US embassy cable - 03BRASILIA1066

UNCLAS SECTION 01 OF 02 BRASILIA 001066 
 
SIPDIS 
 
SENSITIVE 
 
USTR FOR RSMITH, SCRONIN 
 
E.O. 12958: N/A 
TAGS: ETRD, BR, Fee Trade Agreement of America (FTAA) 
SUBJECT: BRAZILIAN FTAA COORDINATOR ON A SOCIAL AGENDA FOR 
THE NEGOTIATIONS 
 
 
 SENSITIVE BUT UNCLASSIFIED, PLEASE TREAT ACCORDINGLY 
 
1. (U) Brazilian press reported on March 28 that President 
Lula wants to include discussion of social issues in the FTAA 
negotiations and that the GOB plans to submit proposals for 
doing so at the Trade Negotiating Committee (TNC) meeting in 
Puebla, Mexico April 7-11.  In discussions with EconOff on 
March 31, Tovar da Silva Nunes, head of the FTAA Coordinating 
Office in the Ministry of Foreign Relations (Itamaraty), 
identified six social issues that the GOB will propose be 
addressed formally within the FTAA process: employment, 
environment, small and medium enterprises, poverty, family 
agriculture, and cultural values.  (Note: the inclusion of 
family agriculture is consistent with recent statements by 
the Brazilian Agriculture Minister that indicate the GOB may 
be softening its opposition in trade negotiations toward 
certain domestic support programs that are designed to aid 
family farms.)  The GOB also plans to propose that all FTAA 
market access offers be made available on the internet. 
 
2. (SBU) According to Tovar, Brazil will be vetting a 
proposal to include discussion of these social issues within 
the FTAA with its Mercosul partners in meetings April 3-4 in 
Asuncion.  He indicated that the GOB plans to put forward the 
concept in Puebla, with the expectation that consensus on 
establishing a mechanism may not be reached until the next 
TNC. 
 
3. (SBU) Tovar suggested that one way these issues could be 
inserted into the FTAA process would be to hold separate, 
hemispheric conferences for each theme.  The products of 
these discussions could then be provided to Ministers for 
their consideration, without obligation.  "Brazilian civil 
society" reportedly identified these areas as those for which 
a better understanding of the implications of the FTAA are 
needed said Tovar without further elaboration.  He claimed 
that the GOB does not have preconceived notions about what 
might emerge from such discussions.  He also did not indicate 
if the intention is that this activity would fall under the 
existing FTAA Committee of Government Representatives on 
Participation of Civil Society. 
 
4. (SBU) Tovar argued that discussions of these issues at a 
hemispheric level could yield a deeper, more valuable 
discourse, particularly since many issues transcend national 
boundaries.  A widespread negative perception of the FTAA 
still persists in Brazilian civil society, largely, Tovar 
argued, out of fear of the unknown.  He claims that what NGOs 
want is "access" to the process, to better understand it and 
its implications.  While not expecting that the most 
outspoken critics will ever offer explicit endorsements of 
the FTAA, he confided that Itamaraty's objective is to at 
least mute their criticism by incorporating them into the 
process. 
 
5. (SBU) COMMENT: Comments Tovar made suggest that the 
proposal also reflects the heavy burden that Itamaraty is 
being asked to take on regarding expanded domestic 
consultations.  President Lula has publicly committed to 
national discussion and debate, not only on trade policy, but 
across the policy board.  Especially on trade, however, where 
experience does not run deep in the PT government leadership, 
the President is determined to ensure that government actions 
are in tune with his social agenda, and to use expansive 
consultations to achieve that aim.  Itamaraty feels under 
pressure to increase its outreach to NGOs, labor unions, the 
Church and other actors in civil society, as well as 
Congress.  At the same time, it is having to expand internal 
government consultations.  For instance, consideration is 
being given to expanding the GOB trade decision-making body 
(CAMEX) to include two additional ministries - Environment 
and Labor.   (The six ministers that currently comprise CAMEX 
are Itamaraty; Development, Industry and Trade; Agriculture; 
Finance; Planning; and Casa Civil (Presidency)).  Itamaraty 
may be hoping that a hemispheric process would help lighten 
the load of domestic consultation.  However, Brazilian civil 
society may not be so easily co-opted.  NGO reps have 
recently been quoted as complaining not about access to trade 
negotiators, but that their ideas have not been incorporated 
into Brazilian negotiating positions.   END COMMENT. 
 
6. (SBU) On market access issues, Tovar took the opportunity 
to state that Itamaraty is still in the process of explaining 
Brazilian offers and their implications internally to leaders 
in the new government, many of whom are uncomfortable with 
what they clearly do not understand.  Itamaraty's tactic at 
this point is for Brazil to remain a participant within the 
process by submitting offers, but ones which will be very 
modest.  For instance, its services offer is expected to 
merely reflect existing law, as will probably the investment 
and government procurement offers, although new carve outs to 
support small and medium enterprises and family farms may be 
included in the government procurement offer. 
 
7. (SBU) The GOB hopes to convince its Mercosul partners this 
week to adopt the same minimalist approach.  If successful, 
it will announce in Puebla its readiness to put forward 
services, investment and government procurement offers. 
Note: Brazil was able to persuade Argentina to hold back its 
services offer at the last minute in mid-February, but not 
Paraguay and Uruguay; it is unclear whether or not they will 
all follow Brazil's lead this time. Within the GOB, there is 
not uniform endorsement of the minimalist approach. 
Reportedly, the Finance Ministry (recognizing the benefits of 
expanded trade for the economy, according to Tovar) and the 
Agriculture Ministry (which wants increased access for 
competitive products) are pushing for more ambitious offers 
with Itamaraty and the Ministry of Development taking a more 
cautious approach. 
 
8. (SBU) Meanwhile the Lula administration is reflecting on 
various scenarios concerning the FTAA, WTO and Mercosul-EU 
trade negotiations as it struggles to define a comprehensive 
trade strategy, a process they hope to complete within the 
next couple months.  Tovar noted what he called progress made 
recently in the more advanced Mercosul-EU trade negotiations 
and indicated that movement in these talks in some ways will 
make it easier for the GOB to move in the WTO and FTAA, if in 
no other way, because of substantial technical work already 
completed by the GOB.  Tovar voiced optimism that the GOB 
will be in a position to move more substantively on FTAA 
market access by the summer. 
 
9. (U) Tovar also noted that the GOB was having difficulty 
evaluating the U.S. goods offer due to technical problems. 
In particular, he mentioned that the U.S. notified base rates 
using HS 2002 nomenclature, but that the offer was provided 
in 1996 nomenclature.  According to Tovar, 924 products were 
notified for which they cannot find a corresponding tariff 
line in the offer, and there were 18 items where the converse 
is true.  He also complained that the trade value statistics 
provided for the U.S. offer were for 2001 instead of 2002. 
HRINAK