Trade Dispute: Brazil’s Aluminum Industry Halts Exports to USA

RIO DE JANEIRO, BRAZIL – “Today, agreements between Brazil and the United States were formalized on trade facilitation, anti-corruption, and best regulatory practices. These are measures that debureaucratize business between these countries,” said Bolsonaro’s son, Deputy Eduardo Bolsonaro, in a string of tweets depicting photos of the American delegation that was in Brazil this week.

But, while the delegation was pledging to expand trade with Brazil, the aluminum industry was already paying the price of a 50 to 130 percent surcharge levied by Donald Trump’s government on the product about two weeks earlier. The industry then decided to suspend exports to the country.

The sector’s association, ABAL, says that the American government has enforced surcharges on 17 countries, anticipating the investigation of an anti-dumping proceeding requested by American companies. In practice, the Brazilian aluminum industry has stopped selling approximately eight percent of its production, the equivalent of about R$450 million (US$90 million) per year.

The astonishing aspect of the American case is that it involves 17 countries, that is, the majority of the world’s aluminum producers. In general, an anti-dumping proceeding, which investigates an unfair competition practice, involves only a few countries, a few producers.

To assume that all of the world’s countries are being unfair to the United States on aluminum sales seems somewhat excessive. The country wants to know if exporters are selling at lower prices than they practice in their own countries or even if certain subsidies may be artificially reducing prices.

Milton Rego, the ABAL’s president, says that this case of prosecuting so many countries illustrates how the United States has adopted an anti-competitive stance, and not only in relation to China. The Chinese emerged from a nine percent share of the world’s aluminum market at the start of the millennium and closed 2019 with 56 percent of the market.

In an attempt to restrain the Chinese and make America great again, Trump overtaxed Chinese products. But the American industry still failed to sell because other countries sold cheaper and controlled the American market in China’s place. It was then that the American industry decided to lodge the anti-dumping proceeding against the entire world.

The surcharges on aluminum are still not final, which means that in March 2021, when the investigation procedure is over, the American government may refund the taxes. But in practice, if in the meantime the aluminum industry wants to export, it will have to do so almost like a deposit in court.

In other words, it will be paid less. This is why the sector has decided not to sell to the Americans any longer. Rego says that aluminum production, despite the pandemic, will grow in Brazil compared to the preceding year. In 2019, some industries started maintenance and that is why there was a reduction in the volume last year. This year industry has not stopped because turning off the blast furnaces is ultimately more costly.

The Ministry of Economy, through its press office, has reported that it is monitoring the proceeding and helping Brazilian companies in the investigation running in the United States. This week, Brazil signed a memorandum of understanding for a US$1 billion loan and also closed a trade agreement with the Americans.

One of the points was the establishment of an Authorized Economic Operator, which will facilitate the clearance of goods in customs and also provides for a tariff reduction. Apparently, this is not applicable to the aluminum industry.

Source: Veja