Far Beyond the FTAA: The Possibility of Enhanced Cooperation between Brazil and the United States
Kellie Meiman Hock is a former US diplomat who served in Porto Alegre, Sao Paulo, and Recife, as well as Director for Brazil and Mercosul as United States Trades Representative (USTR). She founded the Brazil/Southern Cone and Trade Practices at the global consulting firm McLarty Associates, where she now serves as Senior Counselor. This article was written by Meiman Hock especially for issue 117 of the WBO weekly newsletter, dated May 17, 2024. To subscribe to the newsletter, enter your email in the field below.
As a long-time Brazil hand, I wish I had a dollar for every time I heard a speech highlighting the similarities between the United States and Brazil: two continental countries, two of the largest democracies in the world with highly competitive agricultural sectors, and, more recently, two nations undergoing notable threats to their democratic institutions.
All of this is true. At the same time, to advance our bilateral relationship, we must be clear eyed about the philosophic differences in approach between our countries. I will focus just on trade and investment policy here.
Back in the early 1990s when I entered the Foreign Service, a hot topic was whether we would succeed in creating a free trade zone in North America. In January 1994 we did, and much of US economic and development policy toward the Americas was subsequently framed through the prism of how we could expand this concept throughout the hemisphere. The Free Trade Area of the Americas (FTAA) idea was launched at the December 1994 Summit of the Americas, but the FTAA faltered. Instead, the United States pursued as many free trade agreements (FTAs) in the region as possible, under the concept of “competitive liberalization” championed by US Trade Representative Bob Zoellick under President George W. Bush.
A key reason the FTAA faltered was Brazil’s lack of enthusiasm. Brazil believed that a focus on Mercosul and robust industrial policy with local content requirements, as well as on multilateral trade opening through the World Trade Organization (WTO), would better serve its interests. Brazil’s negotiators needed any trade deal to serve its world-class agricultural sector and understood that the United States would never abandon its subsidization of domestic production unless Europe did too. That would only happen through Geneva-based talks.
Further, the United States wanted “gold standard” FTAs, ones featuring not only tariffs and services, but enhanced intellectual property, investment, and other protections, plus labor and environmental standards. This broader set of FTA objectives was not motivating for Brazil, which believed it had already made sufficient trade concessions at the WTO and viewed labor and environmental policy as the sovereign domain of its government.
This walk down memory lane is not meant to open old wounds, rather to see what space might exist for discussions today. Once highly critical of local content requirements, President Biden has designed an industrial policy – including sourcing requirements benefiting US producers and our FTA partners – that could have been inspired more by Brasilia than Washington. In addition, the consensus in the United States on the wisdom of those “gold standard” FTAs has frayed. Investor-State Dispute Settlement provisions are under fire and were severely limited under the renegotiation of NAFTA conducted under President Trump. Meanwhile, Washington has become comfortable with more limited trade agreements, so-called “mini-deals,” concluding one with Brazil in 2020 that featured customs and regulatory commitments.
Ironically, this new reality in Washington, courtesy of weakened domestic agreement over the role of trade policy in US and global economic development, could potentially bring the United States and Brazil closer together. Smaller, targeted trade deals might sound more attractive to Brasilia, if couched in the right way. And while Brazil will fiercely guard its sovereignty in every instance, President Lula has sought to reassure stakeholders in Brazil and globally that Brazil is committed to strong labor and environmental standards. This will be on display as Brazil hosts the COP next year and is reflected by the bilateral Partnership on Workers’ Rights announced by Presidents Lula and Biden last September.
There are several areas where we can build on existing cooperation to take advantage of this moment, particularly as we celebrate the 200th year of our diplomatic relations. Exploring a Critical Minerals Agreement to allow Brazil to benefit from the new US focus on industrial policy is one; continued work to keep the WTO relevant is another. There also is much we could do together to confront the challenges and opportunities of technological change, including artificial intelligence.
Brazil’s leadership of the G-20 this year creates an interesting platform for collaboration, with Brazil navigating its dual role as a leader of the Global South and of the West in a unique fashion to promote our shared agendas of more equitable economic development, environmental protection, food security, and modernization of international institutions. The pragmatic approach Brazil has historically taken toward international engagements gives it a flexibility that eludes the United States, with its focus on iron-clad alliances.
While there is a great deal of opportunity, challenges remain. The United States is powerfully distracted by conflict in the Middle East, war in Europe, and national security threats posed by China. The amount of Chinese investment in Brazil and how the country navigates its role in the newly expanded (at China’s behest) BRICS, now featuring Iran, raises concerns in Washington. Navigating this dynamic at a time where US leaders on both sides of the aisle are obsessed with the China threat is no small feat. But as the world becomes ever more multipolar there is much on which to collaborate -- and perhaps Brazil with its long history of flexibility in its international engagements can help to show us the way.
