US embassy cable - 04BRASILIA701

UNCLAS SECTION 01 OF 02 BRASILIA 000701 
 
SIPDIS 
 
PASS TO USTR FOR CRONIN, JANICE FAIR 
NSC FOR SHANNON, DEMPSEY, CRUZ 
TREASURY FOR OASIA/SEGAL 
FED BOARD OF GOVERNORS FOR ROBATAILLE 
USDA FOR U/S PENN, FAS/FAA/TERPSTRA 
USDOC FOR 4322/ITA/IEP/WH/OLAC-SC 
SOUTHCOM FOR POLAD 
 
E.O. 12958: N/A 
TAGS: ETRD, ECON, EINV, PREL, PGOV, BR, Trade 
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