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DE RUEHBR #0637/01 0901922
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P 311922Z MAR 06
FM AMEMBASSY BRASILIA
TO RUEHC/SECSTATE WASHDC PRIORITY 4970
INFO RUCPDO/USDOC WASHDC
RUEHLP/AMEMBASSY LA PAZ 4460
RUEHSO/AMCONSUL SAO PAULO 6656
RUEHRG/AMCONSUL RECIFE 4538
RUEHRI/AMCONSUL RIO DE JANEIRO 1791
RUEHAC/AMEMBASSY ASUNCION 5320
RUEHMN/AMEMBASSY MONTEVIDEO 6146
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UNCLAS SECTION 01 OF 04 BRASILIA 000637 
 
SIPDIS 
 
 
SENSITIVE 
SIPDIS 
 
H-PASS 
STATE PASS TO USTR FOR MSULLIVAN/KLEZNY 
NSC FOR SUE CRONIN 
DEPT OF TREASURY FOR FPARODI 
USDOC FOR 4332/ITA/MAC/WH/OLAC/JANDERSEN/ADRISCOLL/MWAR D 
USDOC FOR 3134/USFCS/OIO/SHUPKA 
 
E.O. 12958: N/A 
TAGS: ETRD EAGR WTRO ENRG PGOV PREL BR
SUBJECT:  CODEL GRASSLEY MEETS WITH BRAZILIAN GOVERNMENT 
POLICYMAKERS 
 
 
¶1.  (SBU)  Summary and Introduction.  During a March 19-23 trip to 
Brazil, a Congressional delegation led by Senate Finance Committee 
Chairman, Senator Chuck Grassley (IA), visited Manaus, Santarem 
(Para state), Brasilia, Maringa (Parana state), and Sao Paulo.  This 
cable reports on the Codel's March 21 meetings in Brasilia with 
Foreign Minister Amorim, Trade Minister Furlan, and Agriculture 
Minister Rodrigues.  The delegation's session with Foreign Minister 
Celso Amorim focused almost exclusively on the WTO Doha Round trade 
negotiations.  Amorim declined to provide details of Brazil's next 
move in the talks, but reiterated general statements about the GOB's 
intent to improve its offers on industrial products (NAMA) and 
services.  Noting that he agreed with Senator Grassley that time was 
running short, Amorim said he saw services and the outline of a 
final deal falling into the June/July timeframe rather than the end 
of April.  Trade Minister Furlan's principal message was that U.S. 
agricultural subsidies distort world markets and disadvantage 
Brazil.  The session with Minister of Agriculture Rodrigues was very 
positive, with both sides expressing a desire to cooperate, 
particularly on WTO Doha Round issues.  Although each meeting was 
held separately, the three ministers delivered a coordinated message 
that the U.S. and Brazil need to do more to develop third country 
markets for renewable fuels such as ethanol.  A report on the 
meetings in Sao Paulo and Maringa with private sector and NGO 
representatives, which covered the same general topics though our 
interlocutors there adopted a harsher tone -- will be sent septel. 
End Summary and Introduction. 
 
-------------- 
The Delegation 
-------------- 
¶2.  (U) In addition to Senator Grassley, the delegation consisted 
of: 
--Senator Mike Crapo (ID), Senate Finance Committee 
--Senator Wayne Allard (CO), Senate Appropriations Committee 
--Representative Collin Peterson (MN), Ranking Member, House Ag 
Committee 
--Representative Steve King (IA), House Agriculture Committee 
--Representative Phil English (PA), House Ways and Means Committee 
--Representative Darrell Issa (CA), House International Relations 
Committee 
--Representative Russ Carnahan (MO), House Transportation & 
Infrastructure Committee 
--Everett Eissenstat, Assistant U.S. Trade Representative for the 
Americas 
 
-------------------------------------------- 
Meeting with the Minister of Foreign Affairs 
-------------------------------------------- 
 
¶3.  (SBU) Minister Amorim welcomed the delegation, stating that 
relations between Brazil and the United States were good and noting 
the excellent chemistry between Presidents Bush and Lula as well as 
his own positive relationship with USTR Portman.  Amorim 
characterized the WTO as a forum for mutual cooperation, although he 
described Brazilian and U.S. interests as not identical, but 
"concurrent."  Specifically, he spoke of the need to identify future 
areas of bilateral cooperation, such as assistance to Lusophone 
African countries and expansion of ethanol markets (given the 
increased interest in the United States in renewable fuels). 
 
