US-Brazil Trade Relations in a New Era
by Jeffrey J. Schott, Peterson Institute for International Economics
To be published in O Brasil e os Estados Unidos num Mundo em Mutação
edited by Paulo Roberto de Almeida and Rubens Antonio Barbosa
© Peterson Institute for International Economics
US-Brazilian trade relations have become increasingly contentious in recent months, complicating efforts to advance negotiations both on the Doha Round of the World Trade Organization (WTO) and on the Free Trade Area of the Americas (FTAA). Differences over agricultural issues sparked a bitter confrontation between the two countries at the WTO ministerial meeting in Cancun in September 2003; similar issues have hindered progress on the FTAA and threaten to disrupt the FTAA ministerial in Miami on November 20-21, 2003.
In Cancún, Brazil put together a sizeable coalition of developing countries opposed to a joint US-European proposal for farm trade reforms, provoking recriminations from US officials because some members of that group (the so-called G22) were unwilling to discuss liberalization of their own trade barriers. The early termination of the Cancún meeting left all these issues unresolved. US and Brazilian negotiators never got the chance to work out a negotiated resolution of their dispute.
The Miami ministerial could suffer the same fate and further delay FTAA talks. US and Brazilian officials have significant differences regarding the scope and coverage of the prospective deal, including which issues should be deferred in whole or part to the WTO talks. The dispute has impeded both countries from exerting the leadership role in the talks mandated by hemispheric leaders at the Summit of the Americas in April 2001, who appointed them as co-chairs of the negotiations from November 2001 until the talks conclude.
Lost in these heated disputes are the substantial common interests of both countries in working together to achieving a big package of trade reforms in both the WTO and the FTAA negotiations. Anticipating these frictions, IIE Senior Fellow Jeffrey Schott analyzed US-Brazil trade relations in a paper written in summer 2003, assessed the benefits of removing long-standing barriers to trade and investment (including a doubling of bilateral trade and a needed boost to an underperforming Brazilian economy), and recommended what both countries needed to do to achieve their common goal of deep cuts in agricultural protection and subsidies and a successful conclusion to the Doha Round and the FTAA.
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