Analysis: U.S., Brazil must team on trade

By Bradley Brooks UPI Business Correspondent From the Business & Economics Desk Published 1/3/2003 2:56 PM

RIO DE JANEIRO, Brazil, Jan. 3 (UPI) -- The U.S. trade representative told Brazil's new government this week that the two countries should work closely together to battle the European Union and Japan on agricultural subsidies.

At first blush, this may seem a preposterous suggestion: Brazil is one of the harshest critics of U.S. import barriers and especially the $190 billion farm subsidy bill President Bush signed in May.

But on a closer look, it is clear the United States has much to gain -- and Brazil can only reap benefits -- should the two powerhouses of the Americas work together to battle protectionism worldwide.

Robert Zoellick, the U.S. trade representative, was in Brazil for President Luiz Inacio Lula da Silva's inauguration Wednesday. He told the country's new finance and foreign relations ministers that the Bush administration wants Lula, as he is commonly known, on board to fight subsidies, said Donna Hrinak, the U.S. ambassador to Brazil.

Lula and his team have repeatedly criticized the United States on its farm subsidies. But Hrinak pointed out -- as U.S. officials often have -- that until EU and Japanese subsidies are addressed, there will be no progress on the issue.

Thus, U.S. officials reason with Brazilians and other emerging economies, it is better to work around U.S. protectionism in the short term to achieve just trade policies in the long term.

"We understand the Brazilian position. But the U.S. cannot review its agricultural programs -- we cannot reduce the subsidies -- if Europe and Japan won't do the same thing," Hrinak said.

She also underscored the fact that the farm subsidy programs of the EU and Japan are far greater than those of the United States.

Zoellick told the officials the United States and Brazil should work together in the World Trade Organization to push through cuts in agricultural protectionism worldwide.

Brazil's outgoing President Fernando Henrique Cardoso was never shy when it came to battling the United States and the EU on trade barriers, and the country's aggressiveness -- if in rhetoric only -- will increase with Lula.

One of the hallmarks of Lula's campaign for the presidency -- and a theme highlighted in his inaugural address -- was the call to create a more just trade climate worldwide, to be rid of "scandalous" trade barriers.

Brazil, like many emerging economies, depends upon the export of raw goods for its economy.

Should hurdles to the richest markets in the world -- the United States and the EU -- seem passable in the future, Brazil could well be enticed to ease the Bush team's work on selling the Free Trade Area of the Americas, and the U.S. proposal before the WTO to eliminate tariffs on manufactured goods by 2015.

C. Fred Bergsten, director of the Institute for International Economics, told United Press International shortly after the U.S. proposal on eliminating manufacturing tariffs in November that trade liberalization has to be pushed through as a complete package.

"The agricultural and non-agricultural sectors can only be liberalized together," Bergsten said.

The Bush Administration may be realizing this as it works against stiff resistance to both the FTAA and the manufacturing tariffs proposal.

The EU stamped the tariff proposal as unrealistic, given that the Third World will never agree to knock down protection for its nascent manufacturing sector if the First World won't agree to lower agricultural barriers.

Should the United States and Brazil lead a global campaign against agriculture protection, it could well bring poorer countries on board for the elimination of manufacturing tariffs.

A potent partnership between Brazil and the United States could also work wonders for the FTAA talks, of which the two countries are now co-chairs.

If the United States can convince Brazil that it wants to see agricultural barriers lowered around the globe, Brazil may well bring the rest of Latin American on board and deliver the FTAA by its proposed deadline of 2005.

The Bush administration is also aware that a partnership between the United States and Brazil on reducing trade protectionism is the best route to keeping Brazil in a political sphere it feels comfortable working with.

Much has been made of Lula's leftist roots. His first meeting upon taking office this week were with Venezuela's populist President Hugo Chavez, and Cuban leader Fidel Castro.

While that may raise red flags in Washington's more conservative circles, it shouldn't be overblown.

Lula has made moderate choices for his top economic posts, his social proposals on reducing poverty -- while unrealistic -- are certainly nothing in which to find fear, and he has clearly stated his government will remain fiscally austere, though that remains to be seen.

Lula's friendliness with Chavez and Castro shouldn't translate into his acceptance of their political actions, which he has repeatedly rejected in the Brazilian media.

Lula is at the head of one of the world's largest leftist parties -- the Workers' Party -- and arguably Latin America's most organized political outfits. Some 75 percent of Brazilians think his government will be "excellent."

Additionally, there is a solid balance of power in Brazil, where the outgoing president's party and others will act as a strong check against Lula, as is the case in any healthy democracy.

While Zoellick's appearance as the U.S. representative to Lula's inauguration was seen as a political slight, his message of future teamwork on farm subsidies worked to soothe ruffled feathers.

Brazil's new Agriculture Minister Roberto Rodrigues told reporters that his visit with Zoellick, while mostly a friendly courtesy visit, was "more concrete" than he imagined.

Zoellick told Rodrigues that Brazil has a great importance for the United States, especially when it comes to international trade negotiations.

But Rodrigues replied that until the United States opens its market to Brazilian agricultural goods, all other trade negotiations -- the FTAA, the manufacturing tariff proposal -- would be delayed.