SAO PAULO (Reuters) – The historic trade agreement between Mercosur adn the European Union has raised concerns in the country’s largest metalworkers’ union, which fears an increase in imports of European industrialized products in a situation in which the industry has been asking for years of safety improvement of competitiveness.
The agreement, the terms of which were announced on Tuesday, provides protection mechanisms for some sectors of the national industry in case of damage to brazil. though, given the weight of agribusiness in the negotiations, there are fears that there are difficulties in implementing measures that could curb a possible increase in imports from the European industrial sector, the managing director of the ABC Metalworkers Union, Wellington, said at the fair on Wednesday Damascene.
“The way it (the agreement) is constructed benefits agribusiness much more,” said the director of the ABC union, which says it represents 72,000 workers in the Sao Paulo metropolitan region.
“The trade balance may remain favorable for Brazil, but in terms of technological growth, more skilled labor, added value, it could represent a big long-term loss,” the union leader said.
The terms of the agreement were signed a few months after the federal government adopted the first trade protection measures for some of the country’s industrial sectors, with an eye especially to the jump in brazilian imports of products from China.
But with the EU-Mercosur tariff release agreement still taking months, or years, to implement, Damasceno sees a new risk for Brazil’s industrial sector.
“We are very concerned that thes sectors – automotive,chemical,machinery,pharmaceuticals,among others – are very vulnerable,especially since a large part of the headquarters of companies operating in Brazil are in Europe.”
Since last week, when the trading blocs announced the deal, brazil’s industrial sector has shown restraint in its comments on the agreement.
The association of car manufacturers Anfavea, for example, said that Europe “is a historic partner of Brazil” and that the agreement “appears” to stimulate an “surroundings of greater competitiveness for the national industry, to the benefit of all parties involved.”
The body that brings together auto parts producers, Sindipeças, said it was necessary to analyze the terms of the agreement in detail, saying that ”this is another possible way to increase the inclusion of our industry in value chains global”.
Simultaneously occurring, on the day of the announcement of the agreement with the EU, Fiesp declared that it “confident that the agreement will constitute a space for dialog to promote trade on a fair basis, as a way to overcome any measures that limit the flow of goods and services between economic blocks”.
AUTOMOTIVE
According to the director of the ABC union, the protection mechanisms for the Brazilian automotive sector provided for by the agreement are not sufficient.
Under the terms of the Mercosur agreement with the EU, Brazil will be able to suspend for three years the tariff liberalization program for the entire automotive sector or restore the 35% rate currently in force, without the need to offer compensation to the European Union. The suspension can be renewed for two years.
“It’s not enough…it doesn’t matter how old you are, a car isn’t produced overnight and the next cycles, especially for electrification, could consider a European platform for export to the Brazilian market,” Damasceno said, citing that currently, the Brazilian automotive industry is already importing an increasing number of electronic components to equip its vehicles.
The agreement between the two blocs comes at a time when Europe’s largest car maker, Volkswagen (ETR:), is in conflict with workers over closing factories and laying off staff in Germany amid excess capacity production, weak demand and competition with car manufacturers in China.
Damasceno is the union’s representative on Volkswagen’s global workers committee and returned to Brazil this week from a meeting with the automaker’s metalworkers in Germany.
According to him, there is a possibility that upgrades to vehicles produced in Brazil by Volkswagen will only be made in Europe, with the automaker choosing to import them only into the country. The same can happen with new models.
“They (VW in Germany) have spare production capacity of 500 thousand vehicles (per year). This is the annual production of Volkswagen in Brazil and Argentina. We have cars produced here that are also produced there and the agreement paves the way “There is a possibility that these cars will arrive here without paying import taxes,” said the director of the ABC metalworkers union, citing the Nivus, Polo and T-Cross vehicles.
Last year, Volkswagen signed an employment stability agreement with the Brazilian metalworkers’ unions until 2028. For Damasceno, the agreement with the workers is one of the factors that allowed the car manufacturer to announce investments of 16 billion reais in Country until 2028.
volkswagen currently has four plants in Brazil, employing 15,000 workers, including 8,200 in São Bernardo do Campo (SP), home of the union, Damasceno said.
According to the director, the Brazilian company currently enjoys good autonomy from the Volkswagen headquarters, presents “good results” and the agreement reached last year is used as a “model” in discussions between the company’s workers in Germany .
(By Alberto Alerigi Jr.)
How can Brazil ensure balanced support for both its agricultural and industrial sectors under the EU-Mercosur trade agreement?
Interview: Navigating the EU-Mercosur Trade Agreement – An Insight with Wellington Damasceno
Editor (Time.news): Welcome, Wellington. Thank you for joining us today. The recent EU-Mercosur trade agreement has everyone buzzing, especially within Brazil’s industrial sector. As the managing director of the ABC Metalworkers’ Union, what are your initial thoughts on the agreement?
Wellington Damasceno: Thank you for having me. We appreciate the possibility to discuss this crucial topic. our assessment is cautious.While the agreement dose contain provisions aimed at protecting certain sectors of Brazilian industry, we’re concerned that the way it’s structured favors agribusiness considerably more than industrial sectors like ours.
editor: That’s certainly a important point. Can you elaborate on why you believe agribusiness benefits more from this agreement?
wellington Damasceno: Absolutely. The negotiations heavily leaned towards agricultural exports, which means that while we hope to maintain a favorable trade balance, the lack of sufficient support for industrial sectors could result in long-term disadvantages. We are looking at a situation where our capacity for technological advancement and growth in skilled labor might be compromised.
Editor: It sounds like this could pose challenges for Brazil’s industrial competitiveness. With fears of an influx of European industrial products, what specific sectors do you see as the most vulnerable?
Wellington Damasceno: The automotive, chemical, machinery, and pharmaceuticals sectors are particularly at risk. These industries are already grappling with a surge in imports from China, and now they may face additional pressure from Europe. Moreover, many European companies have their headquarters here in Brazil, which complicates the landscape even further.
Editor: That’s a considerable concern. The Brazilian government had just started implementing protection measures against imports, especially from China.Do you think these measures will be effective in light of the new agreement?
Wellington Damasceno: That is still uncertain. The timing of this agreement could hinder the effectiveness of those protective measures. The implementation of the EU-Mercosur agreement could take months or even years, which leaves a window for potential disruption in our industries during that period. Our union believes that immediate support and vigilance are vital to safeguarding our sectors.
Editor: You mentioned that there has been a restrained response from the broader industrial sector since the declaration. How does that reflect on the sentiment within those industries?
wellington Damasceno: Yes, there’s been a cautious approach. While organizations like Anfavea,which represents car manufacturers,have indicated that Europe is a historic partner,we believe that more in-depth analysis is needed on how this agreement could tangibly affect competitiveness across various sectors. there’s a lot at stake,and we need to ensure that our industries can compete effectively without compromising on quality and job security.
Editor: That’s a very measured perspective. What recommendations would you provide to policymakers in brazil as they navigate the terms of this trade agreement?
Wellington Damasceno: Policymakers must prioritize comprehensive support for our industrial sectors. This could involve re-evaluating existing trade protection measures, ensuring that they are adequate, and perhaps even investing in technology and training for workers so they can better adapt to any shifts in the market.Ultimately, we need a balanced approach that safeguards both the agriculture and industrial sectors of our economy.
Editor: Thank you, Wellington. Your insights shed light on the nuanced implications of the EU-Mercosur agreement.We hope to see constructive outcomes for Brazil’s industries in the long run.
Wellington Damasceno: Thank you for having me. It’s essential to keep the dialogue going as we navigate these changes.