Introduction

Brazil has undergone massive structural changes in their economy

since from the great depression of world war II. Its economy,

which had been geared to the exportation of a small number of

primary products, has now become dominated by a large and

diversified industrial sector in a relatively short period of

time. At the same time, Brazilian society which was earlier rural

has become increasingly urbanized. The industrialisation process

from the 1950's to the 1970's led to the expansion of important

sectors of the Brazilian economy such as automobile industry,

petrochemicals, steel and completion of large infrastructural

projects. Few decades after world war II, Brazil's Gross Domestic

Product (GDP) increased at an average rate of 8.5 percent per

annum from 1970 to 1980 despite the impact of 1970's world oil

crisis. The World Bank (2013) states that Brazil is the world's

seventh wealthiest economy and has recorded a GDP growth of 7.5

percent in the year of 2012.

Trade Policies, Trade Patterns and Trade Performance of Brazil

after World War II

Trade Policies

Some of the most successful export commodities like sugar, gold ,

diamond , rubber and coffee were the main exports of Brazil

before world war II. Even before trade liberalization, Brazil

geared for success through many restrictive trade policies.

During 1953 to 1957 Brazil used some multiple exchange rates to

encourage their trade transaction. And towards the end of 1957

the government imposed a broad ad volorem tariff, a tariff which

is levied as a fraction of the value of imported goods. This

system was lead to create the administrative to impose and revise

tariff which was requested by the domestic manufactures of

consumer goods. Some of the import controls used after 1982 had

lead to the worsening of the current account balances. It was

clear that by 1984 with an accelerated inflation more than 200

percent Brazil could have adjust to a better trade policy which

eventually will be viewed as a potential instrument for internal

stabilization within the economy. As a result Import

Liberalization was drawn up for a more potential contributor to

reduce inflation.

Import- Substituting Industrialization (ISI)

Unlike many other Latin American countries, Brazil's post world

war II trade policies have adopted to limit imports of

manufactured goods, Government's strategy that is to replace some

of the agricultural or industrial products to encourage local

production of manufacturing sector for domestic consumption is

known as the strategy of Import-Substituting Industrialization.

Many scholars have pointed out the distortions which were caused

by high and indiscriminate protection policies, excessive

subsidies and exchange controls in most of the Latin American

industrialized countries.

Colistete (2009) states that, many critics have been pointing out

the consequences faced by the nature of import substituting

industrialization which was also led to development of

inefficiency and high cost industries, even in Brazil. By

protecting these import substituting industries, countries do

drain their economic resources away from actual or even more

potential export sector. Bergsman (1971) states a counterpoint

argument regarding the remarkable progress that has surpassed

Brazil's consumption of non-durables due to the import

substitution program. But Bergsman (1971) also states that Brazil

was extremely inefficient in textile manufacturing at the time of

post war period. The reason was that efficiency of production was

solely depended on modern and more sophisticated technology. More

over the infant industry argument which is the protecting of

domestic growing industries by imposing of extreme protectionist

measures, empirically being reviewed by most of the economists

that there is no need of high degree of protection for these

industries as there will not be any exploitation by the developed

and advanced countries.

Trade Liberalism (1985): Theory Underpinning Economic Policies

Many policymakers believe that promoting trade liberalization and

giving importance to openness that is, the removal of or

reduction in the trade practices like dismantling of import

tariff, and other non- tariff barriers will lead to a way to

increase standard of living and welfare in developing nations.

Brazil from 1988 to 1994 followed these recommended policies,

this have not only reduced the average tariff level but also have

changed the structure of protectionism. This has lead to an

increase in import penetration in most of Brazilian's economic

sectors. Most of the developing countries have experienced major

changes in trade policies and trade patterns after trade

liberalization. Dramatic increase in volume of trade and changes

in nature of trade patterns are the important effect of trade

liberalization (Pavnik, et al. 2004).

