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 -------------
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