  Doha Negotiations 
  ----------------- 
 
¶4.  (SBU) Senator Grassley pointed out that timing for completion of 
the Doha Round is very tight given expiration of Trade Promotion 
Authority (TPA) in mid-2007, adding that the U.S. Congress does not 
appear inclined to extend TPA.  He emphasized the importance of the 
April deadline for decisions on full modalities for agriculture and 
NAMA.  On the substance of the negotiations, Grassley said the U.S. 
is willing to trade subsidies for market access and that the U.S. 
should get credit for its good faith effort within its existing 
agricultural offer.  Now is not the time for the U.S. to make a new 
offer, he declared.  Should the Doha Round fail, Grassley predicted 
that U.S. farm programs would look s they had in the past. 
 
BRASILIA 00000637  002 OF 004 
 
 
 
¶5.  (SBU)  Amorim agreed that time was short for the Doha 
negotiations.  He portrayed the Hong Kong Ministerial as an 
important step in the process as was WTO Director General Lamy's end 
of April deadline, but identified the June/July timeframe for 
movement in services and suggested there should be an outline of a 
final deal by the beginning of July.  To reach a final deal, he 
sketched out the major contributions necessary by the main actors: 
EU would have to give on market access, Japan on anti-dumping 
(rules); the U.S. on domestic support; and Brazil would offer 
"something" on NAMA and services. 
 
¶6.  (SBU)  Amorim declined to provide greater specificity on the 
"something" to be offered in NAMA and services, but commented that 
proposed legislation pending in the Brazilian congress would make it 
easier for Brazil to improve its offer in mode 3 for services.  In 
response to a question by Representative English, Amorim argued that 
while the Doha negotiations on rules were very important, 
specifically zeroing and de minimis provisions within antidumping 
proceedings, the outcome on this would not end up being a 
deal-breaker. 
 
¶7.  (SBU)  Extension of TPA was possible, Amorim opined, though he 
acknowledged that it couldn't be counted on.  Consistent with public 
statements, Amorim portrayed the U.S. agricultural offer as 
"important" but "not sufficient," stating that Brazil wants the 
elimination of all subsidies, although he acknowledged that 
elimination would not be possible without improved market access. 
While the U.S. offer is not enough, Amorim said he still prefers to 
work quietly through negotiation rather than through litigation, 
arguing that if Brazil and the United States couldn't solve trade 
issues, how could they solve other troublesome issues such as 
efforts to combat terrorism. 
 
¶8.  (SBU) Finally, Amorim remarked that Brazil is not looking for 
special and differential (S&D) treatment within agriculture, despite 
the fact that rich countries enjoy S&D through their ability to 
offer domestic subsidies.  He characterized collaboration with the 
U.S. to press the EU for improvements in market access as in 
Brazil's interest, and suggested that Brazil has the ability to move 
India toward greater market access concessions.  Potentially 
isolated in the end, India would not hold back conclusion of the 
Doha Round, Amorim commented. The principal point for him was that 
Brazil and the United States need to reach agreement. 
 
  FTAA Negotiations 
  ----------------- 
 
¶9.  (SBU) Amorim touched briefly on the Free Trade Area of the 
Americas (FTAA) negotiations, providing several reasons for why they 
have not flourished -- among them that the talks were initiated in a 
different context than today, i.e., prior to the launching of the 
Doha Round.  He also claimed that diversity among the FTAA partners 
made a final deal difficult since "what is good for El Salvador may 
not be good for Brazil." 
 
   Ethanol and Embraer 
   ------------------- 
 
¶10.  (SBU)  In response to a query from Senator Allard regarding 
ethanol, Amorim made a pitch for greater bilateral cooperation in 
developing third country markets for Brazilian and US-produced 
ethanol.  In closing, Amorim complained about USG interference, 
which ultimately aborted Embraer's sale of Super Tucano aircraft to 
Venezuela. 
 
------------------------------ 
Meeting with Minister of Trade 
------------------------------ 
 
¶11.  (SBU)  Furlan opened the friendly, hour and a half discussion 
by stating that Brazil is highly competitive in agribusiness due to 
productivity gains made through process improvements and advances in 
farming technologies.  He recounted his meeting with President Bush 
 
BRASILIA 00000637  003 OF 004 
 
 
in November, and how he had demonstrated to the latter a strong 
connection between Brazilian agriculture and the U.S. economy - 
i.e., three of the four major agribusiness conglomerates operating 
in Brazil have significant U.S. shareholdings.  Furlan stated his 
belief that President Bush understands that Brazil is "winning the 
war against agricultural subsidies," and that it will be hard for 
the United States to compete with Brazil on a level playing field. 
Even with the recent outbreaks of bovine hoof-and-mouth disease and 
avian influenza, Furlan believes Brazil to be more competitive on 
sanitary issues. 
 
