Identifier
Created
Classification
Origin
04BRASILIA526
2004-03-05 19:54:00
CONFIDENTIAL
Embassy Brasilia
Cable title:  

BRAZILIAN RESPONSE TO FTAA DEMARCHE

Tags:  ETRD BR FTAA 
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This record is a partial extract of the original cable. The full text of the original cable is not available.
C O N F I D E N T I A L SECTION 01 OF 03 BRASILIA 000526 

SIPDIS

DEPT FOR U/S LARSON, WHA/BSC, WHA/EPSC, EB/TPP
DEPT PLEASE PASS TO USTR FOR PALLGEIER, RWILSON, KLEZNY
USDA FOR JB PENN, U/S FFAS
NSC FOR MDEMPSEY

E.O. 12958: DECL: 03/04/2014
TAGS: ETRD BR FTAA
SUBJECT: BRAZILIAN RESPONSE TO FTAA DEMARCHE

REF: SECSTATE 44578

Classified By: Economic Officer Janice Fair for reasons 1.5 (b) and (d)

Summary
-------------
C O N F I D E N T I A L SECTION 01 OF 03 BRASILIA 000526

SIPDIS

DEPT FOR U/S LARSON, WHA/BSC, WHA/EPSC, EB/TPP
DEPT PLEASE PASS TO USTR FOR PALLGEIER, RWILSON, KLEZNY
USDA FOR JB PENN, U/S FFAS
NSC FOR MDEMPSEY

E.O. 12958: DECL: 03/04/2014
TAGS: ETRD BR FTAA
SUBJECT: BRAZILIAN RESPONSE TO FTAA DEMARCHE

REF: SECSTATE 44578

Classified By: Economic Officer Janice Fair for reasons 1.5 (b) and (d)

Summary
--------------

1. (C) Econoff delivered reftel talking points to Regis
Arslanian, Itamaraty Director for International Trade, and
Tovar da Silva Nunes, Itamaraty FTAA Coordinator and member
of the Brazilian Co-Chair team, on March 4. In responding,
they conveyed a constructive attitude, albeit without
signaling a major change in Brazilian positions. Both noted
that Foreign Minister Amorim had repeatedly instructed the
Ministry's technical level to "be problem solvers" so that
the common set of rights and obligations, and the
plurilateral procedures could be finalized. Neither
Arslanian nor Da Silva Nunes gave any indication that Brazil
would retreat from concessions made by Mercosul during the
course of the Puebla Trade Negotiations Committee (TNC)
meeting in February.


2. (C) Nunes suggested that U.S. and Brazilian Co-Chair
teams would inevitably have to work together to draft a paper
that would bridge current positions. He claimed that Chile
had approached the Brazilian Co-Chair with the idea, saying
that it would be necessary given the difficulty national
delegations will have in moving off their respective
positions. He appeared anxious to start this process,
perhaps immediately following the informal discussions in
Buenos Aires March 9-10. He also suggested that Co-Chairs
should immediately explore how to minimize differences in the
procedures paper, since time during the next Puebla meeting
will be limited.


3. (C) While Nunes seemed to grasp the talking point without
difficulty, Arslanian was initially confused by our
suggestion that basic elements of the common set need to be
decided, but that delegations should but this result at risk
by attempting to resolve every issue in detail. At first he
mis-interpreted this as signaling U.S. willingness/interest
in carrying over some discussion of common set elements (not
just details) to a future TNC, even though Negotiating Groups
would already be reconvening. He asked, for instance, if the
U.S. would be willing to put off discussion of a special

agricultural safeguard. He emphasized that an adequate
number of elements need to be defined so that Negotiating
Groups have sufficient guidance to allow their work to
proceed. Econoff and EconCouns clarified that the point was
simply not to let insistence on full resolution of every
detail stand in the way of achieving agreement on "the
elements of the common set."


4. (C) Arslanian saw this issue as connected to the G-14
proposal that the common set paper explicitly state that
additional provisions may be included in the common set of
rights and obligations in the future, as may be agreed.
Nunes claimed that such a statement just isn't necessary,
since any delegation has been and would remain free to raise
any issue it so chooses. Arslanian claimed his concern over
this proposal was due to potential gridlock should
delegations start raising new issues in the Negotiating
Groups during common set discussions. When Econoff inquired
whether the provision would be less problematic if additional
provisions were raised at the TNC level rather than in
Negotiating Groups, Nunes answered "maybe."

Market Access
--------------

5. (C) Looking at the key areas of disagreement, Arslanian
kept returning to market access, emphasizing that it is the
crucial area for Brazil. Specifically, he focused on
proposed language for defining the scope for tariff reduction
in the common set. Brazil needs the proposed "significant
improvement in market access conditions" language, Arslanian
argued, to demonstrate that it is gaining something in the
common set. He also inquired about the possibility of
commencing with Mercosul-US market access negotiations even
if some elements of the common set remained undefined, such
as the scope of tariff reduction. Clarifying that we were
not in a position to provide an official response, Econoff
pointed out that past U.S. position was that agreement needed
to be reached on the common set before these market access
discussions could proceed.

