Once again, protectionism proves to weaken investment and growth. A recent on the automotive sector by the World Bank was published concluding that ‘Inovar-Auto’, the program created with the intention of making the Brazilian auto-industry more competitive failed and had no effect on levels of production or employment. Instead, it has limited and depressed imports. Experts claim that the main reason would be the exaggerated focus on the internal market.
In an interview, Pascal Lamy, WTO’s director, has already stated that protectionism is utopic and that barriers are hardly the solution to world trade problems. Alternatively, globalization has brought about growth and reduced poverty. Countries have long since reaped the reward the rewards of investing in infrastructure, education and technology, however more than 70% of the world’s population are still without access to social security. To them, opening trade barriers may be the only way out.
Recently, the World Trade Organization has condemned Brazilian industrial politics. Programs such as Inovar-Auto, which expires in the of 2017, in December, being replaced by Rota 2030. The entity has ruled that the automotive regime violates free trade laws and affects foreign companies unfairly. The new policy would have to simplify taxes and reduce the cost of doing business in Brazil, while supporting innovation and creating a proper environment for companies invest in this kind of activity. The WTO concluded that the current national industrial in Brazil is illegal, as it imposes a heavier taxation regime on imported goods than on domestic ones, granting tax incentives to locally produced goods, and offering subsidies to exporting companies.