This record is a partial extract of the original cable. The full text of the original cable is not available.

C O N F I D E N T I A L SECTION 01 OF 03 BRASILIA 000526 
 
SIPDIS 
 
DEPT FOR U/S LARSON, WHA/BSC, WHA/EPSC, EB/TPP 
DEPT PLEASE PASS TO USTR FOR PALLGEIER, RWILSON, KLEZNY 
USDA FOR JB PENN, U/S FFAS 
NSC FOR MDEMPSEY 
 
E.O. 12958: DECL: 03/04/2014 
TAGS: ETRD BR FTAA
SUBJECT: BRAZILIAN RESPONSE TO FTAA DEMARCHE 
 
REF: SECSTATE 44578 
 
Classified By: Economic Officer Janice Fair for reasons 1.5 (b) and (d) 
 
Summary 
------------- 
¶1. (C)  Econoff delivered reftel talking points to Regis 
Arslanian, Itamaraty Director for International Trade, and 
Tovar da Silva Nunes, Itamaraty FTAA Coordinator and member 
of the Brazilian Co-Chair team, on March 4.  In responding, 
they conveyed a constructive attitude, albeit without 
signaling a major change in Brazilian positions.  Both noted 
that Foreign Minister Amorim had repeatedly instructed the 
Ministry's technical level to "be problem solvers" so that 
the common set of rights and obligations, and the 
plurilateral procedures could be finalized.  Neither 
Arslanian nor Da Silva Nunes gave any indication that Brazil 
would retreat from concessions made by Mercosul during the 
course of the Puebla Trade Negotiations Committee (TNC) 
meeting in February. 
 
¶2. (C)  Nunes suggested that U.S. and Brazilian Co-Chair 
teams would inevitably have to work together to draft a paper 
that would bridge current positions. He claimed that Chile 
had approached the Brazilian Co-Chair with the idea, saying 
that it would be necessary given the difficulty national 
delegations will have in moving off their respective 
positions.  He appeared anxious to start this process, 
perhaps immediately following the informal discussions in 
Buenos Aires March 9-10.  He also suggested that Co-Chairs 
should immediately explore how to minimize differences in the 
procedures paper, since time during the next Puebla meeting 
will be limited. 
 
¶3. (C)  While Nunes seemed to grasp the talking point without 
difficulty, Arslanian was initially confused by our 
suggestion that basic elements of the common set need to be 
decided, but that delegations should but this result at risk 
by attempting to resolve every issue in detail.  At first he 
mis-interpreted this as signaling U.S. willingness/interest 
in carrying over some discussion of common set elements (not 
just details) to a future TNC, even though Negotiating Groups 
would already be reconvening. He asked, for instance, if the 
U.S. would be willing to put off discussion of a special 
agricultural safeguard.  He emphasized that an adequate 
number of elements need to be defined so that Negotiating 
Groups have sufficient guidance to allow their work to 
proceed.   Econoff and EconCouns clarified that the point was 
simply not to let insistence on full resolution of every 
detail stand in the way of achieving agreement on "the 
elements of the common set." 
 
¶4. (C)  Arslanian saw this issue as connected to the G-14 
proposal that the common set paper explicitly state that 
additional provisions may be included in the common set of 
rights and obligations in the future, as may be agreed. 
Nunes claimed that such a statement just isn't necessary, 
since any delegation has been and would remain free to raise 
any issue it so chooses.  Arslanian claimed his concern over 
this proposal was due to potential gridlock should 
delegations start raising new issues in the Negotiating 
Groups during common set discussions.  When Econoff inquired 
whether the provision would be less problematic if additional 
provisions were raised at the TNC level rather than in 
Negotiating Groups, Nunes answered "maybe." 
 
Market Access 
------------------ 
¶5. (C)  Looking at the key areas of disagreement, Arslanian 
kept returning to market access, emphasizing that it is the 
crucial area for Brazil.  Specifically, he focused on 
proposed language for defining the scope for tariff reduction 
in the common set.  Brazil needs the proposed "significant 
improvement in market access conditions" language, Arslanian 
argued, to demonstrate that it is gaining something in the 
common set.  He also inquired about the possibility of 
commencing with Mercosul-US market access negotiations even 
if some elements of the common set remained undefined, such 
as the scope of tariff reduction.  Clarifying that we were 
not in a position to provide an official response, Econoff 
pointed out that past U.S. position was that agreement needed 
to be reached on the common set before these market access 
discussions could proceed. 
 
Agriculture 
-------------- 
¶6. (C)  Nunes went through the common set elements on 
agriculture.  On export subsidies, he said he was trying to 
explore formulations that address the U.S. interest in 
linking the elimination of export subsidies and the 
deterrence of subsidized products from non-FTAA countries, 
but which don't make causality between them explicit.  His 
general idea is to present the concepts as a package -- 
export subsidies are eliminated, and there are efforts at 
deterrence -- but the former (elimination) is not predicated 
on the latter (deterrence).  He also wondered aloud whether 
the definition for export subsidies could be left for the 
Negotiating Group on Agriculture to decide. 
 
