Faced with the European Union, Brazil falters

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By PAULO NOGUEIRA BATISTA JR.*

The negotiation of a terrible agreement between Mercosur and the European Union, during the Lula government

Friends, I was going to write today about a burning and controversial topic – the need for Brazil to arm itself to the teeth, including nuclear weapons. But another matter, more personal, although also national, inevitably intruded – my friend, Ambassador Samuel Pinheiro Guimarães. It was accidental. I was already starting to take notes for the first topic, when his wife, Maria Maia, and historian Sergio Lamarão approached me to ask me to present a book about Samuel Pinheiro Guimarães, to be published in 2024.

I accepted, honored, without hesitation. However, driven by a wild immediacy, typically Brazilian, typically Western, I decided to write about him straight away. I don't have the patience of Job, nor the Chinese, to wait for the book to be published and I'll just say what I think about this great Brazilian. I'm going to talk about Samuel Pinheiro Guimarães and another burning issue, linked to him, that is currently affecting us – the negotiation of a terrible agreement between Mercosur and the European Union, during the Lula government.

Many great Brazilians are forgotten

Does the reader know Samuel Pinheiro Guimarães? If you don't know, you must immediately declare a huge cultural gap. Immense, but not unforgivable. In Brazil, it is not uncommon for great figures to be forgotten, while total nonentities, dedicated to providing service to foreign interests and local Brazilian groups, are celebrated in prose and verse. I won't give examples so as not to get lost in the subject.

Samuel Pinheiro Guimarães is one of those Brazilians who have not yet received the recognition they deserve. He is one of the greatest diplomats of his generation, perhaps the greatest. But how, one might ask, if he was not foreign minister, ambassador to Washington or other prestigious posts on the so-called Elizabeth Arden circuit? Well, well, is this fundamentally important? In addition to being an exceptional public servant, Samuel Pinheiro Guimarães built and continues to build a vast intellectual work. He is not a simple bureaucrat, like many of his colleagues, nor a simple storyteller, like me, but a thinker, a thinker about Brazil and international relations.

People should be valued not for the positions they hold or have held, but for who they are. (I feel like I'm paying homage to Counselor Acácio. Patience. Go anyway). Celso Furtado was Minister of State. Joseph Schumpeter, too. Rudolf Hilferding, too. Is that what they are remembered for? Schumpeter and Hilferding, by the way, were resounding failures as Finance Ministers. Celso Furtado did not have great success or repercussion as Minister of Planning and Culture. Few even know that the three were ministers. What remained was his work, mainly that of Furtado and Schumpeter.[I]

The other day, I went to pay a visit to Minister Mauro Vieira, of Foreign Affairs, and while waiting to be received, I browsed the gallery of photographs of former Itamaraty ministers. Most are as forgotten as they are dead and buried. And for good reason. What did they leave? What exactly is a minister of state? As Nelson Rodrigues said, in general little more than a continuum. There are exceptions, some notable, including Barão do Rio Branco, Santiago Dantas and Celso Amorim at Itamaraty, but they are exceptions that confirm the rule.

Samuel Pinheiro Guimarães was also Minister of State, not of Foreign Affairs, as I said, but of another ministry that escapes my memory, in the Lula government and later in the Dilma government. But this is not what marks his career as a public man, but rather the combination of practical action with intellectual reflection, as in Churchill, as in De Gaulle, as in the economists mentioned above.

The culminating moment of his theoretical action has been, until now, the book Five hundred years on the periphery (Counterpoint), which I highly recommend to all Brazilians and to anyone who masters the Portuguese language. The culminating moment of his practical action was as deputy minister of Foreign Affairs, during the Celso Amorim administration. Among many other battles, I highlight the one that led to the shelving of the Free Trade Area of ​​the Americas – the FTAA, a proposal from the United States that would have been disastrous for us.[ii]

Together with Celso Amorim and Adhemar Bahadian, he worked firmly and skillfully to prevent this agreement from happening. I still remember the day that Samuel appeared at the Plenary of the Chamber of Deputies, in the middle of the fight against the Alca, and was received with an ovation, like a general returning from the battlefield to report on the progress of the war.

Today's war – the Mercosur/European Union agreement

This brings us to the present, which is ultimately what matters most. Samuel, like me, must be giving the Rodrigueans “triumphal dog-run-over kicks” because of the advancement, under the Lula government, of the Mercosur/European Union agreement. Nelson Rodrigues' expression captures our state of mind. Because, amazingly, this agreement is essentially the same as the FTAA and it is not understandable, therefore, that the same President Lula continues to continue with a negotiation of this nature – and, it should be noted, essentially concluded in 2019 by the governments of Jair Bolsonaro and Mauricio Macri, with all the deficiencies that entails.

