Companies urge Europe and Brazil to reach a Free Trade Agreement

Companies say that the high prices of energy in Europe are one of the main difficulties for businesses. Photo: European Union, 2014

Companies say that the high prices of energy in Europe are one of the main difficulties for businesses. Photo: European Union, 2014

In a survey conducted by the EUBrasil Association, international companies involved with Brazil and the European Union indicated that a free trade agreement should be the priority for the new European Commission. They point out that the elimination of tariffs is still important but no longer a priority and that regulations are the main barrier for the growth of businesses.

“This document underlines the view of a significant number of the top Brazilian and European companies and could not be published at a better time, with the inaugurations of the new European Commission and a new Brazilian government. This is a window of opportunity to relaunch a bilateral agreement that made little progress in the last years”, says the president of EUBrasil, Luigi Gambardella.

The report titled: “Enhancing economic and financial ties between Brazil and the European Union” with the findings will be presented to the new president of the European Commission, Jean-Claude Juncker this Tuesday (9/12).

According to international companies with interests in Europe and Brazil – including Port of Antwerp International, Royal Philips, Vale, among others -, the agreement may be bi-lateral (EU-Brazil) or bi-regional (EU-Mercosur), but the European Commission should work in partnership with Brazil’s government to build a permanent dialogue to improve regulations in order to strengthen the financial and economic bi-lateral ties.

“I was surprised by the strong support that the European companies continue to lend to the bi-regional negotiations. It seems that tariff elimination, although important, is not the main priority anymore. Regulations have come to be the main barrier to the development of business. Although high import tariffs continue to hamper bilateral trade, regulations may negatively impact trade in goods, services and investment decisions”, says Sandra Rios, director of Centro de Estudos de Integração e Desenvolvimento (CINDES), who collated and analysed the companies’ answers.

In addition to Mr Juncker, the document will also be presented on the same day to Paulo Rangel MEP, president of European Parliament’s Delegation for relations with Brazil, during a networking event organised by the Association with the Brazilian Mission to the European Union, at the Residence of the Head of the Brazilian Mission in Brussels, Ambassador Vera Machado.

Environment and political decisions

The companies that responded EUBrasil’s questionnaire affirm that Brazil and EU can work together to improve access to markets and investments, two areas that still hinder business operations on both sides.

The companies highlight as the main difficulties in Brazil issues that are not yet well known; such as the complicated process for approval of environmental licenses. They mention also some well-known problems, including the lack of transparency on auction procedures, lack of regulatory predictability, local content requirements, including for government procurement, and the barriers to trade in services in several sectors, such as telecommunications, insurance and maritime transportation.

With regard to the EU, CEOs mention the uncertainty related to “politically based” legislation in sensitive sectors and the limits to investment ownership in key sectors, like airlines and defence. They point out also the high costs of energy and the negative climate in Europe for investment in bio fuels as some of the main issues.

“The companies believe that the political influence over regulations is now bigger in the most sensitive sectors in Brazil (energy, telecommunications etc.) and in EU (bio fuels, raw materials etc.). The regulations now incorporate political or ideological criteria which give less weight to technical and scientific ones”, says Sandra Rios.

“The negotiations between EU and US to conclude the TTIP are about to accelerate. This process aims at the creation of a new system of rules for investments and trade of goods and services that will surely be imposed to the rest of the world. It is time for Brazil and its manufacturing sector to get involved in this debate, in order to avoid being marginalised by the extremely fast emergence of a new global economic paradigm and its regulations. This would be a damaging situation for the interests of both Brazil and EU”, envisages Professor Alfredo Valladão, from the Institut d’Etudes Politiques de Paris and president of EUBrasil Advisory Board.

About the document – The survey for “Enhancing economic and financial ties between Brazil and the European Union” was conducted by EUBrasil between July and October. A questionnaire was sent to the main companies with strategic position in the trade and investment relations between Brazil and EU, which was answered by 27 of them. Brazil’s Centro de Estudos de Integração e Desenvolvimento (CINDES) was responsible for collating the answers and preparing the final document.