Brazil and the United States: Trade Agendas and Challenges of the Bilateral Relationship

**To read the full report for this event, please click on the cover image to the left or scroll down to the report link at the bottom of the page. Below is a brief summary of the events proceedings.**

On October 16, 2007, the Brazil Institute organized a conference to discuss the regional and global challenges for Brazil's trade policy, the trade outlook after the 2008 U.S elections, and the present and future dynamics of Brazilian-U.S. economic relations. Featuring speakers from the Brazilian and U.S. governments and private sectors, participants discussed trade-related challenges between the United States and Brazil in light of the stalled Doha Round and a lame duck administration in Washington. While the future of the Brazilian-U.S. trade agenda may largely depend on the next administration, several trade experts countered that it will take more than a party shift in the Oval Office to advance the bilateral relationship between the two most populous countries in the Americas.

President of the Brazilian section of U.S.-Brazil Business Council and member of the Brazil Institute's Advisory Council Henrique Rzezinski argued it is imperative that both countries shift their political trade agendas to develop a more strategic vision of bilateral trade policies. The two countries should have realistic expectations of each other—focusing more on areas of convergence rather than the inevitable differences. Pedro da Motta Veiga warned against Brazil's "political hyper-activism," which, he contended, is taking a toll on its trade policy. Trade policies under Lula, which prioritize South-South relations over increased engagement with the European Union and the United States, have yielded "very timid results." Rather than increasing Brazil's bargaining power, Motta Veiga asserted that developing country coalitions have constrained Brazil in pursuit of its own interests—such as greater market access to American and European agriculture markets—in the World Trade Organization.

Maurício Mesquita Moreira, senior trade and integration economist at the Inter-American Development Bank, stated that in order to increase its share in global trade, Brazil has to diminish its own protectionist trade barriers, lower the country's exorbitant transportation costs (arguably a more significant barrier), and seek greater market access abroad. Jeff Hornbeck, a specialist in the trade division of the Congressional Research Service (CRS), argued that Brazil is unlikely to overhaul its trade policies, as the country has remained insulated from other economic opportunities by its "Mercosur shell," which has blinded the country to other economic opportunities.

Trade counsel of the House of Representatives Committee on Ways and Means Jason Kearns stressed that a new Republican or Democratic administration will not have much impact on the U.S. approach to trade policy because, in the past three years, neither party has been actively advancing the U.S. trade agenda. I.M. Destler, visiting fellow at the Peterson Institute for International Economics, argued that trade will likely not be a priority for the next administration, citing Hillary Clinton's call to undertake a thorough review of all trade agreements concluded in the last five years. Yet, he added, trade can be an important issue on the next president's agenda if he or she can advance a "new domestic bargain" in which a range of social issues such as pension reform, labor union recognition, and income inequality are addressed alongside trade policies.

Principal with the International Department of Miller & Chevalier Jon Huenemann, contended that the United States and Brazil can advance bilateral trade by absorbing costs in some areas to maximize benefits in others. For example, the United States should be willing to cut agricultural subsidies as a means of finalizing a free trade agreement with Brazil. Similarly, Brazil must be willing to change its position on services, market access, and intellectual property issues.

Kellie Meiman, managing director of McLarty Associates, and Paulo Sotero, director of the Brazil Institute, said it is necessary to look beyond the ethanol initiative launched by President Bush and President Lula in March 2007 in order to properly evaluate the Brazilian-U.S. trade relationship. While American companies have historically been the ones investing in Brazil, Brazilian companies are now increasingly investing abroad, particularly in the United States. These recent developments have renewed interest and pressures from the business communities in both countries, among other things, to negotiate a tax treaty. Brazil's ability to expand its trade horizons, however, will not depend on the private sector as much as it will on Brasília's policies.