Brazilian Trade Policy and the United States (CRS Report for Congress)
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| Release Date |
Feb. 3, 2006 |
| Report Number |
RL33258 |
| Report Type |
Report |
| Authors |
J.F. Hornbeck, Foreign Affairs, Defense, and Trade Division |
| Source Agency |
Congressional Research Service |
Summary:
As the largest and one of the most influential countries in Latin America, Brazil has emerged as
a
leading voice for developing countries in setting regional and multilateral trade agendas. The United
States and Brazil have cultivated a constructive relationship in pursuit of their respective efforts to
promote trade liberalization, including attempting to broker a compromise with the European Union
in the World Trade Organization (WTO) Doha Round and forming bilateral working groups on trade
(and other) issues. Still, they approach trade policy quite differently, are at odds over how to proceed
regionally with the Free Trade Area of the Americas (FTAA), and share concerns over specific trade
policies and practices.
Brazil's trade strategy can be explained only in part by economic incentives. Its
"trade
preferences" also reflect deeply embedded macroeconomic, industrial, and foreign policies.
Whereas
U.S. trade strategy emphasizes the negotiation of comprehensive trade agreements on multiple fronts,
Brazil is focused primarily on market access issues as they pertain to its economic dominance in
South America. Brazil exercises this priority in all trade arenas, such as pursuing changes to
agricultural policies in the WTO, expanding the Southern Common Market (Mercosul) in South
America, and resisting the FTAA for lack of a balance conducive to Brazilian interests.
Brazil has a modern, diversified economy in which services account for 53% of GDP, followed
by industry and manufacturing at 37%, and agriculture at 9%. Agribusiness (commodity and
processed goods) account for some 30% of GDP, explaining Brazil's emphasis on
agricultural
policies in trade negotiations. Brazil is the world's largest producer of sugar cane, oranges,
and
coffee, and the second largest of soybean, beef, poultry, and corn. It is also a major producer of steel,
aircraft, automobiles, and auto parts, yet surprisingly, a relatively small trader by world standards.
The United States is Brazil's largest single-country trading partner.
Brazil is critical of U.S. trade policies such as the Byrd Amendment (repealed, but program in
effect until October 1, 2007), which directs duties from trade remedy cases to affected industries, the
administration of trade remedy rules, and what it considers to be discriminatory treatment in the U.S.
expansion of free trade agreements in Latin America. It also objects to product-specific barriers such
as tariff rate quotas on sugar, orange juice, ethanol, and tobacco; subsidies for cotton, ethanol, and
soybeans; and prolonged antidumping orders on steel and orange juice. U.S. concerns focus on
Brazil's comparatively high tariff structure, especially on industrial goods,
Mercosul's common
external tariff program, and Brazil's refusal to address issues of critical importance to the
United
States such as services trade, intellectual property rights, government procurement, and investment.
Despite these differences, both countries recognize the potential for important gains to be had
from mutually acceptable trade liberalization at all levels. As a developing country with an
opportunity for considerable growth in both exports and imports, however, Brazil may have the most
to gain from addressing both foreign barriers to its trade, and unilaterally opening its economy
further.
