Research Proposal: Brazilian Informatics and the U.S

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Brazilian informatics and the U.S.

In July 1986, Ambassador Flecha de Lima, the secretary general of the Brazilian Foreign Ministry was invited to negotiate with U.S. representatives the state of Brazilian restrictions of informatics sector, namely its manufacturing and trade restrictions.

The restrictions included a state market reserve voted in 1984 and wearing off in 1992, which gave national (Brazilian) firms exclusive rights to engage in "informatics activities" and which clearly hindered a fair development of U.S. informatics firms in Brazil; a national firm was defined as with at least 70% Brazilian ownership of voting stock and brazilian control over management and technology development; and national companies benefited from state protections in the form of governement procurement or fiscal incentives.

In 1985, the U.S. found the conditions unfare and in an effort to uncover foreign unfare trade practices and put pressure on nations adopting these practices to change them, its president, Ronald Reagan ordered three investigations of unfare trade practices, among which the Brazilian informatics restrictions. After numerous attempts to bring Brazil to the negotiation "table," U.S. succeded to establish the first round of negotiations in July 1986.

Goals

Brazil's goals for the negotiation were to maintain trade conditions that would help the country cope with a deficient balance of payments - so, strict control of imports and that would fester the development of the informatics sector. These goals were not to be sacrificed. The extent to which those goals were achieved via trade restriction, however, was negotiable.

Diagnosis

Negotiation can be divided into two types: integrative and distributive. Integrative negotiations refer to those situations in which the outcome is a win/win solution; thus, negotiating parties try to find an optimal solution for all, one that maximizes joint gain. Several issues that are subject to negotiats are analyzed from multiple angles and negotiations are methaphorically trying to expand the pie, rather slice it, thus enabling trade-offs. Distributive negotiations, as opposed to integrative ones, refer to those situations in which the ourcome is a win/lose solution; there is always one negotiating party that gets what it came for and one that gives something up, leaving without getting what it came for.

The Brazil - U.S. informatics trade dispute was subject to a distributive negotiation. This case received much attention as it was one of the most significant example for existing dependency theories. Both countries had a lot to lose from seizing trade cooperation and both countries had a lot to gain from improving trade conditions.

On one side, Brazil saw its informatics sector as a strategical one for the country's development. The development of a national informatics industry was vital for Brazil's future, as maintaining or increasing competitiveness of own manufactured export, rather than the foreign-dependant one was seen as essential. Tancredo Neves, who was elected president in 1985 stated that "A country that cannot control its informatic services will be condemned in a short time to be a subnation."

On the other side, U.S. saw Brazil as a large market and therefore a great opportunity for its firms' to invest in. By 1975, the latter was the sixth largest market for informatics products in the world. U.S.'s interests in this country had to do with the large size of exports - between 1980 and 1982 the U.S. computer exports in Brazil increased 14% per year; and with profit remittances from its multinationals investing in its trade partner and which were inhibited by the 1984 Informatics Law.

Following the 1984 Informatics Law, many brazilian firms resorted to software piracy reaping off profits that otherwise would have been cashed in by large multinationals, such as IBM. Many such large multinationals with business in Brazil complained to Washington about piracy overseas; hence, U.S. authorities' concern with these "shadow economy" products. The adoption of laws targetting the protection of intellectual property and restriction of software piracy was likely to be one of the main issues to be discussed at the first round of negotiations. The idea was for Brazil to develop a strong informatics sector, rather than learning to copy from foreign investors. Consequently, in 1987, after the first round of negotiations, Brazil voted the software copyright bill and U.S. suspended its retaliation threat.

One other issue that might be subject to the first round of negotiating might include the barriers to U.S. investment in the Brazilian informatics sector. The U.S. is likely to request its negotiation partner to take measures targetting the reductions and burdens on its commerce. More specifically the former will be expecting to see more its investment proposals approved by the latter.

Given these two issues that are likely to be on the discussion agenda and given that a copyright law would benefit both parties, Brazil could let the U.S. To open the negotiations, which would also stand as a proof that the country is willing to actively engage in solving the trade dispute. Agreeing on the first point on the negotiation list would gain Brazil enough leverage to bargain for other conditions on the list, such as the extent to which U.S. investment proposals are to be approved by its authorities, as the country is not yet ready to fully open the informatics sector to foreing direct investment.

The best alternative for U.S. On an agreement with Brazil includes a strong commitment of the latter to created the legal environment for intellectual property and a promise to reduce trade restrictions for its multinationals. This second issue on the negotiation list involves more effort and is focused on a long-term perspective, which is why failure to reach an agreement on it might not lead to a negotiation breakdown. The first issue, however, is more stringent as the existing U.S. multinationals in Brazil lobbied significantly for it and intellectual property protection is critical for their survival on the brazilian market. Thus, the failure to reach an agreement on this issue might lead to a negotiation breakdown.

U.S. is interested in reaching an agreement with Brazil as retaliation might trigger a strong adverse reaction from Brazil with macroeconomic effects on the former. One of the strongest implications for U.S. would affect its debt relations. The large North American country's banking system is strongly dependent on international debtor countries, of which Brazil is the largest. In 1982, the former approved the extention of a short-term loan $400 million to the latter. Moreover, in 1983, the ten largest banks in U.S. had outstanding loans worth of 169% of their capital to developing countries. A retaliation against Brazil could also have negative consequences on the country's private banks. Furthermore, U.S. As the architect of IMF (International Monetary Fund) and GATT system (General Agreement on Tariffs and Trade), is interested in enabling fair trade conditions for all countries, by enabling less developed countries to restructure their economies and implicitly create better conditions for fair trade. Brazil is still one large beneficiary of IMF funds and a U.S. retailiation could also slow down the restructuring process in this country.

In the absence of negotiations, U.S. could retaliate in the form of applying mutual trade conditions, which could affect Brazil's exports and by refusing to engage in future debt discussion, which could have a dezastrous impact on Brazil, since this country has always had a deficient international debt position.

Such a retailiation, not only that would throw Brazil into a macroeconomic crisis, but it would also attract negative reactions on behalf of national companies which already disagreed with the authorities' approach of developing strategic economic sectors such as the informatics one. These companies were in favor of opening the economy to foreign investors to enable the knowledge transfer from a more developed trade partner onto the national industries. However, the extent to which these companies would actively support U.S. negotiations is unknown, but it might turn to be useful, thus worth investigating.

Recommendations

The market reserve policy created a greenhouse environment that nurtured the development of many national-owned informatics firms, by retricting the access of competitors and imports on the Brazilian market. However, this approach doesn't guarantee the creating of strong companies able to compete in the international market or against international competitors on the national market once this one opens. The history supports this argument, since most local firms were not able to survive after 1990s when the market protection was reduced. The Brazilian negotiators should foresee this scenario and be in favor of the creation of a national environment that can nurture strong national firms able to compete in a globalized world and therefore be in favor of opening the market to a certain extent and to protect intellectual property. The gain of agreeing with the U.S. negotiators on the intellection property protection issues would be that both national and multinational companies in the informatics sector would reap more profits from their software development. On the other hand, pirate software is cheaper and could help small users that otherwise couldn't affort to purchase it to develop faster, technologically wise. Nevertheless, Brazilian authorities should send a message… [END OF PREVIEW]

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Brazilian Informatics and the U.S.  (2008, December 7).  Retrieved May 19, 2019, from https://www.essaytown.com/subjects/paper/brazilian-informatics-us/724756

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"Brazilian Informatics and the U.S."  Essaytown.com.  December 7, 2008.  Accessed May 19, 2019.
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