engaged in international trade negotiations in favor of development years before.
Since the 1930s, the objective of development had already been a constitutional concept implemented in Brazil’s international relations. As a strategy of foreign policy called today “pragmatic alignment”, President Getúlio Vargas was completely engaged in achieving Brazil’s development. After the Second World War ended and Eisenhower was elected in the U.S, the international scenario was transformed for Brazil. The U.S.’s political representatives had other priorities, so the Latin Americans had to negotiate directly with private and international institutions, such as Eximbank and the International Monetary Fund (IMF) (De Mello & Silva, 1992).
In the 1950s, President Juscelino Kubitscheck launched a strategy for development called the Pan-American Operation (OPA). This diplomatic initiative had everything to do with Brazil’s economic plan of development, known as “fifty years in five”. Brazil’s high spending rates and the lack of international monetary liquidity made the situation difficult for the national economy. Nevertheless, during this time Brazil’s foreign policy became more engaged in multilateral discussions on international trade and investment. Given its position as a developing country, the country gained more space in international discussions (De Mello & Silva, 1992).
For over sixty years, developing countries (DCs) have been trying to increase their participation in the multilateral trade system. As Celso Amorim remarks, coordination among those countries can amplify their voices. One turning point for international relations at the GATT was the Tokyo Round (1986-1994), it was when the DCs began to show collective power. They acted together to avoid the inclusion of new subjects in the negotiation rounds and the interference of the international order in their domestic policy (Haroldo Jr., 2012). An important decision in favor of emerging countries at the WTO was the Global System of Trade Preferences (GSTP), in which the members of the G77 could establish trade preferences for each other (De Almeida, 2011).
Nevertheless, it was not until the Doha round that their interests stopped being marginalized. In the 2000s, the DCs organized the Core Group on the Singapore Issue and succeeded in leaving investments, government purchasing and competition out of the Doha Round. Trade facilitation and other subjects were still under discussion, but the DCs did not have the obligation to implement those if they did not have the physical capacity to do so. Moreover, the DCs negotiated special treatment for those countries which had just entered the WTO. This was seen in the Cotton-4 grouping, in which they strongly argued for the elimination of subsidies in the cotton sector, which helped Brazil to win a settlement against the U.S. Furthermore, Brazil, India and South Africa successfully addressed the deliberations about the TRIPS waiver, allowing some countries in need to disrespect property rights in the Trade-Related Aspects of Intellectual Property Rights (TRIPS) (Haroldo Jr., 2012).
From the Tokyo Round until today, Brazil has joined and voted in many coalitions. South-South coordination, Mercosur, the BRICS and others are examples of groups which Brazil has joined. One concern that could be raised is the different level of economic development they have, given that some are more industrialized than others. When the divergence is so extreme, there are many cases of free-riding, in which a small number of countries, usually called political entrepreneurs, take part in international discussions, but many others are benefited.
One of the greatest examples was the creation of the G20, during a preparatory meeting for the Cancun Ministerial Conference in 2003. Brazil and India were resilient political entrepreneurs against the agricultural proposal coming from the U.S. and the European Union. This Brazilian diplomatic action also represented a solid return of the South-South coalition. After all this diplomatic effort, in July 2004 the Framework Agreement was signed (Haroldo Jr., 2012). This document was essential for the development of what we know today as the Trade Facilitation Agreement (TFA), in effect since 2017.
According to the TFA, the Developing countries and the countries with the Least Developed Countries (LDCs) had a different deadline to fulfill all the customs regulations and would have access to technical cooperation if necessary (Nonnenberg & Mendonça, 2005). Notwithstanding the existence of high trade costs in Brazil, after the implementation of the TFA rules the country was more receptive to international trade and investments. As a recipient of foreign investment, trade facilitation is helpful to equilibrate its balance of payments (Nonnenberg & Mendonça, 2005).
