The OECD Digital Trade Review is a new series analysing the challenges and opportunities that the digital transformation raises for trade for particular countries, offering policy recommendation on how to ensure that new challenges can be met and benefits shared more inclusively.

The digital transformation is affecting all parts of the economy, fundamentally changing the way countries, businesses and people trade. This is largely driven by the considerable reduction in the costs of engaging in international trade enabled by digitalisation which has given consumers, and firms of all sizes, new opportunities to benefit from trade. However, in this new and evolving environment, new approaches to market openness are needed to help ensure that the benefits from the digital transformation for trade can be reaped and shared more inclusively. This is especially the case in the context of accelerating digitalisation as a result of the COVID-19 pandemic.

This chapter identifies the challenges and opportunities that digitalisation raises for trade, including in the context of the COVID-19 recovery. It suggests that Brazil’s ability to benefit from digital trade will depend on whether it can create a policy environment that is conducive to further digital adoption. This will allow Brazil to leverage digital technologies to enable i) more trade in sectors of existing comparative advantage (namely natural resource based sectors); ii) more trade in sectors that have a high digital footprint (e.g. digitally deliverable services); and iii) greater participation in regional and global value chains which, to date, remains low.

This chapter reviews existing data to map different aspects of Brazil’s participation in digital trade. It shows that, despite considerable progress in connecting individuals to the Internet, Brazil still maintains barriers on ICT goods and services. This is affecting the ability of Brazilian firms to effectively leverage digital technologies to increase trade. In particular, Brazil lags in the use of ICT inputs in key export sectors such as agriculture, forestry and fishing and in manufacturing. However, Brazil has emerged as a strong regional supplier of digitally deliverable services. Moreover, further engagement in trade in parcels can provide new avenues for exports of Brazilian SMEs.

This chapter examines Brazil’s trade in goods contained in the WTO Information Technology Agreement (ITA). It discusses the Agreement and models the potential implications of accession on Brazil’s economy. The results suggest that lower prices for IT goods arising from accession to the ITA can lead to growing competitiveness across a range of sectors, including in primary activities but also services and manufacturing. Accession might also increase medium-term GDP by 0.17% in Brazil and 0.05% in Argentina. However, domestic IT value added is likely to decline and some tariff revenue will be lost.

This chapter maps Brazil’s evolving policy and regulatory environment for digital trade, placing Brazil in the broader regional context and benchmarking performance against international best practices. The chapter argues that, while Brazil has made good progress implementing a range of digital trade related policies, there are a number of areas where Brazil could further update rules and regulations to help boost participation in digital trade. These include reductions in restrictiveness across a range of services sectors that support the digital transformation and a wider engagement on digital trade issues in trade agreements.

This chapter uses detailed firm-level data to investigate different aspects of the digital transformation for Brazilian firms. The analysis shows that imported digital inputs contribute to the export competitiveness of Brazilian goods exporters. These are especially important for micro-sized firms. It also highlights that the digital services trade restrictions faced by Brazilian exporters significantly affect their capacity of export digitally deliverable and non-digitally deliverable services, especially in the case of smaller exporters.