Technical Barriers to Trade of Leather and Shoes: Potential Impacts and Challenges to the Brazilian Market

The purpose of this paper is to analyse both the current and potential non-tariff barriers imposed by the international market to Brazilian leather products. These barriers are bureaucratic restrictions to trade due to concerns on both environmental and consumers' protection. They are legal, administrative and technical in nature, but this paper focuses only on technical barriers related to the EEC directives which encompass restrictive presence of chemical substances. The paper is based on a summary of the results of a project developed by the technological and innovation observatory (TIO) entitled "technical barriers to trade of the Brazilian leather and shoes". TIO is composed by a group of researchers from Institute for Technological Research of Sao Paulo State (Brazil), and its mission is to support public and private decision making process through an articulation and effective participation of interested stakeholders in issues relevant to the Sao Paulo State economy. The research methodology consisted of (i) literature review; (ii) interviews with professionals from companies' associations, universities, and research institutions; and also (iii) a brainwriting session with professionals with expertise in leather and shoes. The literature review showed that the major leather producing countries worldwide in 2003 were USA, Brazil and China, each one producing over than 30 million pieces per year. The EU production also surpassed 30 million pieces in that year. As it regards to the world shoes market, the leading producing countries in 2005 were China, India and Brazil. However, the major exporting countries in this same year were China, Hong Kong, Vietnam, Italy and Brazil. Brazil is fifth in this rank because most of its production is still consumed in the internal market. The Brazilian participation in the yearly worldwide exports is decreasing, but it is still an important source of revenues to the country. It is important to mention that by the year 2000, around 95% of the Brazilian leather was tanned with Chromium. Open-end questionnaires were used in the interviews to gather relevant data and information on the market of leather and shoes and also on technical barriers affecting the exports of these products. In these interviews, participants were asked questions dealing with (i) technical barriers on leather and shoes imposed by the European, American and Japanese markets; (ii) current and potential impacts of the EEC directives on the Brazilian leather and shoes exports; (iii) major concerns regarding technical agents (e.g.: Chromium VI and other chemical substances); (iv) challenges that Brazilian chemical labs have to overcome concerning problems imposed by the technical barriers; and (v) public policies on lab capability and infrastructure necessary to mitigate the negative impacts of these barriers. Nowadays, the most important technical barrier is Chromium VI whose presence is presently tolerated only at very low limits (Germany - 3 mg/kg; other EU countries - 10 mg/kg). In the literature, it has been described as carcinogenic and very harmful to human health. Concerns related to the presence of other substances coming or derived from the leather treatment processes (e.g.: azoic dye, pentacloriumphenol, tetracloriumphenol, formaldehyde, heavy metals, pigments, volatile organic compounds - VOCs) have also increased in recent years. Progressively, these concerns have being translated into norms and regulations by the EEC directives. These directives are posing very stringent limits for all these substances and, in this regard, they have been viewed as potential technical barriers to international trade of leather and shoes produced in Third World countries. Around fifteen professionals with expertise in the leather and shoes industries were interviewed when the survey was being carried out. The most important points highlighted by them revealed that some Brazilian leather and shoes producing companies were unaware of their responsibility for the presence of restrictive substances in their exported products. Also they were not properly informed that, as a penalty, they would not be allowed to export to EU countries again. The brainwriting session was carried out with nine professionals from companies' associations (2), universities (2), research institutions (2), government (1); a labor union (1), and also a federal agency for standard and technology (1) to check out the results of previous interviews and also to gather more information on the impacts of both the existing and the potential technical barriers coming up in the next 5 to 10 years. As a result of this study, it was realized that Brazil needs to adopt and put forward concrete measures to attend the technical demands posed by technical barriers, particularly those resulting from the EEC directives. Lack of preparedness of the leather and shoes producing companies (especially in the small ones) is one of the major problems that prevent the effective adequation of their productive processes for attending the existing technical barriers. Results of the interviews and the brainwriting session showed up some consensus on the urgent need of Brazil to upgrade its labs' infrastructure and invest in training of personnel countrywide in order to meet the demand for chemical analyses derived from technical barriers. By adopting these measures, it is expected that the country may reduce the final cost of its leather products and also keep their competitiveness abroad.