Policy Alignments and Divergences: US-Brazil Economic Relations

 

U.S.-Brazil Economic Relations

Introduction

The United States and Brazil have enjoyed a strong economic relationship for many years. In 2019, Brazil ranked second among the United States’ Latin American trading partners in goods and 19th among all U.S. trading partners. In March 2020, President Donald Trump and President Jair Bolsonaro announced plans to deepen the bilateral trade relationship and potentially move toward free trade agreement (FTA) negotiations in the years to come. These discussions led to the Protocol on Trade Rules and Transparency, signed on October 19, 2020, which includes annexes in trade facilitation and customs administration, good regulatory practices, and anti-corruption.1 The Protocol would need the approval of the Brazilian Congress but would not need approval by the U.S. Congress. Congress has expressed interest in Brazil and U.S.-Brazilian relations with environmental conservation and trade relations at the center of its focus. While some Members of Congress see the agreement as a way to increase U.S. investment and promote U.S. values in the South America region, others oppose an expanded U.S. economic partnership under the Bolsonaro Administration because of human rights, labor, environmental, and other concerns.
The United States and Brazil historically have enjoyed robust political and economic ties, but many say the countries’ occasionally divergent policy approaches on trade and other matters have hindered the development of a close partnership. In March 2019, President Donald J. Trump and President Jair Bolsonaro announced plans to deepen the bilateral trade relationship, which could lead to eventual negotiations for a free trade agreement (FTA). This led to an acceleration of the bilateral dialogue under the 2011 Agreement on Trade and Economic Cooperation (ATEC) negotiated during the Obama Administration. In October 2020, the two countries announced the successful conclusion of a Protocol on Trade Rules and Transparency, which adds three annexes to the ATEC: Trade Facilitation and Customs Administration, Good Regulatory Practices, and Anti-Corruption. The Protocol does not require U.S. congressional approval, but would need approval by the Brazilian Congress. Congress has expressed interest in Brazil and U.S.-Brazilian relations with environmental conservation and trade relations at the center of its focus. While some Members of Congress see the agreement as a way to increase U.S. investment and promote
U.S. values in the South America region, others oppose an expanded U.S. economic partnership under the Bolsonaro Administration because of human rights, labor, environmental, and other concerns.
The deepening of the trade relationship is part of a broader push by the Trump and Bolsonaro administrations to strengthen the overall U.S.-Brazilian relationship. During the Obama

Administration, U.S. and Brazilian officials frequently highlighted the countries’ shared values as multicultural democracies, and pledged to form a stronger partnership.

Some U.S. officials, however, viewed Brazil’s policies in international trade and climate change as obstructionist, while some Brazilian officials viewed the U.S. national security surveillance in Brazil as a reason to believe that the United States opposed Brazil’s rise. Such episodes fueled an ongoing mistrust between the governments of the two countries. Since the January 2019 inauguration of President Bolsonaro, relations between the two countries have warmed. The Bolsonaro Administration views a close relationship with the United States as essential for advancing Brazil’s national interests and strengthening the country’s international standing. President Trump has welcomed Bolsonaro’s rapprochement. It is unclear if a Biden Administration would continue to pursue closer trade relations and build on the recently concluded agreements with Brazil.
Despite historical differences in trade policy approaches, U.S.-Brazil trade relations are strong and have deepened in the past two decades. Total merchandise trade (exports plus imports) between the United States and Brazil totaled $73.7 billion in 2019, with $42.9 billion in U.S. exports and $30.8 billion in U.S. imports. The United States has had a merchandise trade surplus with Brazil since 2008 ($11.9 billion in 2019) and a services trade surplus for over 20 years. In 2019, the U.S. services trade surplus with Brazil was $17.8 billion, down from $20.1 billion in 2018. Although U.S. trade ties with Brazil are strong, China ranks first among Brazil’s trading partner and Brazil’s total trade with China ($98.6 billion in 2019) is significantly higher than with the United States ($59.8 billion). A factor motivating the United States to strengthen the bilateral relationship is to increase the market for U.S. goods and services in Brazil.

U.S.-Brazilian Relations 

The ongoing bilateral trade negotiations are part of a broader push by the Trump and Bolsonaro administrations to strengthen U.S.-Brazilian relations. The United States and Brazil historically
have enjoyed robust political and economic ties, but many say the countries’ occasional divergent policy approaches and national interests have hindered the development of a closer partnership.
During the Obama Administration, for example, U.S. and Brazilian officials frequently
highlighted the countries’ shared values as multicultural democracies, and pledged to “form a U.S.-Brazil Partnership for the 21st Century.”4 However, Brazil’s independent foreign policy frustrated some U.S. officials, who viewed Brazil’s negotiating positions in international trade and climate discussions as obstructionist.5 Similarly, revelations that the U.S. National Security Agency had engaged in extensive surveillance in Brazil reinforced a view among some Brazilian officials that the United States opposed Brazil’s rise.6 Such episodes fueled mutual mistrust
between the countries’ policy-making communities and stalled bilateral initiatives.
U.S.-Brazilian relations have warmed since the January 2019 inauguration of President Bolsonaro. Whereas the past several Brazilian administrations sought to maintain autonomy in foreign affairs, Bolsonaro views a close relationship with the United States as essential for advancing Brazil’s national interests and strengthening the country’s international standing. He frequently has aligned his foreign policy positions with those of the Trump Administration,
particularly within multilateral organizations. Over the past two years, Brazil has backed the U.S. trade embargo on Cuba at the United Nations, joined with the United States to impose sanctions on Venezuelan officials using the Inter-American Treaty of Reciprocal Assistance, and supported the Trump Administration’s candidate to lead the Inter-American Development Bank, rather than offering its own.7 Bolsonaro also has expressed support for U.S. actions outside Latin America, including the killing of Iranian military commander Qasem Soleimani in Iraq and the Trump
Administration’s decision to withdraw from the World Health Organization.8
President Trump welcomed Bolsonaro’s rapprochement and joined with him to reaffirm a “strategic alliance” between the United States and Brazil.9 Enhanced security cooperation has
been a top priority for both countries. U.S. and Brazilian law enforcement agencies have signed