Brazil and US hit restart button on trade relations

Brazil and US hit restart button on trade relations

But despite the desire of both administrations to take advantage of the conservative ideological camaraderie — and their meeting of minds on removing Nicolás Maduro from power in Venezuela — the reality is that full-blown trade talks are not high on the agenda for Washington.

 Relations between Brazil and the US — two of the biggest economies in the western hemisphere — withered from mutual neglect for most of the 13 years of leftist Workers’ party rule in Brazil that ended in 2016.

Brazil became the B in the Brics label for emerging economies during that time, and focused on partnerships in Latin America, Asia and Africa.

Now, however, US president Donald Trump and his Brazilian counterpart Jair Bolsonaro are political soulmates — both elected on brash populist platforms with a common distaste for China’s growing global influence.

Just days before Mr Bolsonaro’s trip to Washington in March his son, Eduardo, arrived at a soirée sporting a green cap emblazoned with gold letters reading: “Make Brasil [sic] Great Again”.

The presidents were as enthusiastic and pledged to strengthen economic ties. “Brazil and the US are pushing the restart button in terms of their trade relations,” said Marcos Troyjo, Brazil’s deputy minister for foreign trade.

                But despite the desire of both administrations to take advantage of the conservative ideological camaraderie — and their meeting of minds on removing Nicolás Maduro from power in Venezuela — the reality is that full-blown trade talks are not high on the agenda for Washington.

Bilateral trade between Brazil and the US is just $100bn a year. This is just a sixth of Mexico-US trade, even though Brazil’s $2tn economy is nearly twice as big as Mexico’s. In the Americas, Robert Lighthizer, the US trade representative, has been focused on pushing the revised Nafta deal with Canada and Mexico through Congress. Beyond that, Mr Lighthizer’s attention has been dominated by the denouement of trade talks with China, and the possible launch of new ones with Japan and the EU.

Optimism prevailed among US officials and business executives during Mr Bolsonaro’s visit, but this was largely because trade relations have been so testy that the bar for improvement was very low. “The Bolsonaro government views the US as a strategic partner and wants to reset the relationship on more positive terms — and the US government appears to be on board,” said Cassia Carvalho, executive director of the Brazil-US business council.

There were some advances. Both countries reached a deal to support US space launches from the Alcântara base in northern Brazil through a series of technological safeguards; Brazil dropped its visa requirements for US citizens; and the US said it would back Brazil’s membership of the Organisation for Economic Cooperation and Development, or OECD, in exchange for Brazil abandoning preferential treatment at the World Trade Organization.

                “For Brazil it is important to enter the OECD and, in fact, the US was blocking its entrance there, so giving up the preferential treatment was reasonable,” said Pedro da Motta Veiga, director of the Brazilian Center for Integration and Development Studies.

Meanwhile, some steps were taken to reduce tensions around access to the agricultural markets in both countries. Brazil showed a willingness to allow more pork from the US into the country alongside tariff-free wheat imports, and the US is exploring options to reopen imports of fresh Brazilian beef.

Yet agriculture is likely to be the biggest obstacle to any prospective trade deal, since both countries are global rivals in the field. “In several sectors, with emphasis on the agricultural sector, both countries are competitors and that may raise difficulties while discussing the offers of both sides for an eventual free trade agreement,” said Renata Amaral, a visiting scholar at the American University in Washington DC.

Analysts and executives also note that regulatory divergences — trade facilitation, tax simplification, anti-corruption and intellectual property rights — would need to be tackled in any expansion of US-Brazilian trade relations.

Moreover, Brazil’s hands are tied by Mercosur, a regional customs pact that forbids its member countries from individually negotiating trade deals.

For risk consultancy Stratfor, the Bolsonaro administration “appears to be seriously analysing the prospects” for a trade deal with the US. But, it added, “Brazil can’t actually begin such negotiations unless it can modify the Mercosur charter.”

During his first visit since taking office in January, Mr Bolsonaro told Mr Trump “we want to have a great America, yes, and we also want to have a great Brazil”. The problem is that changing deep-rooted trade dynamics “won’t be as easy as changing the colours and country names on sports caps”, warned a diplomat from South America.

Andres Schipani and James Politi