Brazil Warns on Trade Negotiations with US

The Brazilian government on Wednesday warned that negotiations towards a Free Trade Area for the Americas would be deadlocked unless the United States improved its recent offer.

The government said this week's US proposal on tariff reductions for the FTAA was not only modest but would be meaningless if it continued to insist that non-tariff barriers be discussed within the World Trade Organisation.

The US on Tuesday offered to eliminate import tariffs on about 65 per cent of consumer and industrial goods and 56 per cent of farm products when the FTAA begins and phase out remaining tariffs in 5, 10 or more years.

Brazil said immediate tariff cuts on textiles and steel had already been promised years ago but continued to face non-tariff barriers. "What good is it to have a zero-tariff on steel if we are then hit with 50 or 100 per cent anti-dumping levies," said Clodoaldo Hugueney, undersecretary for economic affairs in the foreign ministry.

The tariff proposal to be made this weekend by Mercosur, the four-nation South American trade block that includes Brazil, will be conditional on clearer anti-dumping rules, retaliatory rights, and the application of safeguards, Mr Hugueney said.

The US proposed to liberalise several "sensitive" farm products, Brazil's most competitive exports, in only a decade or longer, while subsidies to its own agriculture would continue, government officials complained.

"We cannot have FTAA focus on everything that interests the US, while Brazilian interests are dealt with in WTO negotiations with an uncertain outcome," said Celso Amorim, foreign minister.

Mr Hugueney suggested there was room to discuss subsidy issues within FTAA without waiting for results from the current [WTO] Doha round of trade talks. "Export subsidies could be reduced on FTAA farm products," he said.

Yet trade experts cautioned that the US wasn't likely to accept such talks because that could reduce its bargaining power in the WTO.

"The proposal that was billed as bold and comprehensive but when you look at the details it is quite limited," said Ruben Barbosa, Brazil's ambassador in Washington.

The US proposal, which offers different tariff concessions to trade blocks within the hemisphere, was discriminatory, Mr Barbosa said. "This is no longer a free trade area we are negotiating but a series of bi-lateral agreements between trade blocks."

Brazil says preferential tariff concessions ought to be granted to the hemisphere's smallest economies not trade groups.

Despite the apparent impasse, Brasília has not given up hope that subsequent more audacious proposals on both sides could break new ground. "These are initial proposals subject to improvement. Otherwise, the talks and the FTAA are over," Mr Hugueney said.