Where you least expect it, nothing really comes from there, said the Barão de Itararé. The result of the negotiations between the Bolsonaro and Macri governments with the European Union was so bad that a European negotiator, John Clarke, even said: “We have in a way got away with murder on this deal”, which in loose translation means – is so favorable to us that it amounts to murder.[iii]

The agreement was not signed during the Jair Bolsonaro period because the Brazilian government, notably the clumsy Minister of the Environment, Ricardo Salles, adopted stances and policies in the environmental area that ended up making its completion unfeasible. There are “Salles” who come for good, I wrote at the time,[iv] predicting, however, that if Lula were elected in 2022, the issue of the agreement would be raised again,[v] as it actually happened. Furthermore, the Europeans presented in 2023 an additional protocol or side letter, reinforcing requirements in the environmental area and configuring even more clearly what could be called “green protectionism”, the imposition of barriers to trade under the pretext of protecting the environment.

What did the Lula government do? Negotiations resumed, accepting as a starting point the package inherited from Jair Bolsonaro... Mercosur was thus in the intrinsically unfavorable position of asking for modifications to a vast, intrusive agreement seen as ready, or practically ready. Added to this was the presence in the government, in some ministries, of representatives of Bolsonarism and neoliberalism, enchanted by the prospect of reaching an understanding with the “First World”. Muttism and fifth columnism joined hands to lead the country into a dangerous situation. We are in it right now, with the government, or at least its negotiating team, apparently committed to closing the negotiation in 2023.

The serious problems of the agreement with the European Union

So far, as far as I know, the Brazilian government has raised only two issues: (i) the climate issue, seeking to avoid or mitigate the “green protectionism” of Europeans through the modification or elimination of side letter and other environmental clauses; and (ii) the issue of government purchases, trying, among other things, to expand the possibilities, very limited in the original agreement, of directing public tenders to suppliers installed in the country. These are positive points, but far, far from enough to make this agreement palatable for us.

It is worth asking: is Lula immune to the temptation of seeking a “symbolic” and “political” result with the Europeans? I am not sure. I hope it isn't. Do not play with “symbolism” in matters of strategic importance. It is equivalent to exchanging land with European invaders for little mirrors, as some of our indigenous ancestors did.

The problem, reader, is that the Mercosur/European Union agreement, like the FTAA and other agreements made by developed countries with peripheral satellites, does not offer significant gains in any area and negatively affects several aspects of the economy. It practically makes a policy of reindustrialization and development unfeasible. To address all your issues in depth, an essay of at least 50 pages would be required.[vi] I just give a few examples so that the reader has an idea of ​​the size of the problem.

(1) Europeans would gain free access to our industrial markets, but make few concessions in the areas where we are competitive. The agreement reduces import taxes on more than 90% of trade in goods to zero. Now, Brazil's average import tax for industrialized goods is 15,2%; that of the European Union, 1,8%. In other words, the reduction to zero on our side is an important advantage for the Europeans, but on their side the decrease is residual, insufficient for Brazil to be able to export industrial goods to developed economies such as those in the European Union. The industry would be the great loser of the agreement, which would even lead to major disturbances in Mercosur's industrial chains.[vii]

(2) The agreement prohibits export tax, which is permitted under World Trade Organization rules.[viii] Now, this tax, if well calibrated, can be an instrument for promoting investments in adding value to agricultural and mineral commodities. This is what China and Indonesia, among other countries, do. Argentina, correctly, excluded the country from applying the export tax ban, without any reservations. Brazil, at the request of the Europeans, is rushing to define a list of strategic minerals that will be excluded from this ban. A comprehensive list of excluded products is a trap. This is because, with technology evolving rapidly, what is a strategic raw material today was not strategic yesterday. And it may stop being tomorrow.

(3) It is established that state-owned enterprises must act exclusively on the basis of commercial considerations in their purchases or sales of goods and services. This restricts the price and local content policies of these companies, affecting, for example, the development policies and supplier training programs used by Petrobras.[ix] Argentina excluded several strategic state-owned companies from the scope of the agreement. Brazil did not exclude any.

(4) The agreement weakens Brazilian family farming, as it almost completely liberalizes trade in what is produced by it. Our family farmers would be threatened by imports of European products produced with high subsidies.

(5) Agribusiness gains little or nothing from the non-free trade agreement, since the agricultural sector would continue to be managed by quotas.[X] The quotas are either insufficient (lower than current Mercosur exports to the European Union), or fictitious (for products in which the competitiveness of the European product hardly makes room for our exports) or harmless (for products that no longer face barriers in the European Union ).[xi]

How can I explain what is happening?!

It is incredible that, after so much accumulated experience, including in Lula's previous terms, a strategically important negotiation like this is being conducted in such a negligent manner by the current government. Australia recently abandoned negotiations with the European Union. The reasons that led Australia to abandon them are essentially those that should lead Brazil to do the same.[xii] But while Australia acts with sovereignty, Brazil falters.

A solution to the risk we run would be for the Europeans to remain intransigent on the two issues raised by Brazil, which would give the government reason to abandon everything. But are we going to count on European intransigence to save us? Isn't it more reasonable to assume that the Europeans, realizing the immense advantages that the agreement brings to them, will make concessions on the points raised? This could leave the Brazilian government unable to refuse the result. It would therefore be necessary to act now to interrupt and redirect a poorly managed negotiation.