In 1984, Brazil’s exports reached the largest surplus in the 20th century. Although diplomatic representatives were active at the GATT discussions, after that year the level of exports was not a priority. Growth rates were notable in 1988 and 1992, but nothing compared to before. The government was more focused on the country’s domestic economy, and the export rates were altered by the monetary economy and other factors used in order to stabilize inflation rates. For example, until 1999 the exchange rate was high and did not stimulate exports regardless of the high profitability of Brazilian exports (Brazil, 2024d).
When the Brazilian economy was liberalized, it led to progressively higher export rates. From 2001 to 2013, agricultural exports grew by 8%. Three factors were essential for this to happen: a well-regulated international market, low tariffs and fewer agricultural subsidies in other countries. After some years of stabilization, in 2021 Brazilian exports grew 19.7%. One economic concern is that soy exports are expected to rise by 33.6% from 2021 to 2031 (Brazil, 2024b), but manufacturing products are only in decline (Brazil, 2024a). This is a global tendency, and some countries are establishing successful policies so as to avoid it, such as China and India, and others are not managing this, such as Brazil (Coronel, Azevedo, & Campos, 2014).
In 2023, Brazil exports, ranked in value, were soy, iron ore, petroleum, sugar, fresh beef, soybean meal, cellulose, corn, manufacturing industry and poultry meat. Many of these products symbolize Brazil’s diplomatic eagerness to liberalize agricultural trade and have been more exported due to former diplomatic efforts at the WTO (Brazil, 2024c).
In 2024, sixty years have passed since international institutions first discussed development and specific rules for developing countries. Brazil’s economic prominence in international trade occurred hand in hand with its diplomatic efforts. Brazilian diplomats know well that consistency in foreign policy is the best way to enhance the country’s economic and political international profile.
4. The Continuity of Brazil’s Foreign Policy
According to John Hertz’s “theory of global militarization” investments, whenever a country chooses to raise its military spending, its neighbors do the same. This causes a progressive increase in regional tensions. Nevertheless, Brazil has always prioritized diplomacy over the military. With a celebrated diplomatic history, the biggest country and economy in Latin America has influenced its neighbors to do the same. Brazil’s prominent 122 years of foreign policy, especially for the last 30 years, has had an important impact on the country’s role at the WTO (Farias, 2013).
Since the 1920s, some world leaders, such as Woodrow Wilson, have called for the end of secret diplomacy, trade multilateralism was not a transparent environment for Brazil. In the 1970s, Brazilian representatives did not even have access to former tariff offers the countries had signed in the last decades of the GATT. Despite undergoing obscure rounds of discussions, Brazil and other Latin American countries are shown by the most recent historiography to be important participants in trade multilateralism (Farias, 2013).
Since the London Preparatory Meeting for the International Conference on Trade and Employment of 1946, Brazil was the first country to argue that economic development should be discussed in the multilateral system. Brazil’s protagonism was maintained at the end of negotiations at the Uruguay Round in 1994 (Farias, 2013).
At the initial meetings (1946-1951), the creation of an international institution was negotiated and then the GATT structure, happening initially through a preparatory committee created at ECOSOC in 1946. Brazil was skeptical about the American initiative. It was divided between the ones who wanted to protect Brazil’s industries and to avoid more inequalities when compared to the industrialized countries and the ones who wanted to take part actively in negotiations. Predominantly, the Brazilian delegation argued that it was necessary to protect national industries to achieve development, so the liberalization of tariffs should be well thought out (Farias, 2013).
After 1951, Brazil underwent profound instability in the national economy and it had to renegotiate former commitments. The new strategy was related to the perspective of the Brazilian Parliament; therefore, diplomats had to withdraw former agreements in order to uphold Brazil’s higher tariffs internationally. At that moment, Brazil almost left the negotiations in the GATT system, but more than 60 Brazilian academics, diplomats and others continued the debate in Geneva until 1960, all in order to balance domestic and international legislation. It was clear that what had been established could not be adapted to a developing country (Farias, 2013).
