The revelation that the U.S. National Security Agency has been reading the text messages and e-mails of Brazilian President Dilma Rousseff and other senior officials and gathering information on the national oil company Petrobras led to a scramble for new Brazilian Internet protocols, a rewiring of the greater part of the continent, and, of most immediate consequence, a postponement of President Rousseff’s October State Visit to the United States.
Even a last minute U.S. visit by the Foreign Minister could not circumvent the embarrassing postponement for the Americans.
The debacle has led many observers in both countries and across the world to ask fundamental questions about U.S. intentions with respect to Brazil and its role in the world. Michael Shifter, President of the Inter-American Dialogue concluded,
“The revelations suggest that the U.S. went way too far, beyond any reasonable justification of containing security threats… Such an overreach is disrespectful and has touched a real nerve in Brazil, a country that prizes its sovereignty and is understandably sensitive about such abuses.”
In large part the U.S.-Brazil relationship is decentralized across a number of bilateral dialogues, ranging from the Strategic Energy Dialogue to the Joint Initiative on Urban Sustainability among dozens of other consultative mechanisms. How has U.S. spying on the Brazilian government damaged these dialogues and breached whatever bilateral trust existed before the debacle?
Does Washington have the desire to conduct an honest, mutually respectful relationship with its largest South American ally and trading partner or – reckoning back to a Cold War mentality – has it been hoping only to manage this global swing-state, to balance Brazil away from Russia or China, and perhaps – as many in Brazil suggest – prevent her rise?
Too Much Dialogue, Too Little Negotiating?
Representative David Nunes, Chairman of the powerful House Ways and Means Committee, noted in his opening remarks in a June 12 hearing on the US-Brazil trade and investment relationship, that “currently there are around thirty U.S.-Brazil bilateral dialogues. About half focus on trade and economics, with the White House, USTR, Commerce, State, Treasury, Energy, and USDA all leading different dialogues with numerous Brazilian agencies.”
Recent remarks from U.S. government officials and business leaders center on the key issues of: energy, investment, trade, and defense and democracy.
Energy is the foundation for a large part of the US-Brazil relationship. Biofuels and deep-water drilling make up the bulk of the conversation. Biofuels have been an official area of cooperation since 2008, when the two countries signed a Memorandum of Understanding, but current discussions center more on Embraer and Boeing cooperating on the research and development of biofuels for jet engines. U.S. officials have repeatedly cited this example as a strong area of cooperation on biofuels.
In May 2013 Vice President Biden remarked:
“We’re making things together. We both know there’s a future in biofuels and aviation. Embraer and Boeing are jointly researching and testing the development of biofuels and the capability to use it as jet fuel. If they’re successful, the market is limitless.”
On September 10, Deputy U.S. Trade Representative Miriam Sapiro noted that, “the United States and Brazil are already innovating together. One such example can be found in biofuels and aviation. Brazilian and U.S. aircraft manufacturers Embraer and Boeing are doing research and experimenting with the development of biofuels as jet fuel. If their experiments are successful, then together we will have created a brand new growth opportunity for both companies and countries.”
When Acting Commerce Secretary Rebecca Blank visited Brazil with a trade delegation of U.S. business representatives, they visited Embraer.
The other area of energy where the U.S. has made efforts to cooperate is in deep-water oil production. U.S. oil companies have their eyes set on the investment possibilities in the large pre-salt oil fields, but a quartet of new laws to govern the promising fields diminish opportunities for foreign participation while boost the share of work ceded to domestic content suppliers and Petrobras, the state controlled, national oil company. In his May visit, Vice President Biden stressed U.S. experience in the industry and a hope for cooperation:
“But I would argue that we have as much expertise in deep-water extraction and unconventional fuels and petrochemicals as any nation in the world. And we stand ready to be your partner.”
Rob Mosbacher Jr., chairman of Mosbacher Energy Company, chairman of the Council of Americas Energy Group and former head of the Overseas Private Investment Corporation echoed the vice president’s confidence in the expertise of America’s oil companies at the September 4 meeting of the Council of the Americas:
“We are compelled to share best practices throughout the Americas if not the world on drilling and completion techniques, on issues of water utilization, and field emissions.”
