The Carter administration, enunciating a new trade policy, warned Brazil and other "advanced" developing nations yesterday that continuance of protectionist devices may bring then into collision with Western Countries, similar to the current confrontation with Japan.
This policy statement was contained in a major speech by Assistant Treasury Secretary C. Fred Bergsten to the Brazillan-American Chamber of Commerce,in New York, in which he warned that unless Brazil abandoned subsidies to its exporters, it would be met with sharp retallation by the United States.
He made clear in an interview that Brazil was the prototype for other "advanced developing countries," including Mexico and South Korea, as well as two major oil-exporting countries, Iran and Saudi Arabia, that have achieved rapic economic growth in recent years.
These countries, he said, having acquired greater economic power, should gradually more away from the protection afforede industries in the poorer developing countries. At the same time, he said, they are entitled "to be brought frost and center into the internationl decision-making process."
Bergsten likened the barriers Brazil now places on pentetration of its own markets and its wide array of export subsidies to Japan's trading policies, which he said "can jeopardize the openness of the entire trading system."
The Bergsten speech, read for him by Deputy Assistant Secretary Gary Hufbauer, was approved in advance by the State Department, White House, and Robert S. Strauss' office of the Special Trade Representative.
Brazil today is "one of the most advanced of the world's developing coutries," Bergsten said. At the end of 1977, it had the 10th largest Gross National Product in the world ($163 billion) and is the second largest exporter of food (United States is first). Its econimic growth rate over the last 15 years has been the fastest in Latin America, and there are only six other nations wher the investment of U.S. dollars is larger.
"We fully recognize this new status and welcome Brazil, as we welcomed Japan in the late 1950s and early 1960's, as a nation prepared to play an enhanced role on a whole range of international economic issues," Bergsten said.
In per capita terms, however, Brazil's performance is not so spectacular. Recent figures on real output per person show Brazil with $765 while neighbouring Argentina had double that amount.
Bergsten's reference to Japan's threat to the trading system relates to current discussions with that nation on its $20 billion trade surplus this year, half of which is with the United States Brazilian foreign trade is far from that volume.
In 1979, Brazil's exports were worth $10 billion, almost a fifth to the United States, while imports were $12 billion, a quarter from the United States.
Brazil is already the 13th largest importer in the world. and 15th largest exporter - and growing. Therfore, Bergsten said, "It is not too soon to ask whether Brazilian policies might have somewhat similar effects (to Japan) in the future."
Bergsten said in the interview that in talks with Brazilians in the past few months, he found many officials - and the entire business and financial community - ready to accept a new role compatible with this greater economic strength.
He said in hsi speech, however, that Brazil still maintains high tariffs and quotas, and allows export incentives to its manufacturere, "some of which can run directly afoul of countervalling dity statutes in the United States and elsewhere." If continued, he said, such policies will force the United States into precisely the kind of protectionist response that many in Brazil fear.
As Bergsten said, the problem created by subsidized Brazilian exports is not a new one, and hs been met in the past by special U.S. duties.
A complication is that the Treasury authority to waive countervalling duties will expire on Jan. 3, 1979. Bergsten said that unless Brazil withdrawa its subsidies, there would be an immediate imposition of a 14 percent countervalling duty of Brazilian handbags. Exports of handbags from Brazil to the United Stats last year amounted to $8 million.
Similar retallatory steps in the case of footwear and textiles are being considered, Bergsten said, adding that the administration hopes to reach an overall agreement with Brazil on subsidies and countervalling duties in the course of trade negotiations now going on in Geneva.
For the "advanced developed countries" like Brazil, Bergsten said, it is unrealistic to expert a multilteral agreement in Geneva requiring total abandonment of subsidies overnight. Instead, "a commitment to freeze the existing level" might be a first step, with elimination of all over time.
"In return," Bergsten said, "guarantees might be included in the multinational trade negotations agreement to ensure that other countries repond constructively, and apply countervalling duties only when a subsidy is shown to have injured an industry in the domestic market."
Bergsten said in the interview that it is not yet totally clear how the advanced countries like Brazil can be brought more into the decision-making process on the internationl front.