NATIONAL ASSOCIATION OF MANUFACTURERS DELEGATION VISITS

UNCLAS SECTION 01 OF 04 BRASILIA 000755 SIPDIS SENSITIVE SIPDIS DEPT FOR EEB/TPP/MTA/MST FOR AARON SCHEIBE DEPT PASS USTR FOR SUE CRONIN USDOC FOR 4332/ITA/MAC/WH/OLAC/ ADRISCOLL/MCAMPOS USDOC FOR 3134/ITA/USCS/OIO/WH/RD/DRAMBO USDA FOR FAS E.O. 12958: N/A TAGS: ECON ETRD WTO BR SUBJECT: NATIONAL ASSOCIATION OF MANUFACTURERS DELEGATION VISITS BRAZIL TO DISCUSS WTO SECTORAL TALKS REF: Sao Paulo 242 ¶1. (SBU) Summary: From April 11-13, FIESP (the Sao Paulo State Industrial Federation) hosted visits to Sao Paulo and Brasilia by a National Association of Manufacturers (NAM) delegation led by Governor John Engler, the organization's president. The meetings, which came on the heels of USTR Susan Schwab's March 9-10 meetings in Sao Paulo with leading Brazilian industrialists and agriculture sector representatives (reftel),were part of ongoing NAM/FIESP consultations focused on non-agricultural market access (NAMA) sectoral discussions within the context of the Doha Round. In Sao Paulo, the discourse between FIESP and NAM centered on sectoral issues and the current Doha trade talks. The wood, pulp and paper, plastics, medical equipment, construction and agricultural machinery sectoral meetings appeared to progress smoothly, with the wood sector requesting a USG proposal for consideration. In contrast, representatives from the Brazilian Association of Electrical and Electronic Industries (ABINEE),expressed public concern that their industry would not benefit from the Doha Round emphasis on agriculture. The presidents of U.S. Plastics and the Brazilian Plastics Association (ABIPLAS) plan to continue sectoral discussions in a May meeting. ¶2. (U) In Brasilia, NAM and FIESP leaders held separate meetings with Brazilian Vice President Jose Alencar, newly appointed Minister of Development, Industry and Trade (MDIC) Miguel Jorge, President of the Senate Renan Calheiros, and President of the Chamber of Deputies, Arlindo Chinaglia - all of whom expressed willingness to work for a successful Doha outcome. Both MDIC leaders and FIESP President Paulo Skaf emphasized the importance of greater Brazilian agricultural access to the U.S. market, with Skaf stating that his country would accept no less than a Swiss coefficient of thirty. The round of meetings ended with plans by FIESP and NAM to meet in Washington, DC in late May for additional sectoral meetings and a joint NAM-FIESP statement announcing the creation of a formal bilateral Brazil-U.S. Industrial Dialogue. End Summary. -------------- Brasilia Meetings with Government Officials -------------- --Discussion with Vice President Alencar ¶3. (U) Governor Engler told Vice President Alencar that Brazil and the U.S. were important to the success of the Doha Round and emphasized that Brazilian G-20 leadership is critical to overcoming the pessimism expressed by some about the negotiations. NAM delegation members added that success will depend on candid discourse between the U.S. and Brazil. ¶4. (U) Alluding to perceived Brazilian intransigence on trade issues, Skaf noted there was once a belief that Brazil wasn't committed to the fight against intellectual property rights (IPR) piracy, but said "we changed that." Skaf called for Alencar's support for a successful conclusion to the Doha Round, while indicating that the U.S. and E.U. must further reduce agricultural subsidies for the trade talks to accomplish this. ¶5. (U) Alencar used the example of his support for the Free Trade Area of the Americas (FTAA) to underscore his openness to multilateral trade talks, but cautioned that any trade agreement must provide opportunities for all involved. He added that countries must prepare themselves to be competitive in the face of continuing worldwide globalization. --Meeting at the Ministry Development, Industry and Trade (MDIC) ¶6. (U) During their meeting at MDIC, Engler recognized the key role that agricultural issues will play in the Doha Round but noted that industrial tariffs and barriers must also be open for negotiation. The NAM delegation called on Minister Jorge and the MDIC to move forward on sectoral discussions, negotiations on a bi-lateral tax treaty, and reform of the Brazilian tax and customs system. BRASILIA 00000755 002 OF 004 ¶7. (SBU) Minister Jorge said that the U.S. and Brazil have had a strong relationship in the past and the GOB is willing to work to find ways to forge stronger ties. MDIC leaders noted the importance of trade with the U.S. and were generally receptive to the NAM message. Nevertheless, they pointed to increased access to the U. ¶S. agricultural market as their key goal. For the GOB to provide the U.S. with greater NAMA access, they declared, the GOB will need to receive concessions from the U.S. on agriculture. For his part, Skaf stated that with respect to tariff-cutting formulae, the minimum Brazil would accept would be a Swiss coefficient of thirty; fifteen was a complete non-starter, he added. (Comment: NAM officials told EconOff that they continue to support a coefficient of fifteen for developing countries such as Brazil. End Comment.) --Talks with Legislative Leaders ¶8. (U) In meetings with Senate President Renan Calheiros and president of the Chamber of Deputies Arlindo Chinaglia, Gov. Engler spoke of the need to increase contacts and improve the U.S. - Brazil trade relationship. He noted that NAM wanted a stronger trade relationship with Brazil and pointed to the influence the GOB has, as a leader of the G-20, to help ensure a successful conclusion of the Doha Round. ¶9. (U) In both meetings, Skaf asked the legislative leaders to support forward movement on tax reform and other changes to improve the business environment in Brazil. He noted that much could be done to improve Brazil's attractiveness