MAKING EU-BRAZIL BUSINESS RELATIONS MORE PRODUCTIVE

At the occasion of each EU-Brazil Summit (the last one took place in February 2014 in Brussels), business communities of both sides organize a Business Summit to assess bilateral economic relations, identify common interests and elaborate joint recommendations. The Business agenda is then summarized in a bilaterally agreed joint statement presented to the Authorities at the end of the meeting.

EU-Brazil Joint Action Plan (JAP) Agenda

From a business perspective, the current JAP agenda presents four main problems:

• excessively broad: the broadness in terms of the thematic areas covered makes it difficult to focus on the business sectors’ priority issues;
• excessive number of initiatives in each thematic area: within each thematic area of the Partnership economic agenda  the one that is of highest interest to the business sector  there is, in most of the cases, a great number of initiatives foreseen, which makes it difficult to prioritize and focus on initiatives also at this level;
• absence of specific targets and objectives: there are not, in general, specific targets and objectives to achieve relating to the different initiatives. This reduces the accountability of the agenda and the incentives for the production of deliverables for the governmental agents involved in the process. Even when the specific issue or initiative is relevant to the business sector, it is difficult to perceive how the proposed treatment can lead to concrete results with positive effects for the decisions of Brazilian and European businessmen; and
• absence of an integrated approach: the agenda lacks a conception of an “integrated project” with a high level of political priority with clearly defined responsibilities for its implementation and accountability.

The EU-Brazil Strategic Partnership  and its Joint Action Plan is lagging behind in unequivocally defining precise objectives, timeframes and a methodology to achieve the objectives. Furthermore, JAP was elaborated without the support of a broad consultation process, which could have provided the opportunity to include the priority initiatives from the point of view of the private sector. However, this consultation process has not been put in place.

Recommendations

1. Create a higher profile mechanism. A higher profile mechanism with highly energized and centralized cabinet-level leadership could help advance the Partnership. If nothing else, it could enhance the definition of priorities and the achievement of specific objectives if properly empowered. It will be imperative to ensure a role for business representatives in this new mechanism.
2. Improve mechanisms of coordination, monitoring and transparency. The many dialogues and initiatives included in the JAP are coordinated by different Governmental agencies. It would be very helpful to have a centralized mechanism to monitor and publicize information and reports of the different dialogues. This would facilitate a comprehensive assessment of the evolution of the JAP. To this end, the creation of a joint EU/Brazil website, managed by the European Commission and the Brazilian Government, with updated information on the several initiatives included in the JAP, would be a very useful tool.
3. There are relevant areas where progress in removing obstacles to business is possible. Trade facilitation, technical barriers and sanitary and phytosanitary measures are some of the issues that should deserve a larger room or should be included in the agenda. .
4. Review the sectors elected for the bilateral sectoral industrial dialogues: JAP includes pilot sectoral industrial and regulatory dialogues which started with the following sectors: textiles and clothing; forest-based products; steel; non-ferrous metals; and minerals. Although the evaluations made by the main stakeholders of these dialogues are very uneven, there is the perception that it is necessary to review the sectors elected and the goals set in these dialogues, such as chemicals, automobiles, and pharmaceuticals.
5. Pursue sector or issue-specific agreements. Deepening on the idea of reviewing the industrial dialogues, it is possible to engage on negotiations to agree on areas with common political and economic interests. These may include the following: digital agenda, automotive standards, energy projects, infrastructure PPP rules and environmental equipment standards. It is important to engage closely all stakeholders in these negotiations.
6. Improve tax regulation to reduce tax burden on investments. Even more relevant, the tax burden over the bilateral flows of direct investments should be urgently addressed. Investments are a powerful vector of economic integration and have been impaired by the double taxation involved in the tax regulations. Moreover, the trade in services has also been jeopardized by tax regulations. In the area of taxation on investment there are substantial proposals already prepared by the EU-Brazil Investment and Tax Council.
7. Strengthen bilateral dialogues on regulatory issues. Changes in regulations reduce predictability for companies’ investments and operations. Bilateral dialogues in trade areas subject to specific export regulations and also in economic sectors subject to regulatory frameworks (as energy, telecommunications, infrastructure, raw materials) should be strengthened. There should be opportunity for private sector consultation and manifestation prior to the entry into force of new regulations.
8. Strengthen the dialogue on Information and Communication Technologies, incorporating not only the official agencies but also private operators: ICTs are fundamental for the good performance of businesses, and play a strategic role in the development of e-Health, e-Government, Smart Grids, e-Learning, modern agricultural practices and many other key policies. This is the correct time for the players in the ICT sector to act as an ally of the Brazilian government. The key issues that have to be taken into account are not many, but indeed strategic for the ICT sector: defining a regulatory framework that fosters investments and grants stability; putting in practice adequate spectrum policies; defining clear roles of the public and private actors in the sector, having a clear view that public participation in the supply of services should be an exception rather than the rule; suppressing existing restrictions to launch multiple-play convergent offers; and establishing proportionate Net Neutrality schemes, granting operators with flexibility to explore new business possibilities. These possibilities are, for example, seen in the potential for the use of Cloud computing to make the use of ICT more economically and environmentally efficient. Cloud computing works at a global scale, so the regulatory framework, particularly on data transfer, security standards and on quality of service needs to adapted to allow Cloud to be successfully developed for all businesses and consumers. And when designing policies as strategic as a Digital Agenda, it is critical that the new Government and ANATEL decide to maintain a smooth dialogue with operators. Consultations and exchange of ideas are fundamental to achieve together the challenges and solutions that Brazil needs.
9. Improve the mechanisms of dialogue between the intergovernmental process and the business forum. An even more rigorous top level government to government approach is not sufficient in terms of institutions. The Business Summits have been useful in ensuring higher degrees of business community participation and in identifying priorities and initiatives. However, organized as a business-only interaction and a forum to provide inputs to policymakers, it is not always sufficient to move major agendas forward, especially when the mechanisms of interaction between the business sector and the governments are weak and not systematic. Hence, beyond the recommendation (set above) on the strategic management of the intergovernmental process, it should be stressed the relevance of strengthening the mechanisms of dialogue and interaction between the private sector and the governments. The annual Summits are a very relevant instrument for the Partnership, but they occur only once a year. It is important to maintain a continuous dialogue among the parties – including authorities and business representatives from both sides – during the year and plan focused initiatives.