¶12.  (SBU)  The Minister stated that the Brazilian economy continues 
to grow, as social development and increased employment under the 
Lula administration have led to increased consumption.  Industrial 
goods account for 55% of Brazilian exports, and Brazil actively 
seeks to diversify its products and export markets.  With a US$45 
billion dollar trade surplus and a strengthening currency, Furlan 
said that he worries that Brazil is not importing enough inputs. 
 
WTO Talks 
--------- 
 
¶13.  (SBU) In response to a question from Senator Allard,  Furlan 
responded that, for the most part, he believed that Brazil was 
aligned with the United States on most WTO issues.  He stated that 
since the United States agreed to reduce agricultural subsidies on 
the condition that the EU do the same, this shows that the U.S. 
recognizes that the current system is unsustainable in the long 
term.  He also went on to say that Brazil understands that it needs 
to open it own markets, and not be as defensive on services.  He 
thought that Brazil could compete fairly on services, particularly 
banking, e-commerce and e-government applications. 
 
¶14.  (SBU) Rep. English mentioned that the USG was pleased with the 
constructive role Brazil played during the December Hong Kong 
meeting, and asked how Furlan thought the WTO Doha Round would 
evolve and whether he envisioned further opportunities for finding 
common ground.  Furlan commented that since the Uruguay round, 
multilateral trade negotiation meetings have largely been a waste of 
time.  In his view, all depended upon major moves coming from the US 
and EU.  He felt that the formation of the G-20 was useful, because 
it helped define common ground between smaller countries which were 
similarly aligned. 
 
   Biotech 
   ------- 
 
¶15.  (SBU)  On the issue of biotech labeling requirements, Furlan 
stated his belief that Brazil was one of the few countries in the 
world that knows how to properly segregate GMO crops, and said that 
Brazilian farmers will continue to produce whatever the market 
dictates.  Furlan went on to compare cattle production in Brazil and 
the United States, likening U.S. feed lots to "cattle hotels," while 
Brazilian cattle were pasture-fed the "old-fashioned way" with 
natural grasses. 
 
  Flex-fuel Vehicles 
  ------------------ 
 
¶16.  (SBU) Furlan praised Brazil flex-fuel vehicle programs and 
opined that Brazil sees increasing ethanol consumption not only as a 
future commodity, but as a way to improve air quality around the 
planet.  He stated that flex-fuel cars represent 70% of GM's 
Brazilian production, adding that in Brazil the difference in price 
between flex and non-flex vehicles is much smaller than in the U.S. 
because of less complicated technology. 
 
¶17.  (SBU) The meeting ended with Furlan sending his regards to 
Senator Grassley (who was unable to attend the meeting) and 
expressing his desire to meet with him during the Minister's next 
trip to Washington.  In addition, the Minister stated that he is 
looking forward to hosting visits by USTR Portman, Energy Secretary 
Bodman, and Commerce Secretary Gutierrez in the near future. 
 
 
BRASILIA 00000637  004 OF 004 
 
 
--------------------------------- 
Meeting with Agriculture Minister 
--------------------------------- 
 
¶18.  (SBU) In the session with Minister of Agriculture Rodrigues, 
Senator Grassley reiterated the point that TPA expires soon and that 
without greater market access opportunities it will be difficult to 
get any Doha Round accord through Congress.  For his part, Rodrigues 
said he had participated in the recent London meetings and that 
there appears to be little flexibility in current negotiating 
positions.  Like ForMin Amorim, he conceded that Brazil must offer 
more on industrial products and services in order to gain improved 
market access for agriculture. 
 
¶19.  (SBU)  Turning to other issues, Minister Rodrigues, as did 
Amorim and Furlan, emphasized that Brazil and the US should 
cooperate on biofuels, thus providing a model for the world to 
follow.  When queried about prospects for biotech soybeans, the 
Minister said that the current crop is about 20 percent biotech and 
that within a few years it will increase to 50 percent.  Both 
Rodrigues and the Codel felt that there was room for Brazil-U.S. 
cooperation on biotech, especially with regard to the EU.  Senator 
Grassley mentioned the need for Brazil to ensure adequate IPR 
protection for GMO soybeans, acknowledging that progress has been 
made but that additional GOB enforcement efforts would help. 
 
¶20.  (SBU)  Finally, Rep. English invited Rodrigues to visit Capitol 
Hill, citing the ongoing work being done in the Congressional Brazil 
Caucus.  From the Senate side, Senator Grassley extended a similar 
invitation. (Rodrigues is scheduled to visit Washington April 25 and 
is seeking a meeting at that time with Secretary Johanns.)  Overall, 
Rodrigues and his team felt that the meeting was a good step forward 
in improving the bilateral relationship. 
 
¶21.  (U)  This cable was cleared by Codel Grassley prior to 
transmission. 
 
Linehan