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Brazil, until a few years ago, hardly registered on the official U.S. radar screen. Few congressional delegations visited there. Its people speak Portuguese, hardly a world language for the U.S. population. Its large cities were better known in the United States for their favelas than for any sense of social justice. The natural beauty of Rio de Janeiro became less appreciated as the media and word of mouth reported the dangers of strolling on its lovely beaches. The capital, Brasilia, was thought of as an anodyne, artificial city built to house a bureaucracy rather than as a place for people to live. The military ran the country until the 1980s. Brazil was best known as a country of promise that was never realized.
There is another picture of Brazil that is now coming to the fore. Brazil is a vibrant democracy-almost too vibrant, in light of its contentious political parties. Its president, Fernando Henrique
Cardoso, is probably the most admired head of government in the Americas in terms of intellect and personality. Brazil has a population of 170 million, or 49 percent of all of South America. Its gross domestic product is $765 billion, the second largest in the Americas after the United States and 36 percent of the GDP of all of Latin America and the Caribbean together.
Brazil's economy is the eighth largest in the world. Net annual foreign direct investment has been about $30 billion per year during the past two years. The only Latin American country that is even close is Mexico, where the comparable annual figure has been around $13 billion. U.S. merchandise exports to Mexico dwarf those to Brazil-$111 billion to $15 billion in 2000-but Brazil dominates U.S. exports to South America. It took the U.S. government a long time to pay attention to Brazil, but the private sector has not been as laggard.
This brief excursion into some data about Brazil is intended as a prelude for commenting on the tension that exists between the United States and Brazil about the path toward a Free Trade Area of the Americas
(FTAA). Official U.S. sources, sometimes directly but more often through off-the-record remarks, have been consistent in painting Brazil as a recalcitrant negotiator. Many members of the U.S. Congress and their staffers make clear in private statements that Brazil is the most difficult country in the hemisphere in getting on with the free-trade negotiations. These remarks have gone as far as saying that the United States should go ahead without Brazil, if necessary, to complete the FTAA negotiations, and allow Brazil to sign up later-and they seem to be confident that Brazil would do so.
Brazil, at times, has stimulated this contentiousness. In earlier years when the FTAA negotiations were just getting under way, Brazilian officials stated that the agreed 2005 date to complete the negotiations was an option, not a fixed target. President Cardoso of Brazil said recently that making Mercosul work is Brazil's destiny, whereas the FTAA is an option. The two can coexist, and it is hard to understand why this comment was necessary other than to downplay the FTAA just before a meeting of heads of state intended to move the hemispheric free-trade process along. Brazil's import tariffs (really those of
Mercosul, which, in theory, has a common external tariff) are relatively high, about 15 percent on average, and it was the unwillingness to consider lowering them in the near future that prompted Chile to give up on its negotiations to enter Mercosul and instead to reopen free-trade negotiations with the United States. In a comment that may have been more candid than he intended, a senior official of Itamaraty (the Foreign Ministry, which is responsible for Brazil's trade negotiations) said to a colleague and me that Brazil felt that it still had scope for import substitution industries. The translation to the uninitiated is that Brazil should keep many tariffs high for now to protect industries that may not otherwise be able to compete-the auto industry may be one example of this.
There have been endless interpretations of Brazil's position in the FTAA negotiations. The one most often heard is that Brazil wishes to remain the hegemon in South America, and the FTAA would undermine this position because of the power of the United States. Brazil's efforts to reach free-trade agreements between Mercosul and other South American countries gave some credence to this analysis. Another argument, one used by Brazil itself, is that while the United States wants all other countries to alter their import protection-even to change laws to accomplish this-the United States is not prepared to make concessions on issues of importance to the Latin American countries. What Brazil has mainly in mind in this assertion are the high U.S. price supports and import restrictions for agricultural products, such as sugar, peanuts, tobacco, and chocolate, which for the most part seem nonnegotiable. The United States has also made clear that it is reluctant-that may not be a strong enough word-to revise its antidumping laws and procedures, which severely limit Brazil's exports of orange juice, steel, and shoes.
There is much justice in this Brazilian argument in that these restrictions do limit many of Brazil's most competitive exports. Brazilian spokesmen even put a number on the export loss from these restrictions-$10 billion a year. The figure may not be precise, but the argument is valid.
In a statement issued on April 7 by the 34 trade ministers of the hemisphere, the question of the date for concluding the FTAA negotiations was settled-no later than January 2005, allowing one year to complete the national ratification processes. The United States had been pushing for an earlier date, despite the knowledge that Brazil opposed this. The important point is that all the governments-Brazil included-have now signed on to this date.
There remain many deep problems in concluding the negotiations by the target date. These include tariff reductions, lowering impediments to trade in agriculture, devising rules for investment, working out rules of origin, and setting up a dispute-settlement mechanism. Before these substantive negotiations come into play, however, the U.S. president will have to secure trade promotion authority from the Congress, which would permit the final agreement to be dealt with as a package, no doubt with some modifications but not wholesale amendments. Absent this authority, many countries will not put forward their final offers if the final bargain has to be renegotiated with the U.S. Congress. Many members of Congress are insisting on trade and environmental conditions before granting trade promotion authority and are supporting the AFL-CIO position that if core labor standards and agreed environmental provisions are violated, the punishment should be import restrictions. Brazil fiercely opposes this, as do many other hemispheric countries. The elliptical language of the April 7 trade ministerial statement contains the following long sentence:
We reiterate that one of our general objectives is to strive to make our trade liberalization and environmental policies mutually supportive, taking into account work undertaken by the World Trade Organization and other international organizations, and to further secure, in accordance with our respective laws and regulations, the observance and promotion of worker rights, renewing our commitment to the observance of internationally recognized core labor standards, and acknowledging that the International Labor Organization is the competent body to set and deal with these labor standards.
To interpret: the International Labor Organization (ILO), and not bodies set up by the
FTAA, will deal with these labor standards.
It serves no purpose to castigate Brazil for seeking to protect its interests-all countries do. It is sophistry to talk about an FTAA that excludes 36 percent of the economy of Latin America and the Caribbean. We must learn to get over our exclusive concentration on U.S. political limits, which ignores those of all other countries. We have an opportunity to unify the hemisphere in trade terms, and it would be a major loss if we squandered this.
* Sidney Weintraub, an economist, is also Dean Rusk professor emeritus at the Lyndon B. Johnson School of Public Affairs of the University of Texas at Austin. A member of the U.S. Foreign Service from 1949 to 1975, Dr. Weintraub held the post of deputy assistant secretary of state for international finance and development from 1969 to 1974 and assistant administrator of the U.S. Agency for International Development in 1975. He was also a senior fellow at the Brookings Institution. His most recent book is
Financial Decision-Making in Mexico: To Bet A Nation (Macmillan, and University of Pittsburgh, 2000). Earlier he wrote
Development and Democracy in the Southern Cone: Imperatives for Policy in South America (CSIS, 2000);
NAFTA at Three: A Progress Report (CSIS, 1997) and NAFTA: What Comes Next? (Praeger/CSIS, 1994). Among his books on Mexico are
A Marriage of Convenience: Relations between Mexico and the United States (Oxford University Press, 1990) and
Free Trade between Mexico and the United States? (Brookings, 1984). Weintraub received his Ph.D. from the American University and speaks Spanish and French.
** Issues in International Political Economy is published by the
William E. Simon Chair in Political Economy at the Center for Strategic and International Studies
(CSIS).
(c) 2001 by the Center for Strategic and International Studies.
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