According to The Economist (2019), it is difficult to be
optimistic about trade at the moment: almost the entirety of
US-China trade is covered by an average 25% tariff (up from an
average 5% at the start of 2018), Japan and Korea are putting up
trade barriers over a history spat, and the WTO's dispute
settlement mechanism looks set to become ineffective in December,
with the US blocking the required reappointment of judges. However,
unexpected developments are providing reasons for optimism. So far
this year, Mercosur has signed meaningful free-trade agreements
with both the EU and the European Free Trade Association. A few
more are in the pipeline, and those with Canada and Singapore look
like they could be signed later this year.
This progress might seem surprising. Until their changes of
government a few years ago, which saw protectionist left-wing
governments leave power, Brazil and Argentina, the two largest
economies in Mercosur, had long had an anti-free trade slant.
Notable changes include Jair Bolsonaro (Brazil's president), and
his installation of a reformist economic team, as well as a
response to US unilateralism. Progress on the free-trade agreements
and the imminent passage of pension reform are two key reasons why
we expect Brazil's economy to rebound a little in 2020, with growth
accelerating to 2%, from 0.8% this year.
That will be enough to lift GDP per person, which is still
below the level of five years ago. There are some risks to the
forecast, particularly from international concern about
deforestation and the long-standing vested interests that work
against reform, and so the recovery remains fragile for now.
Are you surprised to see Brazil emerging as a force for free
trade?
analyze and describe situation
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