China formally acceded to the World Trade Organisation (WTO) during the 4th ministerial meeting concluded on the 14th November in Doha, Qatar, after 15 years of arduous negotiations, having made numerous concessions to its trade partners in the process. Amongst such compromises, there will be a reduction of the countries industrial tariffs from an average of 24.6% to 9.4%. Non tariff trade barriers will be removed. Import licenses and quotas will be gradually eliminated over a period of five years. As a result of the adoption of the non-discrimination principle of the GATT 1947, foreign companies will be entitled to import, export and distribute, in China, according to rights deriving from WTO standards, within three years. Chinese state companies with be subject to the multilateral rules applicable to all member states of the multilateral trade system.
Similarly, the Chinese accession to the WTO expressly implies in the acceptance of all the treaties of Marrakech, which comprehend areas such as investments, intellectual property, textiles, agriculture, rules of origin, sanitary and phyto-sanitary norms, subsidies, services, customs valuation and the resolution of disputes. As a result of the direct consequences of the accession, the World Bank has estimated that the Chinese participation in world trade will treble until 2005, when it will reach the important threshold of 10% of total global trade. In 2010, the Chinese GDP will evolve from being the fourth largest to the second largest in the world, growing 400% over the benchmark of 1994. By that year, the per capita consumption of the Chinese people will have grown 390%!
This set of developments will undoubtedly offer sundry opportunities for Brazilian exporters reinforcing the firm tendency of expansion of the bi-lateral trade links between China and Brazil. In 2001, this bi-lateral trade will grow over 100%, reaching approximately US$ 3,5 billions, meaning that China became Brazil`s 6th largest commercial partner, overtaking Mexico. Thus, the Brazilian trade with China is now four times larger than that with Canada, is of the same size of that with Korea, half of that with Japan, and 20% of that with the United States of America (USA). It is also estimated that Brazil will have this year a surplus of about US$ 100 million in its trade with China.
Conditions of access to the Chinese market are good and China, very fortunately for Brazilians, does not pursue that branch of odious protectionism of applying peak tariffs to selected areas, which has shamefully characterised the trade policies of the USA in the past 40 years. As part of the agreements for joining the WTO, China agreed to reduce the tariffs for soy from 85% to 9%, for poultry from 20% to 10%, for beef from 45% to 15% and for orange juice from 35% to 17%. Thus, Brazilian agricultural products will have ample conditions of competitiveness in the Chinese markets. The Brazilian agricultural sector will find in China the opportunities denied by the multilateral trade system of the GATT since 1947, followed by that of the WTO since 1995. No other trade partner offers Brazilian producers the free conditions of access of agricultural products to its markets that China does. In addition, China does not subsidise its agriculture, as its level of support is lower than 1.5% the value of the total agricultural production.
Very good conditions of access will also be applicable to industrial products, in general, with the reduction of tariffs of about two thirds. Brazilians already do well in the sector, selling aeroplanes and buses. There are also opportunities in the services sector. Brazilians already do well in civil construction and can rapidly make important gains in banking and in information technology. On the other hand, it is to be expected a greater presence of Chinese products in the Brazilian markets, as well as international competition, such as in the shoes sector. There will be ample opportunities for joint exploration of the global markets by joint-ventures of Brazilian and Chinese companies, and here rests the greatest potential of bilateral relations.
The governments of Brazil and China have established a strategic partnership, which gives a very solid foundation for trade relationships between companies of the private sector of both countries. These are interesting for the exploration of the domestic markets of China and Brazil, as well as for joint access to commercial opportunities in third markets, such as Asia and Latin America. At this point, it is worthwhile mentioning that, whilst the USA does 68% of its international trade with Asia, Brazil does only 18%. The bulk of the opportunities in Asia, for Brazilians are to be found in China. We, at Noronha Advogados, estimate that China will be Brazil`s third largest trade partner by 2005. Thus, there is much to explore, much to gain and very little to loose.
It is not difficult for businesspeople of Brazil and China to relate well to each other. On the contrary, it is curious to note that, in spite of notable linguistic differences, there is a great cultural and psychological affinity, which facilitates understandings and commercial ventures. On both sides, one will find respect, business acumen, the spirit of free enterprise, creativity, resilience under adverse institutional conditions and very good humour. The Brazilian or, for that matter, the Latin American businessman intent on being involved in international trade who ignores China will be making a very serious strategic error and will pay dearly for it.
Lawyer admitted in Brazil, England and Wales and Portugal. GATT and WTO panelist. Brazilian government ad-hoc representative for the Uruguay Round of the GATT. Post-graduation professor of the law of international trade.