Brazil and EU agree: cooperation is key to achieving regulatory convergence

convergencia regularoriaWhile the private sector has a key role to play in improving bilateral trade relations, policy makers on both sides must show that they are serious about regulatory convergence in order for constructive dialogue to be turned into meaningful action. In addition, new avenues for cooperation must be explored to ensure that policy makers, businesses and institutions are able to cooperate effectively.

These were some of the key outcomes of a roundtable discussion on regulatory convergence on trade, which brought together European and Brazilian decision-makers, corporate representatives and other stakeholders. The event, held on 9 June in Brussels, was organised by the EUBrasil Association and the Brazilian Trade and Investment Promotion Agency (Apex-Brasil), with the support of the Brazilian government.

“While tariffs are mostly dealt within the framework of EU-Mercosur negotiations, regulatory convergence can also be achieved at the bilateral level. This makes certain issues potentially easier to resolve and can encourage us to seek low hanging fruit that could be fast-tracked,” said Enrico Ponzone, Head of EU Public Affairs, EUBrasil Association.

“From the almost 80 sectors supported by Apex-Brasil, more than 50 have identified Europe as a key market. We are committed to improving open dialogue between the private and public sector,” said Emily Rees, Head of EU Public Affairs, Apex-Brasil.

Enhanced regulatory convergence between the EU and Brazil aims to avoid unnecessary duplication of procedures, resulting in additional costs for business operators without additional benefits for consumers, the environment etc. Whilst ambitious and comprehensive trade agreements, such as the EU-Mercosur Association Agreement currently being negotiated, constitute the preferred means to advance bilateral trade and investment, regulatory tools may serve to advance technical solutions at sectorial level, provided that the necessary political will supports such dialogue. These regulatory tools include, for example, mutual recognition and equivalency agreements, and dialogue on technical issues such as Sanitary and Phyto-Sanitary (SPS) and technical barriers to trade (TBT).

Private sector: Policy makers must address non-tariff barriers and listen to the voice of business

Carlos Eduardo Abijaodi, Director of Industrial Development at the Brazilian National Confederation of Industry (CNI), outlined the situation from the Brazilian business perspective. “Open trade is not just about what happens at the border, but also what happens behind borders in terms of government policy, and sometimes countries make regulatory choices without considering their impact on trade,” he said. “There is also growing demands on compliance. Despite all the progress that has been made, non-tariff barriers remain a serious potential obstacle to trade.”

Luisa Santos, Director of International Relations at BUSINESSEUROPE, shared many of Abijaodi’s views and agreed that non-tariff barriers are becoming an increasing concern. “While regulation is often needed to protect consumers and workers, this can create an extra level of compliance and more costs,” she said. Santos welcomed regulatory dialogue between trading partners, but stressed that the private sector needs the involvement of policy makers. “It is important that such dialogues produce effective solutions,” she concluded.

Regulators: Dialogue and bilateral cooperation are key to removing trade barriers

The European Commission outlined some trade impediments in Brazil. These include labelling requirements in Brazil for clothing, rules in relation to the sugar content of alcoholic beverages, allergen labelling and descriptions of chemical compositions in Portuguese for cosmetics and perfumes. Although well intended, they have an impact on trade. These rules not only affect goods; they also affect the services sector, where for example there are severe restrictions for foreign lawyers that are tougher than in other countries.

Márcio Luiz Naves de Lima, Director of International Negotiations at the Brazilian Ministry of Development, Industry and Foreign Trade, highlighted the success Brazil has achieved in regulatory convergence with the US. “We have had amazing results including concrete steps such as voluntary compliance in the ceramic sector,” he said. “Although we don’t have the same results with Europe as we have with the US, we are working on a new plan and have committed to identifying two or three industrial sectors where there might be some interesting regulatory cooperation.”

Putting forward solutions

Private sector participants focused on the importance of dialogue and ensuring that policy makers are aware of business concerns. Abijaodi called for a “pragmatic agenda” involving a dialogue of best practice and a convergence initiative and suggested that a first step forward might be the development of a roadmap for regulatory cooperation. Santos again underlined the need for a strong political commitment. “If the private sector talk among themselves – if they are not involved – then regulation is not something that they can control,” she said. “Without a strong public sector commitment, results will be very limited.”

Hermance de la Bastide, international trade manager at drinks giant Pernod Ricard, stressed the importance of public consultations for both consumers and producers. “We believe we have an opinion on what is technically feasible,” she said. Emiliano Alonso, the permanent representative of the Brazilian Association of Animal Protein (ABPA) in Brussels, also called for a permanent sector dialogue with European authorities in order to exchange ideas and “understand each other”. Cristina Mihai, Head of international affairs and reinsurance at Insurance Europe, said: “I would welcome the inclusion of our concerns in discussions with EU. The financial services are underrepresented.”

From the public sector, representatives from the European Commission suggested that with sufficient political will, progress could be made. The EU would welcome a better focussed dialogue with Brazil at bilateral level to be able to address, and if possible solve, very concrete issues in a pragmatic way. But having a result-oriented dialogue does not mean giving up on the right to regulate. The EU is the biggest trading entity in the world, but this does not prevent it from having high-quality standards. For instance, the EU has to guarantee to its consumers that products are safe. It is in both EU interest and in the interest of Brazilian importers (as, if they meet EU standards, they will also be able to export elsewhere) – to ensure that what is being exported to the EU is of the highest quality.” Finally, Márcio Rezende, agricultural attaché at the Brazilian Mission to the EU suggested: “Both sides need to go to the centre, to show that we both have the willingness to go further. Reciprocity is the key. There are problems on sides, which is why we need a positive approach from both sides.”

Facts and figures

The EU is the number one destination for Brazil’s exports and imports: 20% of Brazil’s exports go to the EU, while 21% of Brazil imports come from the EU. In 2014, Brazil represented 2.0% of EU Trade in goods with the world, immediately after India and before Saudi Arabia. In 2014, EU exports to Brazil stood at €37.0 bn, and EU imports from Brazil at € 31.1 bn. In 2014, Brazil was EU’s 10th trading partner worldwide, down from the eighth position in 2013.

About EUBrasil: The EUBrasil Association, based in Brussels, is the only private networking platform in Europe and Brazil created with the objective of supporting the development of trade relations between the EU and Brazil and at the same time promote the political and cultural exchange between the two blocks. EUBrasil gathers think tank organisations, business leaders, opinion makers and Brazilian and European academics as well as members of the Brazilian Congress and the European Parliament directly involved in decision-making within the EU-Brazil strategic partnership.

About Apex-Brasil: The Brazilian Trade and Investment Promotion Agency (Apex-Brasil) works to promote Brazilian products and services abroad, and to attract foreign investment to strategic sectors of the Brazilian economy. The Agency´s efforts comprise trade and prospective missions, business rounds, support for the participation of Brazilian companies in major international trade fairs, arrangement of technical visits of foreign buyers and opinion makers to learn about the Brazilian productive structure, and other select activities designed to strengthen the country’s branding abroad. Apex-Brasil also plays a leading role in attracting foreign direct investment (FDI) to Brazil, by working to identify business opportunities, promoting strategic events and lending support to foreign investors willing to allocate resources in Brazil.