Trade Policies of Bric

Topics: International trade, World Trade Organization, Economics Pages: 8 (2781 words) Published: November 18, 2010
Throughout the last 100 years, few countries have seen the level of political conflict and change that Brazil has experienced. Before the 1990s, Brazil was notorious for its “inward oriented policies”. In the early 1990s, however, Brazil became one of the last countries in the region to finally move into a regime characterized by open trade policies. Brazil quickly began working to liberalize trade, which included strong unilateral and regional goals. Within the next five years, Brazil had effectively cut tariffs substantially, removed non-tariff barriers (NTBs), and brought about the existence of Mercosur. It was this initial momentum that allowed Brazil to achieve its status as a BRIC country, the fastest developing countries in the world. Due to complications in the mid-1990s, however, Brazil lost much of the momentum of those five years. The country failed to adopt sound fiscal and monetary policies, which ultimately lead to unstable inflation and exchange rate fluctuations. Brazil also had its fair share of external shocks as well. Despite the loss of momentum, not all benefits were lost.

Today, Brazil’s regime is more protectionist that other Latin American and Caribbean countries. In 2007, Brazil ranked 92nd out of 125 according to the Trade Tariff Restrictiveness Index (TTRI). Brazil remains stuck at a level of protectionism that, while it is not as extreme as the 1980’s, continues to prevent Brazil from boosting productivity, experiencing substantial welfare, and enjoying growth gains. High protectionism also is risky as production becomes more fragmented. In addition, there are many benefits to be enjoyed by joining global value chains that require lower trade costs. Not only must a country open its markets up to the global market but also become more active in the global market. Currently Brazil has focused on South-South Agreements. The limited size of the market seriously constrains any attempts to exploit scale and efficiency gains. Ultimately there are costs for nonparticipation in the global market. The limited number of trade agreements focusing only on southern countries puts Brazil in a disadvantage when compared to India and China, who do a substantial amount of trade with other countries in the global market.

A common complaint by global marketers is that Russia’s regime is extremely complex due to lack of transparency and redundancy. Russia has a substantial amount of tariff and non-tariff barriers. Discrimination against foreign business stems from “abuse of power”, sub-national regulations and practices that violate Russian law. For example, many domestic companies are able to bypass fees for licenses via bribes that foreign companies lack the knowledge, experience, and networks to utilize. In many ways, Russia has worked to minimize foreign investment. Russia does not allow foreign banks to establish branches in the country, as well as limits the level of foreign equity in most industries. Due to the signing of the WTO (World Trade Organization) Bilateral Agreement in 1996, which was the first step of Russia joining the WTO, Russia must allow up to “70% of the country’s total banking sector” to be foreign owned. Russia, however has managed to find loopholes, and much that was fixed remains to be a problem.

In various industries, Russia has maintained a protectionist policy. From telecommunications to insurance, the United States is at a disadvantage to EU firms, who are able to offer life and mandatory forms of insurance. In the telecommunications industry, there are significant barriers. The legal requirements and administrative laws appear to be discriminatory, favoring Russian satellite communications systems. Currently, Russian legislation restricts foreign investment in this industry to only 25% of a particular enterprise. Purchase of agricultural land by foreigners is prohibited. Ultimately, Russia has made several wide ranging changes that have allowed more foreign...
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