Trade Patterns

Brazilian trade patterns in post war were different than earlier

decades. In 1980's and early 1990's Brazil's most dominated trade

partners were United States and the Europe. Brazil's major

exporting markets were relatively high income earners for

instance, United States as the major exporting market for

Brazilian coffee. These exporting patterns started as an effect

of trade liberalization reflected a strong position among other

Latin American trading partners. On the other hand Middle East is

one of the prominent trading partner because of high valued

petroleum imports formed the Latin American Free Trade

Association (LAFTA) which was formed by negotiating for a mutual

tariff reductions by most of the South American countries and

Mexico. Later LAFTA was replaced by the Latin American

Integration Association (LAIA). Argentina, Brazil's mostly traded

economy in early years had an agreement which was known as the

Common Market of South (Mercosul), to address the shortcomings of

the early 1990's traditional trade of inward-oriented industrial

policies.

International Trade Relations with World Trade Organisation(WTO)

Brazil remained committed within the WTO to strengthen the

ongoing multilateral trade systems and for some of the successful

conclusions of the Doha Development Agenda (DDA). Participating

in favour of the Anti-dumping negotiations and lobbing for

agricultural trade liberalization (WTO Trade Policy Review,

2013).

United States / Brazil WTO Trade Dispute

Cotton dispute that basically between Brazil and United States is

on the issue of unfair subsidies for cotton producers in the

United States. Acquisition of new farm bill, which is a system of

insurance scheme instead of direct payments to cotton farmers of

the united states was called upon to be unfair and WTO dispute

settlement said it was in violation with the United States

obligations.

This U.S./Brazil cotton dispute case was first brought to the WTO

in 2002. And in following years 2005 and 2006 WTO allowed to file

over $800 million penalties against wide range of U.S. companies.

U.S is the world's second largest and world's dominant exporter

for cotton. Again in 2010 U.S. came up for a deal to pay a

monthly compensation of $12 million for the Brazilian cotton

interests even without changing their trade laws.

Paulo Sotero, Wilson Centre Brazil Institute Director (2014),

states that Brazil's current economic position to retaliate is

not a good decision as the Brazil/ U.S. trade relations are in a

more delicate moment . And what WTO's role in cotton subsidies

case is to certify whether the current version of the farm bill

comply with that of the United States obligations. If Brazil were

to retaliate they could do cross retaliations, stop paying for

intellectual property rights but Brazilian government would stick

to the decision that would not allow them to do so as the two

countries was trying to solve the dispute.

Trade Performance

Brazil is the seventh largest economy in terms of GDP growth and

the largest Latin American nation. And the country's naturally

driven trade with diverse agricultural and manufacturing

production has actually driven a prominent position in the BRICS

nations. The overall performance of Brazil's foreign trade can be

considered as a favourable condition in the last 10 years. The

total contribution of trade flow (exports plus imports) to the

Brazilian GDP rose from 20.2 percent in the year 2000 to 22.8

percent in 2010, and even a peak rate of 29 percent was recorded

in 2005.

The most prominent exports of Brazilian market has changed during

the post war-II situation, where they now export minerals which

is of 25.2 percent, foodstuff accounting for 13.8 percent and

vegetables which accounts for 12.3 percent in the years from

2009-2011. Whereas the sectors gained losses in total exports

were transportation , which was 8.4 percent , machinery and

electronics accounted for 8.2 percent and metals were 8.7

percent.

The main trading partners of Brazil are the Europe, United

States, China, Argentina and Japan and accounting for 60.9

percent of total sales in the years from 2009-2011. China has now

become the most dominating trading partner for Brazil surpassing

United states and the Europe (Canuto,et al.2013).

