International trade, economic performance and the political economy of protection: Some aspects of the Brazilian experience

The empirical evidence presented here seems to suggest a positive relationship between economic growth and "openness" to international trade in the Brazilian experience from the 60's to the 90's. Estimates of total factor productivity growth, incorporating human capital, seemed positively associated with trade variables.; Caution in the interpretation of this result is needed, however, since several caveats apply: (1) the detection of correlation does not solve the question of causality; (2) defining and measuring "openness" is a tricky business; (3) "outward orientation" does not have to mean "laissez faire" (the anti-export bias of import substitution policies seems to have been counterbalanced by activist export promotion schemes in the Brazilian experience); (4) export promotion since the 60's might have been effective because it was preceded by import substitution in the 50's.; An analysis of trade policy in Brazil in the early 90's is provided. It concludes that the structure of nominal and effective protection was maintained virtually unchanged in the period: sectors that were the most protected previously continued to be the most protected ones.; In terms of efficiency, we found some empirical evidence that would tend to support the claim that trade liberalization was associated with increases in industrial productivity across sectors.; From the institutional point of view, we stress the heterogeneity of the actors affected by trade liberalization, and conclude that expressions like "government", "export sector" and "import competing sector" are useful but potentially misleading terms. Rather than monolithic concepts, each of these terms encompasses a variety of different--and sometimes conflicting--interests.; The sustainability and fate of trade liberalization efforts in Brazil depends on domestic and external factors. On the domestic front, a stable macroeconomic environment, an adequate management of the exchange rate, and a sound position in the Balance of Payments are some of the key issues to consider if further trade barriers are not to be imposed. On the external front, the development of regional arrangements such as the MERCOSUL, the implementation of the GATT agreement, the evolution of the World Trade Organization, the insistence of multilateral organizations such as the International Monetary Fund and the World Bank on liberal policies, and the pressures of bilateral trade partners such as the United States, are some of the forces that help shaping trade policy in Brazil.; Finally we provided a model of the political economy of protection, with especial reference to Brazil. Empirical estimation using Brazilian data seems to confirm some of the predictions of the model. Asymmetries in the distribution of gains associated with trade interventions, and transaction costs involved in participation in the political process, are some of the major elements in the endogenous determination of trade policy. In particular, the finding that opaqueness in trade policy can be understood as a politically rational strategy provides a framework to understand the apparent surge in new forms of potentially protectionist measures in Brazil, such as anti-dumping actions. Trade liberalization does not remove the incentives for sectors to seek protection, and resorting to indirect, non-tariff barriers, can undermine the thrust of liberalization efforts.