Mack McLarty, former Clinton chief of staff and chairman of McLarty Associates, noted in testimony to the House Ways and Means Committee that:
“The enthusiasm surrounding Brazil’s discovery of enormous pre-salt oil deposits off its coast has been tempered by the acknowledgement that deep-water drilling remains a difficult and risky endeavor. The United States’ significant technological and operational safety expertise could be coupled with Brazilian know-how to produce meaningful results.
“Chevron and Exxon Mobil participated in the 11th oil and gas bidding round conducted by the Brazilian authorities in May; but more can be done to further our technical and commercial cooperation in deep-water exploration and production.”
McLarty also explained that room for cooperation in shale gas extraction and production had increased and commended the House Ways and Means Committee’s “leadership in lifting the ethanol tariff,” so that “our two countries more aggressively pursue business opportunities in ethanol production.”
The drive to expand and facilitate investment opportunities runs through much of the U.S. government’s engagement with Brazil. The 2014 World Cup and 2016 Summer Olympic Games are two significant opportunities that have framed U.S. government and companies’ most recent efforts to influence Brazilian public policy.
Tom Shannon, former U.S. Deputy Secretary of State and Ambassador to Brazil, along with Reta Jo Lewis, Special Representative for Global Intergovernmental Affairs at the Department of State, discussed the evolving bilateral relationship since the two countries signed the 2011 Memorandum of Understanding designed to forge greater cooperation in support of these global sporting events. Both highlighted the growing list of opportunities for U.S. headquartered firms at a Center for Strategic and International Studies event in February 2013.
There are plenty of opportunities for investment in major infrastructure projects, such as stadiums, airports, and roadways, but too few U.S. policymakers have worked to expand these opportunities within a broader, strategic approach to Brazilian development.
Of course, this U.S. posture is most clearly demonstrated by the U.S. unwillingness to comply with the World Trade Organization ruling against U.S. cotton production and agricultural commodity export subsidies.
Roberto Marques, representative of the Brazil-U.S. Business Council (affiliated with the U.S. Chamber of Commerce) and chairman of Johnson & Johnson, lamented to the House and Ways Committee hearing on the U.S.-Brazil trade relationship that:
“U.S. and Brazilian firms have barely tapped the possibilities of this relationship. Brazil’s market is far more open to imports than it was 15 years ago, but its tariffs and other barriers are on average significantly higher than those of most other middle-income economies.”
But Marques reported that the Brazilian private sector was emerging as a voice for greater free trade and that the Brazilian National Confederation of Industry is,
“dissatisfied with the way Mercosul has held Brazil back from undertaking external trade negotiations. Brazil’s Federation of Industries of the State of São Paulo has echoed this dissatisfaction with Mercosul, suggested that Brazil’s internal market may be insufficient to guarantee its future, and has indicated that Brazil should explore the possibility of negotiating market-opening trade agreements bilaterally.”
Several months later Deputy United States Trade Representative (USTR), Ambassador Miriam Sapiro, proposed a Bilateral Investment Treaty to the Brazil-U.S. Business Council.
Trying a multi-avenue strategy to encourage Brazil to change the way it handles foreign business transactions, the United States also hopes to draw Brazil into negotiations toward developing the Trans-Pacific Partnership and the Trans-Atlantic Trade and Investment Partnership, regional trade agreements that would further streamline the flow of goods and services between the countries.
A larger issue shaping the bilateral trade agenda is the cotton dispute. For over a decade Brazil and the United States have sparred over the latter’s agricultural support programs, largely within the institutional arena of the World Trade Organization.
This commercial conflict came to a head in 2009 when the U.S. government exhausted every possible appeal to the WTO’s decision that subsidies for cotton production in the U.S. were illegal and that the GSM-102 agricultural commodity export financing program was also illegal under international trade law.
The WTO authorized Brazil to impose $829.3 million in retaliatory cross measures, including intellectual property, making for one of the largest cases in WTO history.
In March of 2010 the Brazilian government published a list of U.S. goods whose import tariffs would be greatly increased under the WTO’s retaliation authorization. Also, Brazil announced its intention to carry out so called “cross-retaliation” on a number of intellectual properties, as authorized by the WTO. Quickly thereafter, the U.S. Chamber of Commerce, its Brazil-U.S. Business Council, and representatives of many U.S. headquartered industries targeted for retaliation by the Brazilian government advocated a solution or suspension of this historic commercial conflict.