¶7. (C)  As a matter of principle, Mercosul does not believe 
there should be any product differentiation with regard to 
safeguards; agricultural products should be dealt with under 
the same mechanism as industrial products, according to 
Nunes.  He claimed that Mercosul had had "bad experiences" 
with Andean trading partners, leading them to conclude that 
special agricultural safeguards are too prone to use for 
protectionist purposes.  Neither Nunes nor Arslanian 
responded directly when Econoff suggested that rather than 
rejecting a special agricultural safeguard outright, perhaps 
Mercosul's concerns about possible abuse could be addressed 
in the specifics of how the safeguard mechanism would operate 
-- a level of detail beyond what is sought in the common set 
document. 
 
¶8. (C)  On domestic support, Nunes claimed that it would be 
very difficult for Mercosul to accept elimination from the 
common set document of any reference to "mechanisms to 
neutralize the effects of distorting measures..."    Drawing 
on points in reftel, EconOff reffirmed that the U.S. is not 
prepared to address domestic support within the FTAA and we 
see this as an area in which Mercosul ambition must be 
lowered.  Nunes said that he is discussing the issue with 
Mercosul colleagues to find out the exact needs of the group, 
and claimed it was helpful to know that language on a 
neutralization mechanism relating to domestic support was a 
non-starter for the United States. 
 
AD/CVD 
----------- 
¶9. (C)  Nunes claimed that this was not a problematic area, 
in that Mercosul had backed off trying to obtain changes to 
U.S. legislation. 
 
Environment and Labor 
---------------------------- 
¶10. (C)  Nunes and Arslanian expressed surprise that the USG 
had not pushed for explicit labor and environment language in 
the common set document.  Nunes said that they figured the 
G-14 proposal for language on the Technical Committee on 
Institutional Issues (TCI) was designed to allow for 
introduction of provisions within the TCI Chapter.  Nunes 
said there was recognition that the USG is under TPA mandate 
to seek inclusion of these issue areas and suggested that it 
may be possible to formulate text for the common set document 
that would leave that door open for possible future 
consideration of proposals on labor and environment 
provisions, while not highlighting the opening.  For 
instance, he offered that one possibility may be to eliminate 
both "exclusively" and "but not limited to" from the various 
TCI text proposals. 
 
Private Sector Reactions 
------------------------------- 
¶11. (U)  In recent weeks, both the Brazilian Business 
Coalition (CEB), a broad based group formed to consult with 
the GOB on trade matters, and agroindustry groups have 
appealed to Itamaraty for flexibility so as to secure greater 
market access concessions from the United States.  Brazilian 
agroindustry has been most vocal, admonishing Itamaraty for 
its ideological stance on industrial policy, and pushing for 
increased GOB concessions in services, investment and 
government procurement. 
 
¶12. (U)  In a paper submitted to Itamaraty on February 27, 
the CEB reportedly reiterated the private sector's objective 
of obtaining concrete results in the negotiation, and its 
understanding that to achieve this Brazil would have to 
demonstrate greater flexibility.  The CEB is said to have 
made the following specific recommendations: market access - 
Itamaraty should show flexibility regarding its initial 
proposal for total tariff elimination by accepting that a 
small number of products would be subject to tariff 
reduction, rather than tariff elimination; services - the GOB 
should present a single offer, rather than pursue market 
access bilaterally (regional MFN upon entry into force) and 
commit to GATS-plus in terms of market access and national 
treatment; and on investment - recommends a market access 
agreement restricted to investment rights and negotiated on 
the basis of a single offer which also covers investors 
without a physical presence. 
 
Comment 
----------- 
¶13. (C)  The constructive attitude espoused by Arslanian and 
Nunes in this latest meeting is consistent with what we see 
as a more positive GOB stance toward the FTAA post-Miami. 
Despite negotiating positions designed to maximize the 
outcome for Brazil/Mercosul, the GOB has publicly and 
privately stressed its seriousness in working to gain 
consensus on the common set, and on plurilateral procedures 
so that negotiations can move forward.  Foreign Minister 
Amorim appears to be attaching considerable significance to 
implementation of the compromise framework he "personally" 
formulated with USTR Zoellick, so that long awaited market 
access negotiations with the United States can move forward. 
 
¶14. (C)  Caution may be in order in, however, in evaluating 
Nunes' suggestions and ideas, which do not always reflect 
accepted thinking within the GOB, let alone Mercosul. 
Likewise, it is not clear whether his enthusiasm for drafting 
Co-Chair proposals is shared by the Brazilian Co-Chair, 
Ambassador Adhemar Bahadian. 
 
¶15. (C)  Despite the heightened pressure being exerted by 
parts of the Brazilian private sector following the February 
Puebla TNC, neither Arslanian nor Nunes mentioned any 
possibility of increasing Mercosul's level of ambition in 
services, investment, government procurement, or IPR in 
return for greater USG flexibility on market access.  Public 
statements by Antonio Simoes, Minister Amorim's economic 
advisor, also point to Itamaraty rejection of arguments that 
minimalist concessions in these areas are impacting the 
market access concessions being offered by the U.S. and 
others.  Post does not expect these private sector appeals to 
have much impact on Itamaraty positions in next week's 
discussions in Buenos Aires or in the TNC meeting in Puebla. 
VIRDEN