In the search for alternatives, what was being discussed at the Economic Commission for Latin America (CEPAL) directly influenced Brazil’s diplomatic decisions. At the time, GATT dispositions were very close to a reform and Brazil embraced that possibility. As a result of those initiatives, there was a conference on development: the United Nations Conference for Trade and Development (UNCTAD). Brazil headed the event and met with the G77, at the same time that Brazil’s Ministry of Foreign Affairs (Itamaraty) was gaining more administrative freedom in the government. In 1965, the Kennedy Round was no longer directed by the Ministry of Finance, but instead operated at Itamaraty (Farias, 2013).
The difference was that Itamaraty became more critical of the international system. The disillusionment showed by Antonio Azeredo da Silveira, the Minister of Foreign Relations in 1968, during his speech at the end of the II UNCTAD, was a case in point. Brazilian diplomacy decided to change the ongoing harmful multilateral system, in the perspective of a developing country. At the Tokyo Round, diplomatic efforts were forceful. With modest results in Tokyo, the country entered a defensive phase during times of crises in the 1980s (Farias, 2013).
Rivalry was on the rise in the GATT, so Brazil was against the inclusion of new subjects in new rounds. The country’s efforts were all directed to the regional agenda. Focusing on a customs union, Brazil wanted to connect its tariffs system to Argentina’s and to Uruguay’s tariffs level. However, President Fernando Collor de Mello’s reforms and international tendencies were signs that the second phase of the Uruguay Round would lean toward trade liberalization (Farias, 2013). There were also some negotiations to create a Free Trade Agreement of the Americas (FTAA), but Brazil’s foreign policy prioritized more open-market options and the commitments under the WTO system (Souto, 2024).
In the 1990s and 2000s, the world crises did not help the economic divergence to come to an end. In 2013, the Bali Ministerial Conference of the WTO had a much more positive environment for some discussions. Trade facilitation, agriculture, cotton and the easing of rules for the countries with the Least Developed Countries (LDCs) were part of the Bali declaration, which was presided over by Brazilian diplomat Roberto Azevedo, who was WTO director-general at the time. By then, export restrictions were no longer popular. The price of commodities was not so high, so a scenario like the 2008 crises is unlikely to repeat itself (Farias, 2013).
The international scenario has a strong influence on Brazil’s exports. Trade restrictions imposed by the U.S on China in the 2000s has led this country to preferably buy more soy from Brazil. As Brazil’s most exported product in value, soy is at the center of Brazilian foreign policy economic strategies. The global economy is a basis for Brazil’s secretary of state to establish the country’s financial policy at the WTO.
Acknowledgements
Brazil is a country of diplomacy. Its well-known political and economic roles in the international systems are results of diplomatic investments. These thirty years since the Marrakesh Agreement were another demonstration of Brazil’s diplomatic power. Its export rates are signs of these efforts.
Depending upon the autonomy of the Ministry of Foreign Affairs and the level of Brazil’s domestic economic instability, the country gained more political prominence at the World Trade Organization (WTO). Since the first agreements about the post-war international economy, Brazil has taken part in diplomatic discussions on global trade. As an interlocutor calling for its own development in the 1930s, during the next decades Brazil’s diplomatic representatives began to engage in the international system against the international order, which was created by the developed countries.
In the 1960s, the First United Nations Conference for Trade and Development (UNCTAD) was one of the first demonstrations of opposition coming from developing countries and highlighted the need for international cooperation. During the Tokyo Rounds in the GATT system, there was a turning point in the international order when developing countries started to create groups and to speak together. This diplomatic turnaround was even stronger at the Doha Rounds and their legitimacy was proved.
In the 2000s, Brazil and other developing countries were able to avoid the thematic overload at the Doha Meeting and, then, approved some important decisions in the liberalization of agricultural trade and in the property rights sector. In the same decade, Brazil had strong growth in its agricultural export rates. Cooperation among developing countries was also essential for the Trade Facilitation Agreement to list some exceptions for the developing countries and the countries with the Least Developed Countries (LDCs).
After these considerations, future works have the chance to analyze further repercussions of the WTO discussions on the Brazilian economy. In academia, diplomacy is usually linked to international relations studies, but it is a such dynamic profession that it should be more linked to other fields of research, such as Economic Law.