A month later, the Brazilian and U.S. governments agreed to suspend this conflict temporarily under a Memorandum of Understanding that among several points of agreement provides for an annual payment of US$ 147.3 million to the Brazilian Cotton Institute (known as IBA). The Brazilian government agreed to suspend trade retaliation in exchange for this financial support of Brazil’s cotton industry and a good faith effort to reform U.S. subsidies for domestic cotton producers.
Years after the WTO decision and bilateral accord, the Obama administration and Congress have failed to pass a new Farm Bill that brings U.S. agricultural support programs into compliance with international law, nor has the USTR attempted to negotiate a definite settlement to this case with its Brazilian counterparts.
This state of bilateral affairs has left the Brazilian foreign ministry with few options short of retaliation. Indeed, it appears that the U.S. government will now violate the bilateral agreement that suspends trade retaliation by suspending payments to the Brazilian Cotton Institute in the midst of the budget battle in the U.S. Congress.
Defense and Democracy
In recent years, the military establishments of both nations have engaged in expanding consultation and cooperation, but this may be in jeopardy given the Brazilian government’s public protests against U.S. spying. In April of 2012, then Secretary of Defense Leon Panetta visited Brazil to reinforce the trend toward increasing security cooperation and advocate for the sale of Boeing F/A-18 Super Hornet jets to Brazil.
He spoke at Brazil’s Superior War College and noted Boeing’s efforts to make the sale had the full support of the U.S. Congress and “contains an unprecedented advanced technology sharing that is reserved for only our closest allies and partners.” He also reiterated U.S. intentions to work with Brazil on cybersecurity and humanitarian assistance related issues.
Woven through the rhetoric of U.S. government officials and Washington insiders is the notion of shared values in democracy and liberty as shared values that bind bilateral relations. During the February CSIS event, Ambassador Shannon said that it was in the national interest to help Brazil succeed in hosting the World Cup and Olympics “to show that an emerging democratic power could do as well as an autocratic power.”
In a similar vein, McLarty testified at the recent House Ways and Means U.S.-Brazil trade hearing and pointed out a number of commendable changes in Brazil’s foreign policy:
“In a shift of from even a decade ago, the Brazilian government is more actively engaging in commercial diplomacy and pressing for the rule of law in countries like Ecuador and Bolivia. This trend is almost certainly correlated with the increasing presence of Brazilian multinational companies invested in the region.”
Vice President Biden accentuated the importance of shared values in the bilateral relationship.
“That’s why we look to you to recognize the difference between undue interference in other nations’ affairs and deepening democracy and human rights when they’re under attack… On all these great issues between us – from trade and investment to energy to human rights – we’ll have our disagreements. All countries do no matter how close they are. But I want you to know, whether we disagree, we start from a position of respect.
“Building Trust and Partnership Given the legacy of state surveillance in Brazil — by a U.S.-supported military regime — did U.S. officials expect Brazilians to take pride in the NSA spying as a sign of just how important Washington regards Brazil’s place in the global system?” – Julia Sweig, “Post Mortem Questions”
Brazilian President Dilma Rousseff’s decision to delay her State Visit to the White House is the immediate consequence of the rapid deterioration of bilateral relations fueled by the spying scandal and Washington’s inability to adjust to Brazil as global swing state. Brazil can be both ally and obstacle, but it depends on how quickly and decisively the Obama administration and Congress can demonstrate respect and restore Brasilia’s trust in Washington.
Toward this end, the U.S. government should negotiate binding agreements of cooperation that reflect mutual respect and demonstrate a sense of urgency and compromise focused on advancing the critical interests of both nations. Moreover, it is time to refocus the bilateral relationship away from the diffuse and growing list of consultative mechanisms and toward a sharply focused set of negotiations on the issues that matter most right now.
1. Given former Secretary of Defense Panetta’s views on bilateral relations, including cooperation on cybersecurity, the U.S. government should accept the Brazilian government’s request to negotiate an agreement to cooperate on this important collective security issue to restore Brasilia’s trust in the U.S. government and work out a cooperative arrangement that strengthens anti-terrorism and non-proliferation efforts.
This is the first step toward building a strategic partnership based on shared values, mutual respect and a trust that can fuel greater cooperation on the most pressing security challenges, including Syria and Iran, as well as a reform of the United Nations Security Council and Brazil’s prospects for a permanent seat.
