By Denise Chrispim Marin, O Estado de S. Paulo - 24/02/2005

BRASILIA. - The intention of the Brazilian government to recognize China as a market economy was strongly attacked yesterday, at the joint meeting of the Foreign Affairs and National Defense commissions of the Chamber of Deputies.
The president of the Federation of Industries of the State of São Paulo (Fiesp), Paulo Skaf, warned of the risk of “invasion” of Chinese products, at a time when the instruments of commercial defense will be “weakened”.

Skaf argued that Brazil will only keep its promise if Beijing does the same in terms of supporting Embraer's presence in that country, the purchase of ten planes this year, cooperation in the banking and space areas and the import of steel coke.

Closed last November, during the visit to Brazil of the Chinese president, Hu Jintao, the recognition of China was the main point of an understanding between the two countries, celebrated by the Brazilian side as the beginning of a strategic partnership that has not yet left the paper .

Its application depends on the publication of a regulation text by the Foreign Trade Chamber (Camex), in whose preparation Fiesp wants to participate. Yesterday, no member of the government base defended the measure during the meeting.

"As we have not yet materialized this recognition, we must take the list of commitments made by the Chinese government, even verbal ones, to check what is being accomplished," he said.

In practice, the recognition will bring difficulties previously inexistent for the Brazilian government to apply anti-dumping, compensatory (anti-subsidy) and safeguard measures against Chinese products. In the process of imposing legal limitations on trade, the country will have to prove the increase in imports of certain products and that this fact has caused damage to Brazil, according to the rules of the World Trade Organization (WTO).

Weeks after Jintao's visit, Foreign Minister Celso Amorim himself acknowledged that the initiative would make it difficult to impose anti-dumping measures. In the same vein as Skaf, he also stated that the agreement had a political character and would only be formalized if the Chinese did their part.

The president of Fiesp also drew attention to the fact that the Brazilian industry is exposed, regardless of the difficulty in applying trade defense measures, to 'dangerous and illegal competition'. This situation stems from the currency gap between Brazil and China.

According to the Fiesp survey that Skaf presented to deputies, while the appreciation of the real against the dollar since May 2004 has reached 15%, the Chinese currency is devalued by 30%. This gap would have been the main reason why bilateral trade in industrial goods went from a surplus of US $ 176 million in 2003 to a deficit of US $ 1,628 billion in 2004.

In the analysis of trade in 2004, Fiesp has already identified nine items subject to predatory competition from the Chinese similar. Among them, synthetic and artificial fibers and photographic films. The import of electronics, for example, increased 514,0%, in relation to 2003. Those of transport materials, 264,9%.

"With interest rates here and China, if we facilitate, we will have a flood of imports of Chinese industrial products which will cost us jobs."