for international trade even outside of an agreement in the Doha Round. ¶10. (U) In response to Skaf's plea for help reducing the sales tax (ICMS),including retroactive relief for stockpiled inventories, Calheiros noted that sales tax issues are an issue for individual states and not principally a federal matter. Both Calheiros and Chinaglia agreed that Brazil and the U.S. should have a closer relationship in a number of areas and said it is important to work to that end. -------------- Media Coverage -------------- ¶11. (U) Press coverage of the meetings was mixed, with headlines stating that the Brazilian sectors were reacting negatively to the NAM delegation contrasted by more moderate text. The exception was comments made by representatives of the Brazilian Association of Electrical and Electronic Industries (ABINEE),who stated publicly that their industry does not want to be the sector to "pay the price" for agricultural gains. -------------- Results -------------- ¶12. (SBU) The visit generated the following positive results: - The wood, pulp and paper, plastics, medical equipment, construction and agricultural machinery sectoral meetings appeared to progress smoothly, with the wood sector requesting a USG proposal for consideration. - FIESP and NAM agreed to meet in Washington, DC for additional sectoral meetings in May or June. The Brazilian industries will identify the sectoral areas to be discussed at this meeting, which could possibly be auto parts, granite, textiles, and ores and minerals. - The presidents of U.S. Plastics and the Brazilian Plastics Association (ABIPLAS) plan to continue sectoral discussions in a May meeting. - FIESP agreed to join NAM in lobbying counterpart organizations in other countries to address NAMA issues. BRASILIA 00000755 003 OF 004 ¶13. (SBU) A NAM official told Sao Paulo EconOff that the three days of discussions were the "beginning of a process" that allowed both sides the opportunity to talk, continue with the recent momentum in the negotiation process, and begin to search for common areas of interest in the sectorals. He also observed that a good personal relationship was developing between Paulo Skaf and John Engler, thereby relieving some of the possible tension in future sectoral discussions. ¶14. (SBU) Trade relations with China figured prominently throughout the meetings, with GOB and FIESP officials telling NAM representatives that any further lowering of Brazilian tariffs would put Brazilian industry at a severe competitive disadvantage with Chinese imports. ¶15. (U) At the meeting's conclusion on April 13, NAM and FIESP agreed - after intensive discussion on some of the wording - to release the following joint statement announcing the creation of a formal bilateral Brazil-U.S. Industrial Dialogue intended to work with the USG and the GOB to obtain the balanced and ambitious DDA agreement sought by both FIESP and the NAM: Begin text of joint statement: JOINT NAM-FIESP STATEMENT Sao Paulo, Brazil April 13, 2007 The Federation of Industries of the State of Sco Paulo (FIESP) and the National Association of Manufacturers (NAM) are united in the objective of liberalizing world trade and building a stronger trade environment through the successful negotiation of the World Trade Organization (WTO) Doha Development Agenda (DDA). We believe the attainment of this objective will benefit both our nations, as well as the world as a whole. To further this objective, the two organizations announced today the formation of the bilateral Brazil-U.S. Industrial Dialogue, a joint initiative with a special focus on finding solutions for pending issues in the multilateral talks. This initiative is a direct result of the deepening of the relationship of the two organizations, building on their initial Memorandum of Understanding (MOU) of March ¶2005. The objective of the Industrial Dialogue is to encourage and support the Brazilian and American governments in increased efforts to obtain the balanced and ambitious DDA agreement sought by both FIESP and the NAM, and to do so within a short period of time. The Industrial Dialogue will also explore advising on complementary actions in terms of investment opportunities, trade adjustment measures, domestic reforms - with an emphasis on taxation, discussion of common interests with regard to the global challenges presented by China, combating intellectual property piracy and counterfeiting, and other matters of mutual interest. In our initial discussion, both associations explored the role that sectoral negotiations could play in the Non Agricultural Market Access (NAMA) negotiations. Both agreed to continue these discussions with a desire to seek as much commonality as possible. Both FIESP and the NAM acknowledge that the ambitious DDA outcome they seek also depends on further movement from other key players in the negotiations. Therefore the two organizations will work to engage private sector representatives throughout the world to encourage them to persuade their governments to improve their offers in the DDA, particularly focusing on industry representatives from Argentina, Canada, China, the European Union, India, Japan and South Africa. FIESP and the NAM believe that this is an important moment to break the DDA stalemate of the last several months. To achieve this end, both business organizations will intensify their efforts to work with their governments and to engage in close contact with each other to advance the resolution of the issues that are pending in BRASILIA 00000755 004 OF 004 the DDA. Paulo Antonio Skaf, President Federation of Industries of the State of Sao Paulo (FIESP) John Engler, President and CEO National Association of Manufacturers End text of joint statement. ¶16. (U) Consulate Sao Paulo contributed to this cable. Sobel