Emerging Issues in Export Competition

A Case Study of the Brazilian Market Gao ID: NSIAD-85-121 September 26, 1985

Pursuant to a congressional request, GAO used the Brazilian market as a case study and reviewed: (1) various export techniques that foreign trade competitors have developed to meet the import restrictions that restrain trade with developing countries; and (2) the trade issues that have emerged as a result of competition and the application of existing multilateral trade rules to those issues.

GAO identified trade practices considered to be key factors in export competitiveness in Brazilian markets, including: (1) bilateral trade accords; (2) countertrade; (3) export financing; and (4) compliance with trade-related industrial policies. GAO found that U.S. exporters support accords because they are often at a disadvantage in overseas markets due to competitor government involvement. Countertrade has grown in a number of developing nations faced with foreign exchange shortages, and Brazil considers the willingness to countertrade a significant competitive factor in certain market sectors. Since competitor medium- and long-term export financing has almost dried up, the Export-Import Bank of the United States has been a leader in making continued support available to Brazil; however, the other competitor governments offer a wider range of export support programs. Brazil has been targeting certain industries for accelerated, government-supported national development because of its need to alleviate its balance-of-payments deficits. Foreign firms exporting to Brazil face protective import restrictions and investment performance requirements that provide protection for the local developing industries. Without established international discipline, there is wide latitude for foreign countries to respond to Brazil's industrial targeting practices, and the United States may need to engage in innovative trade arrangements to accommodate Brazil's financial problems, industrial targeting strategies, and procurement preferences.

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