US embassy cable - 03BRASILIA439

UNCLAS SECTION 01 OF 02 BRASILIA 000439 
 
SIPDIS 
 
SENSITIVE 
 
DEPT FOR WHA/EPSC BBOWIE-WHITMAN 
DEPT PLEASE PASS TO USTR FOR RSMITH, SCRONIN 
USDA FOR JBPENN US/FFAS 
 
E.O. 12958: N/A 
TAGS: ETRD, BR, Fee Trade Agreement of America (FTAA) 
SUBJECT: BRAZIL SWAYS MERCOSUL ON FTAA OFFERS 
 
REF: BRASILIA 00356 
 
SENSITIVE BUT UNCLASSIFIED 
 
1. (U) Following through on its rhetoric to strengthen and 
unify Mercosul, Brazil's new government has acted forcefully 
and decisively to forge consensus with its Mercosul partners 
over FTAA initial offers.  Foreign Minister Amorim, first 
securing the Argentine pledge of solidarity in Buenos Aires 
on February 4 was able to bring Uruguay and Paraguay into the 
fold during a February 5 Ministerial meeting in Montevideo. 
A week earlier, there had been dissension in the Mercosul 
ranks at Brazil's insistence that investment and government 
procurement offers from the group be delayed beyond the 
February 15 deadline (reftel). 
 
Where the Offers Stand 
---------------------- 
 
-- Goods 
 
2. (SBU) As previously reported (reftel), Mercosul plans to 
submit by February 15 a consolidated offer as a group; the 
list will cover industrial and agricultural products. A 
chapeau for the offer will present some general conditions 
including reference to a single-undertaking, balance between 
commitments in market access with obligations in other areas, 
GATT, etc.  In a February 7 discussion with econoff, Tovar da 
Silva Nunes, head of Itamaraty's FTAA Coordinating Office 
(COALCA), provided the following rough breakdown of the 
Mercosul goods offer as a percentage of Mercosul-FTAA trade: 
 
Category A (immediate duty-free): 18 percent 
Category B (tariff elimination in 5 years): 3 percent 
Category C (tariff elimination 5-10 years): 18 percent 
Category D (tariff elimination over 10 years): 60 percent. 
 
Product coverage of the offer is comprehensive (total above 
is less than 100 percent due to rounding error).  NOTE: local 
press reported incorrectly that the above percentages refer 
to number of products.  According to Da Silva Nunes, the 
number of tariff lines relating to categories A, B, and C 
combined is roughly 54 percent.  END NOTE. 
 
3. (U) Da Silva Nunes claimed that Brazil's offer had been 
more ambitious before the Mercosul consolidation process. 
Given the disparity in the productive structure of the 
Mercosul partners, he explained that the general rule used to 
produce a joint list was to adopt the most cautious position 
presented by one of the Mercosul partners.  So, if three 
countries had placed a product in the A category, but the 
fourth had it in Category C, it was placed in Category C on 
the combined list.  Apparently this process had to be applied 
to over 7,000 tariff lines, he noted, not always with a 
result that made sense for Brazilian business. 
 
4. (U) Brazil's decision-making body for foreign trade 
issues, CAMEX, met yesterday to approve the offer.  According 
to press reports, the Ministries of Fazenda and Agriculture 
had wanted a more ambitious offer, but Itamaraty and the 
Ministry of Development, Industry and Trade (MDIC) prevailed 
with the Mercosul offer as agreed to in Montevideo. 
 
-- Services 
 
5. (SBU) According to Da Silva Nunes, Mercosul continues to 
plan to present services offers by February 15, but that 
decision is still not final since ministerial consultations 
within the GOB are on-going.  In addition, the GOB is 
evaluating whether recent changes in its civil code will 
require slight revisions to its offer (a new civil code which 
passed at the beginning of the year includes several 
provisions relating to the establishment of businesses).  The 
services submission will be under a Mercosul chapeau, with 
separate, positive lists attached (reftel).  As Da Silva 
Nunes explained, Mercosul countries have to supply separate 
offers because GATS plus for one would not necessarily be 
GATS plus for another. (Note: Brazil had indicated that its 
offer will only apply to commitments at the central or 
federal level.  Da Silva Nunes said that Paraguay has asked 
Brazil to consider whether, as negotiations proceed, it would 
be willing to make commitments at the sub-federal level.) 
 
-- Investment and Government Procurement 
 
6. (SBU) While no time-line for submission of investment and 
government procurement offers has been decided, Da Silva 
Nunes suggested that Mercosul would definitely want to submit 
these offers in advance of the Trade Negotiating Committee 
(TNC) meeting April 9-11.   He claimed Mercosul will want to 
be in a strong position in the TNC meeting to argue for the 
establishment of certain modalities and would not want its 
position undermined by not having submitted offers in all of 
the market access areas. 
 
7. (U) Da Silva Nunes stressed that these are initial offers 
and that once offers are on the table, Mercosul will evaluate 
whether or not it has to quickly improve its offers to be 
compatible with what others have presented. 
 
Public Access to Information on Offers 
 
8. (SBU) Econoff inquired as to GOB plans regarding public 
dissemination of information contained in FTAA offers.  Da 
Silva Nunes said no decision has been made yet.  He said that 
the GOB will probably release all the details of its own 
offers.  He noted that it would be helpful to know what other 
FTAA partners are planning or would prefer in terms of 
treatment of their offers.  He believed the GOB would act 
according to the wishes of each of its FTAA partners. 
HRINAK