Agriculture
--------------

6. (C) Nunes went through the common set elements on
agriculture. On export subsidies, he said he was trying to
explore formulations that address the U.S. interest in
linking the elimination of export subsidies and the
deterrence of subsidized products from non-FTAA countries,
but which don't make causality between them explicit. His
general idea is to present the concepts as a package --
export subsidies are eliminated, and there are efforts at
deterrence -- but the former (elimination) is not predicated
on the latter (deterrence). He also wondered aloud whether
the definition for export subsidies could be left for the
Negotiating Group on Agriculture to decide.


7. (C) As a matter of principle, Mercosul does not believe
there should be any product differentiation with regard to
safeguards; agricultural products should be dealt with under
the same mechanism as industrial products, according to
Nunes. He claimed that Mercosul had had "bad experiences"
with Andean trading partners, leading them to conclude that
special agricultural safeguards are too prone to use for
protectionist purposes. Neither Nunes nor Arslanian
responded directly when Econoff suggested that rather than
rejecting a special agricultural safeguard outright, perhaps
Mercosul's concerns about possible abuse could be addressed
in the specifics of how the safeguard mechanism would operate
-- a level of detail beyond what is sought in the common set
document.


8. (C) On domestic support, Nunes claimed that it would be
very difficult for Mercosul to accept elimination from the
common set document of any reference to "mechanisms to
neutralize the effects of distorting measures..." Drawing
on points in reftel, EconOff reffirmed that the U.S. is not
prepared to address domestic support within the FTAA and we
see this as an area in which Mercosul ambition must be
lowered. Nunes said that he is discussing the issue with
Mercosul colleagues to find out the exact needs of the group,
and claimed it was helpful to know that language on a
neutralization mechanism relating to domestic support was a
non-starter for the United States.

AD/CVD
--------------

9. (C) Nunes claimed that this was not a problematic area,
in that Mercosul had backed off trying to obtain changes to
U.S. legislation.

Environment and Labor
--------------

10. (C) Nunes and Arslanian expressed surprise that the USG
had not pushed for explicit labor and environment language in
the common set document. Nunes said that they figured the
G-14 proposal for language on the Technical Committee on
Institutional Issues (TCI) was designed to allow for
introduction of provisions within the TCI Chapter. Nunes
said there was recognition that the USG is under TPA mandate
to seek inclusion of these issue areas and suggested that it
may be possible to formulate text for the common set document
that would leave that door open for possible future
consideration of proposals on labor and environment
provisions, while not highlighting the opening. For
instance, he offered that one possibility may be to eliminate
both "exclusively" and "but not limited to" from the various
TCI text proposals.

Private Sector Reactions
--------------

11. (U) In recent weeks, both the Brazilian Business
Coalition (CEB),a broad based group formed to consult with
the GOB on trade matters, and agroindustry groups have
appealed to Itamaraty for flexibility so as to secure greater
market access concessions from the United States. Brazilian
agroindustry has been most vocal, admonishing Itamaraty for
its ideological stance on industrial policy, and pushing for
increased GOB concessions in services, investment and
government procurement.


12. (U) In a paper submitted to Itamaraty on February 27,
the CEB reportedly reiterated the private sector's objective
of obtaining concrete results in the negotiation, and its
understanding that to achieve this Brazil would have to
demonstrate greater flexibility. The CEB is said to have
made the following specific recommendations: market access -
Itamaraty should show flexibility regarding its initial
proposal for total tariff elimination by accepting that a
small number of products would be subject to tariff
reduction, rather than tariff elimination; services - the GOB
should present a single offer, rather than pursue market
access bilaterally (regional MFN upon entry into force) and
commit to GATS-plus in terms of market access and national
treatment; and on investment - recommends a market access
agreement restricted to investment rights and negotiated on
the basis of a single offer which also covers investors
without a physical presence.

Comment
--------------

13. (C) The constructive attitude espoused by Arslanian and
Nunes in this latest meeting is consistent with what we see
as a more positive GOB stance toward the FTAA post-Miami.
Despite negotiating positions designed to maximize the
outcome for Brazil/Mercosul, the GOB has publicly and
privately stressed its seriousness in working to gain
consensus on the common set, and on plurilateral procedures
so that negotiations can move forward. Foreign Minister
Amorim appears to be attaching considerable significance to
implementation of the compromise framework he "personally"
formulated with USTR Zoellick, so that long awaited market
access negotiations with the United States can move forward.


14. (C) Caution may be in order in, however, in evaluating
Nunes' suggestions and ideas, which do not always reflect
accepted thinking within the GOB, let alone Mercosul.
Likewise, it is not clear whether his enthusiasm for drafting
Co-Chair proposals is shared by the Brazilian Co-Chair,
Ambassador Adhemar Bahadian.


15. (C) Despite the heightened pressure being exerted by
parts of the Brazilian private sector following the February
Puebla TNC, neither Arslanian nor Nunes mentioned any
possibility of increasing Mercosul's level of ambition in
services, investment, government procurement, or IPR in
return for greater USG flexibility on market access. Public
statements by Antonio Simoes, Minister Amorim's economic
advisor, also point to Itamaraty rejection of arguments that
minimalist concessions in these areas are impacting the
market access concessions being offered by the U.S. and
others. Post does not expect these private sector appeals to
have much impact on Itamaraty positions in next week's
discussions in Buenos Aires or in the TNC meeting in Puebla.
VIRDEN