2. President Obama should authorize the USTR, in concert with the USDA and congressional leaders, to negotiate a definitive resolution to the WTO cotton dispute and agree to eliminate trade-distorting subsidies and compensate Brazilian cotton producers for past losses associated with the price and production-distorting impacts of U.S. cotton subsidies.
Working together, the National Cotton Council and the Brazilian Association of Cotton Producers (ABRAPA) provided the U.S. government with a set of recommendations for resolving much of the cotton case. Moreover, the agreement should include a reform of the GSM-102 export subsidy program to gradually phase out the trade distorting aspects of the program.
The agreement should be negotiated quickly and jointly with the respective producer associations, then presented to Congress to be incorporated into the reauthorization of the Farm bill.
3. Given the promotion and success of renewable transportation fuels in both countries and the growing interdependence in ethanol production and supply, it is time to negotiate a bilateral free-trade agreement on biofuels that provides greater certainty to investors, increases supply and price stability, and offers the opportunity for others in the region to build a regional biofuels marketplace.
Removing Barriers to Partnership
The most important part of the binational relationship is what makes both nations so exceptional: their people. There are far too many barriers that unnecessarily distance and ultimately frustrate cooperation between people, organizations, universities and research centers, firms, and investors across the binational borders.
Accordingly Langevin reports:
U.S.-Brazil relations feature a dense web of social and economic relationships that exact greater cooperation and partnership. Brazilian emigration to the U.S. has grown exponentially, increasing the social, organizational, and economic connections between the citizens of both countries, including remittances that Brazilian immigrants send to relatives back home.
Trade and foreign direct investment (FDI) flows between the two countries have multiplied in ways that deepen commercial relations despite the high profile trade conflicts that plague the bilateral trading agenda. The movement of people, goods, services, and investments between the U.S. and Brazil is accelerating, too, without much fanfare or scholarly attention.
Moreover, these forces of gravity continue to amplify cross-national connections and consequently test U.S. and Brazilian governments in both bilateral and multilateral arenas across a host of issues.
The most sensible step forward for U.S. foreign policy toward Brazil is to unilaterally remove as many of these obstacles as possible and begin to negotiate the rest with Brazil to formalize an agreement that facilitates what U.S. and Brazilian citizens are already doing, cooperating along a broad spectrum of social and economic issues and relations.
Toward this end, the U.S. government should waive the visa requirement for Brazilians for family reunification, tourism, business, scholarship and scientific activities without expectations of reciprocity from the Brazilian government.
Perhaps there is too much talk, too many consultative mechanisms, and too few focused negotiations on the issues that matter most to both countries. Too many consultative mechanisms, dialogues, and working groups diffuse the bilateral relationship rather than concentrate attention upon its strategic promise for both nations.
Indeed, too much of the rhetoric and consultations reflect a U.S. drive to expand exports to Brazil, including the advocacy on behalf of Boeing, rather than a concerted negotiation to work out the politics and processes for achieving a strategic partnership. Evidently the myriad of consultative mechanisms have not built sufficient mutual respect and trust to prevent the United States from spying on Brazil or resolve the decade long cotton dispute.
Brazil is a global swing state and its future development and geopolitical footprint may challenge Washington at times. Yet, the Obama administration and Congress must adapt, comply with its commitments to Brazil, and seek to resolve those conflicts that undermine the mutual respect and trust that both U.S. and Brazilian citizens expect.
Ultimately, the promise of the bilateral relationship can only be achieved if the U.S. government makes the first move and dedicates efforts to making bilateral relations work for both nations. Brasília matters and Washington’s foreign policymakers must reconcile themselves to this essential fact.
Chris Cote is Research Associate and Mark S. Langevin, Ph.D., the Director of BrazilWorks. BrazilWorks provides consulting services to Brazilian and United States based private sector enterprises, civil society organizations, and policymakers interested in Brazilian markets, investment opportunities, public policies and regulations, the national political economy, and international commercial relations. BrazilWorks specializes in agriculture, biofuels, climate change, capital goods, energy, healthcare, local content policies, oil and gas, development and regulatory policy, and international commercial and investment negotiations. This article was published originally at http://www.brazil-works.com/does-brasilia-matter/