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But Will the Final Exam Be Essay or Short Answers?
Subject Free Trade
Topic International Trade
Key Words Exports, Customs Union, Free Trade
News Story

Faced with an increased number of bilateral trade agreements with the U.S., the World Trade Organization (WTO), Mercosur, the customs union that includes Brazil, Argentina, Paraguay and Uruguay and the Free Trade Area of the Americas (FTAA), and European calls for greater trade liberalization, Brazil has responded by requiring its diplomats to study economics. Brazil is trying to avoid the mistakes it made in the early 1990s during negotiations with the U.S. and European countries. Brazil feels that it made far too many concessions and lost potential trade benefits. Brazil's Foreign Minister, Celso Lafer, has issued orders requiring Brazil's newest diplomats to extend their studies in the areas of economics and trade negotiations.

Brazil has one of the world's largest economies but international trade comprises a small part of its economic activity. Brazil's industries are trying to become more competitive in terms of exports. There are also a number of trade issues, such as the dispute with Canada over subsidies to Brazil's top export, regional passenger jets made by Empresa Brasileira Aeronautica SA, and patent protection issues with the U.S., that will require Brazil's diplomats to become more knowledgeable in the area of free-trade negotiations.

Brazil may have been somewhat complacent in the past, allowing developed nations to determine the rules of trade, but that has changed. Brazil is becoming much more aggressive and has pressed the WTO to convene eight dispute panels against other WTO members. It has also started a campaign in the United Nations concerning affordable AIDS medicines.

Mr. Lafer's curriculum includes increased course work, followed by visits to the WTO and the European Union, and assignments to the Foreign Ministry's economics department. The Foreign Minister would like to create teams focusing upon specific trade issues such as antidumping, subsidies and intellectual property.

(Updated June 1, 2001)

Questions
1.

What are some of the benefits a country like Brazil might hope to obtain by increased trde with other nations?

2. What is dumping? Why might it be important for a trade negotiator to understand this concept?
3. What is a customs union? Explain how Mercosur might benefit Brazil.
Source Jonathan Karp, "Brazil's Diplomats Pass Up the Canapes-and Hit the Books," The Wall Street Journal, May 2, 2001.

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