Courting the South: Lula’s Trade Diplomacy

Abstract

Scholarly consensus regarding Brazil’s Lula government characterizes its economic policy as surprisingly conservative but its foreign policy as roughly in line with the traditionally leftist principles of the Workers’ Party. While broadly accurate, this perspective tells us little about trade diplomacy, which cuts across these two policy areas. In this article we explain why Lula’s trade diplomacy has hewed much more closely to his broader foreign policy strategy than his economic model, despite the critical role of trade in Brazil’s recent economic growth. We argue that two key factors have lowered the costs of adopting a combative, South-South orientation, allowing Lula to use trade diplomacy as a tool for appealing to party loyalists. One is the inherently muted short-term impact of trade diplomacy on key macro-economic outcomes. The other is the failure of the traditional trading powers to offer the incentives necessary to successfully conclude the major North-South trade talks they had initiated.