By Rossella Brevetti, Len Bracken, Brian Flood, and Michael Kepp
Trade relations between the United States and Brazil could receive a major boost from the election of President-elect Jair Bolsonaro, U.S. and Brazilian business groups say.
President Donald Trump tweeted his congratulations to Bolsonaro and said the two “had a very good conversation” and would work together on trade. Like Trump, Bolsonaro has expressed a preference for bilateral deals.
“Considering that this is the preference and policy of Trump government, then there is an opportunity for Brazil-U.S. rapprochement and dialogue on trade issues,” Cassia Carvalho, executive director of the Brazil-U.S. Business Council, told Bloomberg Law in an email.
Bolsonaro’s preference for bilateral agreements is a switch from the past, as Brazil has traditionally favored multilateral agreements, Carlos Eduardo Lins Da Silva, University of Sao Paulo Institute for International Relations professor told Bloomberg in an email. Since Trump also favors one-on-one trade pacts, he said, “we can assume the prospects for dialogue between them are auspicious.”
Press reports have compared Trump and Bolsonaro, saying they have similar styles and that the two leaders are like-minded regarding foreign policy, investment, enforcement, and other issues.
Brazil’s private sector welcomes Bolsonaro’s economic agenda and looks forward to seeing how he will push it forward, Carvalho said. The president-elect is expected to focus on Brazil’s fiscal crisis and to push for social security reform.
Under a Bolsonaro government, there is room to formalize the dialogue on trade, strengthen cooperation, and to start pursuing more strategic agreements, Carvalho said. “They are very much necessary for both countries,” she said. The Brazil-U.S. Business Council has called for a trade and investment agreement between the two nations.
Brazil and the United States enjoy good trade and investment relations, Carvalho said. Two-way investment between the two countries has increased in the past few years. “That is the trend,” she said, suggesting it would continue under the new administration.
Brazil received an exemption from U.S. steel and aluminum tariffs, which Trump imposed under a statute allowing him to restrict imports for national security. Brazil has said that its exports to the U.S. were mainly raw steel purchased by U.S. steel companies for processing.
Cutting Tariffs
During his campaign for president, Bolsonaro called Brazil “one of the least open countries to foreign trade,” and said opening up trade relations would be “a positive technological shock for the country.” He proposed a strategy of reducing “many” import tariffs and “entering into new international agreements.”
The National Confederation of Industry (CNI) opposes the idea of unilateral reduction of many import tariffs, saying such cuts do not guarantee Brazil will have access to other markets. “This reduction increases competition [with foreign goods] inside the Brazilian market at a time of slow economic growth and high unemployment,” the group, which represents Brazilian state industrial federations, said in a statement.
“Without creating internal conditions for competing with imported products from economies with better business environments, the unilateral reduction of import tariffs could be destructive [to Brazilian companies],” Robson Andrade, CNI’s president, said in the statement.
Disputes, Duties
According to the International Trade Commission, the U.S. had 11 anti-dumping duty orders and four anti-subsidy duties on goods from Brazil as of Oct. 22. That marks it as tied with Indonesia for the country with the seventh highest number of such U.S. duty orders.
These duties hit a range of products, including silicon metal ($60 million imported from Brazil in 2016); uncoated paper ($211 million in 2014); and hot-rolled steel flat products ($252.6 million in 2015).
However, Brazil recently avoided steep anti-dumping duties on polyethylene terephthalate resin, a type of plastic ($152.5 million in 2017) after the International Trade Commission found that the imports don’t seriously hurt or threaten U.S. industry.
The U.S.-Brazil Commercial Dialogue issued a joint statement in August, saying the two sides were working on trade facilitation, citing positive developments on the Brazilian side regarding express shipping generally, as well as the simplification of shipments of aircraft parts internationally and within Brazil. The dialogue comprises officials from Brazil’s Ministry of Industry, Foreign Trade and Services and the U.S. Department of Commerce.
The U.S. had a $7.6 billion trade surplus with Brazil in 2017, according to the USTR. Brazil was the 10th largest goods export market for the U.S. in 2017, according to a USTR annual report.
Yet Brazil remained on the U.S. intellectual property watch list in a separate USTR annual report on IP concerns. Brazil has been cracking down markets that sell counterfeit goods, but the levels of counterfeiting and online piracy “remain unacceptably high,” the report said.
Another USTR report, the 2018 National Trade Estimates Report on Foreign Trade Barriers, issued in March, lists a host of trade issues with Brazil, including technical barriers to trade involving telecommunications, toys, and wine; sanitary and phytosanitary barriers to U.S. pork exports; tariff-rate quotas on wheat and ethanol; nontariff barriers on autos and remanufactured goods such as earthmoving and medical equipment.
Brazil is a founding member of Mercosur, a South American trade bloc. Paulo Guedes, who the president-elect picked as his future finance minister, said “emphatically” that Mercosur will not be a priority in the new government.
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Len Bracken
Reporter
Bloomberg BNA
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