The Brazilian government is considering raising the issue of Chinese tariffs on poultry meat and sugar to the World Trade Organization. Last month, China announced anti-dumping duties on Brazilian poultry and sugar in order to protect domestic producers. Beginning this Saturday, Brazilian exporters will have to pay a 38.4% deposit in order to enter the Chinese market. Brazilian companies such as JBS SA, who exports the most poultry meat to China, will be heavily affected. Brazilian sugar will also be affected. Earlier in the year, China and Brazil got into a trade spat on sugar tariffs. Since Brazil is one of the largest exporter of sugar to China, certain sugar companies had to pay an additional 45% duty in order to protect the growing Chinese sugar industry. It is projected that China can potentially become one of the largest sugar producers in the world by the next few decades. In some cases, Brazilian producers of sugar paid up to 95% in tariffs. UNICA, the Brazilian sugar organization announced that in response, Brazil may potentially decrease sugar exports to China by 800,000 tones due to the trade barriers.
According to data from the Massachusetts Institute of Technology, 78% of Chinese imports of poultry meat in 2016-2017 came from Brazil, worth around $1 billion. Brazil also accounted for 34% of Chinese raw sugar imports, also worth $1 billion. However, since this recent anti-dumping tariffs, Brazilian poultry exports to China fell 22%. This is bad news for Brazilian poultry producers since they are already facing an export ban from the EU. Brazilian exports of sugar to China fell to 2.2 million tones, a decrease from 3 million tones in 2017. Sugar companies such as Raizen Energia SA and São Martinho SA will face detrimental effects from these tariffs. The trade spat between China and Brazil is good news for sugar producing
competitors such as India and Thailand, whose exports of sugar to China may increase to 1.5 million tones by the end of this year.
The resulting trade dispute between China and Brazil will have a detrimental outcome. China is strong market for food products due to its large population. Brazil has been increasing its role as the world’s breadbasket. China is already the second largest consumer of poultry meat and may soon become the largest. These tariffs can potentially decrease the amount of Brazilian exports to China, harming the Brazilian economy and also affecting the Chinese consumer. Not only will this hurt China and Brazil’s economic partnership, but also their political partnership as well; both are a part of the BRICS alliance and both are quickly developing. Thus, both countries stand to gain by working with each other. Nonetheless, this trade dispute may become an opportunity for Brazilian producers to look elsewhere in Asia. The Asian market has quickly become extremely important for all countries, due to its large population size. Brazil has recently increased trade with Asian countries, such as Singapore, Bangladesh and Sri Lanka. Trade with Singapore alone has increased by 27% in 2017. At Sidera, we strongly believe that trade barriers only harm the consumers and producers, and no one stands to gain in trade disputes. In this case, free trade and economic cooperation will be important for both China and Brazil.