It remains to be seen whether the President and his ministers are well informed about the agreement, aware of what is being done by Brazilian negotiators and aware of the risk we are taking. The negotiation has been conducted, according to reports, by secretary Tatiana Prazeres, from the Ministry of Development, Industry and Commerce, and by ambassador Maurício Lyrio, from the Ministry of Foreign Affairs, among others.

To achieve this agreement, the first ministry should be renamed the Ministry of Underdevelopment and Deindustrialization; and the second, Ministry of External Subservience. And Mauro Vieira would need to send his diplomats back to school. I haven't spoken to Samuel recently, but I'm sure he'll agree with these recommendations.

*Paulo Nogueira Batista Jr. is an economist. He was vice-president of the New Development Bank, established by the BRICS. Author, among other books, of Brazil doesn't fit in anyone's backyard (LeYa). https://amzn.to/44KpUfp

Expanded version of article published in Carta Capital magazine, on November 17, 2023.

Notes


(1) As for Hilferding, a small addendum: I have doubts whether his publications deserve the fuss. If I remember correctly, his performance in the controversy with Böhm-Baverk over the classic Marxist problem of the transformation of values ​​into prices was poor. Another example was his role in the controversy with Karl Hellferich over the stabilization of the German mark in 1923.

(2) For an analysis of the FTAA see Samuel Pinheiro Guimarães, Five hundred years on the periphery, Porto Alegre and São Paulo: Editora da Universidade Federal do Rio Grande do Sul and Editora Contraponto, 1999; and also Samuel Pinheiro Guimarães, “Brazil does not need the FTAA to be globalized”, Carta Maior Agency, May 2002. I also wrote in detail about the subject, inspired by Samuel's work and action. See “The Alca and Brazil”, in my book Brazil and the international economy: recovery and defense of national autonomy, São Paulo: Editora Campus, 2005, p. 75-116.

(3) “For negotiator, agreement favors the EU more than Mercosur”, Valor Econômico, December 4, 2019, p. A16. Ridiculous was the reaction of diplomat Marcos Galvão, at the time Brazil's ambassador to the EU, who declared: “Mr Clarke wanted to be positive, he wanted to help, but he resorted to an unfortunate image that ended up distorting the message. I hope, however, that his enthusiasm will help convince Europeans in all quarters that we have a good deal for both sides.” Brazilian diplomats definitely have ups and downs.

(4) “International agreements – traps for a future Brazilian government”, Capital letter, May 31, 2021, https://www.cartacapital.com.br/opiniao/acordos-internacionais-armadilhas-para-um-futuro-governo-+brasileiro/amp/

(5) A comprehensive analysis of the 2019 agreement can be found in Paulo Nogueira Batista Jr. and Álvaro Luiz Vereda Oliveira, Mercosur/European Union agreement and entry into the OECD – pitfalls for a future Brazilian government, Text for Discussion III, September 2021, Celso Furtado Chair, Colégio de Altos Estudos da Universidade Federal do Rio de Janeiro, p. 1, 2 and 4-7, available at: Texto-3_-Catedra-Celso-Furtado.pdf (nogueirabatista.com.br)/

(6) A great recent summary of the problematic aspects of the agreement was written by Gustavo Tavares da Costa, “Risks of the Mercosur-EU Agreement are not restricted to the environment and public procurement”, unpublished note, October 2023.

(7) This problem and others highlighted here are old and have been present since the beginning of negotiations with the Europeans in 1999. See, for example, Paulo Nogueira Batista Jr., Brazil and the international economy, op. cit., 132-135.

(8) Gustavo Tavares da Costa, op. cit., p. 3 and 4.

(9) See article published by the president of the Single Federation of Oil Workers – FUP, Deyvid Bacelar, “Mercosur Agreement – ​​European Union raises a warning signal for Brazil”, Power 360, October 25, 2023. www.poder360.com.br/opiniao/acordo-mercosul-uniao-europeia-acende-sinal-de-alerta-ao-brasil.

(10) This is a problem that has not yet been resolved and has been present since the beginning of negotiations with the Europeans. See, for example, Paulo Nogueira Batista Jr., Brazil and the international economy, op. cit., p. 132-135.

(11) Gustavo Tavares, op. cit., p. 4-6. See also Marcelo Zero, “The Mercosur – EU agreement, which is already bad, becomes unacceptable with the new and draconian European demands”, Viomundo, May 14, 2023, https://www.viomundo.com.br/politica/marcelo-zero-acordo-mercosul-ue-que-ja-e-ruim-torna-se-inaceitavel-com-as-novas-e-draconianas-exigencias-europeias.html.

(12) See Andreas Becker, “Lessons from the failure of free trade between the US and Australia”, Deutsche Welle, November 7, 2023, https://www.dw.com/pt-br/li%C3%A7%C3%B5es-do-fracasso-do-livre-com%C3%A9rcio-entre-ue-e-austr%C3%A1lia/a-67334921 and, also, “Australia refuses European Union terms for free trade agreement”, CNN Brasil, October 30, 2023, available at: https://www.cnnbrasil.com.br/economia/australia-recusa-termos-da-uniao-europeia-para-acordo-de-livre-comercio. 


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