Latest GoB Testimony on FTAA to Brazilian Congress

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SUBJECT: Latest GoB Testimony on FTAA to Brazilian Congress



1. SUMMARY. On March 23, EconFSN attended a presentation
to Brazil's Congress by Ambassador Macedo Soares, the MFA's
Undersecretary for South American Affairs and top FTAA
negotiator, on the current status of FTAA negotiations.
Macedo Soares was speaking at the opening of the
Parliamentary Committee of the Americas meeting, held at the
Brazilian Chamber of Deputies and chaired by Deputy Maria
Maninha (PT/DF). Amb. Soares admitted the slow speed of
current negotiations, but still voiced confidence that a
Free Trade Area of the Americas will be agreed by January 1,
2005 and, even if it starts up at a low `level of ambition',
will thereafter develop into a high-ambition project. As
best we can tell, Macedo Soares' notion of this initial FTAA
is limited in nature to market-access and tariff-reduction
aspects. END SUMMARY.


2. Macedo Soares started his presentation by mentioning
that Brazil is the only country in the hemisphere with wide
press coverage on the FTAA issue. He then drew attention to
the contrast between the fast-approaching FTAA deadline and
the lack of progress in negotiations. He mentioned that the
deadline of 2005 agreed at the 1994 Miami Summit had been
reaffirmed during the Buenos Aires April 2001 Ministerial
and at the Third Summit of the Americas at Quebec in
November 2001 (NOTE: there was no reference to the most
recent reaffirmations of the 2005 deadline such as at the
June 2003 presidential summit. END NOTE). He explained
that the pressure on the negotiators increases as time slips
by, especially on those from "weaker" countries.


3. Referring to what he termed the virtual recent
immobilization of FTAA negotiations, Macedo Soares
highlighted the following issues:

-- market access: The goal of Mercosul is to increase both
agriculture and industrial exports to the U.S. and Canada,
but it faces two major problems: agricultural subsidies and
anti-dumping measures on manufactured products, such as
steel. Even if major tariff reductions occur, these two
factors are still strong barriers to market access. Amb.
Soares reiterated that the U.S. has announced that these
issues will not be treated at the FTAA level, as long as
another "strong trade power", the E.U., does not lift its
own such subsidies and barriers.

-- Rules for Services/IPR/Government Procurement/Investment:
Macedo Soares asserted to the Chamber that market access,
with its tariff-reduction lists, should not be traded-for by
means of concessions over rules on the above issues. The
GOB already has its established position for each item. In
general, Brazil will not go beyond its commitments made at
the Uruguay Round, i.e., GATS for services, and TRIPS for
IPR.

-- Regarding investments, said Macedo Soares, Brazil is
neither a member-party to plurilateral agreements, nor has
it approved any Bilateral Investment Treaties (BITs). This,
he commented, has not stopped some foreign companies from
having been in the country for over a century. Brazil is
not in favor of any dispute-settlement arrangement regarding
investments.

-- On government procurement, in Macedo Soares's words, as
there are no international rules on the issue, Brazil
prefers to stick to its domestic legislation, keeping in
mind that this is one of the few available instruments of
industrial policy. Macedo Soares commented that the U.S.
also has restrictive GP policies.


4. Amb. Soares also made the following general observations
on the FTAA negotiation process:

-- the Mercosul countries will "unlock" negotiation groups
so as to find a formula for the "possible FTAA", as defined
by MFA Celso Amorim, or the "FTAA which neither impedes nor
imposes", defined in the Miami Nov 2003 Ministerial.

-- the idea is to find a "common body" of market access for
all 34 countries, leaving greater ambitions for plurilateral
agreements. This would guarantee the successful conclusion
of the negotiations.

-- the current challenge is the definition of what should be
negotiated in the common group both in order to reach a
substantive result and also as preparation for the
plurilaterals.

-- The argument for "emptying" the content of the common
body while intensifying the content of future plurilaterals
is not in the interest of Brazilian businesses.

-- A Brazilian attempt to exchange concessions in
Services/Investments for benefits in agriculture might well
not work;, thus, that is not a GOB negotiating stance.

-- A common market in the Americas, including free transit
of people, is desirable, but should be a long term goal,
because targeting all issues in the short run would be
dangerous, if not an illusion.


5. Further excerpts from Macedo Soares comments during the
prolonged question-and-answer session:

-- The Mercosul expectation is that in Puebla April 22-23, a
set of parameters will be defined for the conclusion of FTAA
negotiations by the end of 2004. A Secretariat and a
program of hemispheric cooperation should be developed to
accompany FTAA implementation.

-- Amb. Soares said that Cancun failed to make progress on
the crucial agriculture question because its agenda was
overloaded, but now prospects are much brighter, with
promising proposals having been put forward by both the U.S.
and E.U. trade authorities.

-- it is not in Brazil's interest to concede to the U.S. the
same benefits which would be conceded to neighbors.

-- environment and labor issues may be considered, as long
as they do not represent an obstacle to free trade and a
means of sanctions based on a non-Brazilian judgment in the
dispute-settlement mechanism.

HRINAK