Destinations 1996–98(%)

2006–8 (%)

2009– 11 (%)

European Union (27) 26.1 24.4 21.9

China 2.1 7.4 16.1United States 19.1 16.1 10.3Argentina 12.6 9 9.1Japan 5.6 3 3.5Chile 2.2 2.7 2.1Venezuela, R. B. de 1.3 2.8 2Russian Federation 1.3 2.5 1.9Korea, Rep. of 1.4 1.5 1.9Mexico 1.7 2.7 1.7India 0.3 0.6 1.7Saudi Arabia 0.8 1.1 1.4St. Lucia 0 1 1.4Paraguay 2.6 1.1 1.2Canada 1.1 1.3 1.2Colombia 0.9 1.4 1.1Others 20.8 21.5 21.5Source: World Integrated Trade Solution.

Brazil is being helped economically by China's demand for goods

and commodities such as iron ore, soy beans and oil. China has

become the number one investor and the number one trading partner

overtaking United States which was the dominant partner earlier.

Summery

The Import Substitution Industrialization (ISI) a policy adopted

by developing nations to replace some of the agricultural or

industrial products to encourage local producers of manufacturing

sector has now shifted towards Export Strategies and more

specifically Export Promotion (EP) in Brazil, where as it is the

Export-Led Growth in South Korea (vieira, 2014). The U.S./Brazil

trade dispute on cotton subsidies were resolved recently by the

involvement of the World Trade Organisation. WTO's role which was

to comply the new farm bill with that was of the U.S. obligations

was concluded with favourable results. And the trade patterns

between Brazil and U.S are currently in a more delicate manner

due to China being overtaken the dominate trade partner (Staff,

2014).

Conclusion

With most of world's economies stagnate Brazil is growing its 7

percent, three times faster than America. With the presence of

abundance natural resources, with faster expansion of farm lands

and 14 percent of fresh water will have comparative advantage for

Brazil. 80 percent of Brazil's Electricity comes from hydro

power, it has the most bio fuelled industry in the world and for

its size the world's greenest economy. Brazil has now become the

largest producer of iron ore in the world and the world's leading

exporter of beef, chicken, orange juice, sugar, coffee, and

tobacco much of now bound for China which has replaced the U.S.

is Brazil's leading trade partner. It's not just commodities

which drives the Brazilian boom, the country has a substantial

manufacturing base and large auto industry. Aviation giant

Embraer is the world's third largest aircraft manufacturer and is

the main supplier of original jets for the U.S. market. But

having these mass production Brazil is in shortage of skilled

labour.

Brazil, currently the seventh largest economy and will be the

world's fifth largest economy sooner. The International Monetary

Fund (IMF) predicted that Brazil will be the fifth largest

economy in 2015 surpassing France.

References

Bergsman, J. (1971). Brazil : Industrialisation and Trade Policies. Economic and Political Weekly 6(10):577-579.

Canuto, O., Cavallari, M., and Reis, J. G. (2013). Brazilian Exports: Climbing Down a Competitiveness Cliff. Working Paper. World Bank.

Colistete, R. P. (2009). Revisiting Import-Substituting Industrialization in Brazil : Productivity Growth and Technological Learning in the Post-War Years. Unpublished article. Department of Economics.

Pavnik, N. , Blom, A. , Goldberg. P. , and Schady, N. (2004). Trade Liberalization and Industry Wage Structure : Evidence from Brazil. The World Bank Economic Review 18(3):319-344.

Staff, F. (2014). U.S./Brazil WTO trade dispute resolved | Markets content from Delta Farm Press. [online] Deltafarmpress.com. Available at: http://deltafarmpress.com/markets/usbrazil-wto-trade-dispute-resolved [Accessed 8 Nov. 2014].

Trade Dispute between Brazil and U.S. 2014, video, CCTV America, 28 February, viewed 8 Nov.2014, < https://www.youtube.com/watch?v=5Cei9aoC7Xo>.

Vieira, V. R. (2014). Invisible legacies : Brazil's and South Korea's shift from ISI towards export strategies under authoritarian rule. Journal of International Relations and Development 17:157-190.

World Bank (2013), Brazil Overview : The World Bank.