VZCZCXRO0036
PP RUEHRG
DE RUEHBR #0755/01 1172054
ZNR UUUUU ZZH
P 272054Z APR 07
FM AMEMBASSY BRASILIA
TO RUEHC/SECSTATE WASHDC PRIORITY 8791
INFO RUEHBS/USEU BRUSSELS
RUEHGV/USMISSION GENEVA 1526
RUEHSO/AMCONSUL SAO PAULO 9728
RUEHRI/AMCONSUL RIO DE JANEIRO 4278
RUEHRG/AMCONSUL RECIFE 6571
RUEHBU/AMEMBASSY BUENOS AIRES 4726
RUEHMN/AMEMBASSY MONTEVIDEO 6852
RUEHAC/AMEMBASSY ASUNCION 6051
RUEHSG/AMEMBASSY SANTIAGO 6198
RUEHRC/USDA WASHDC
RUCPDOC/USDOC WASHDC

UNCLAS SECTION 01 OF 04 BRASILIA 000755 
 
SIPDIS 
 
SENSITIVE 
SIPDIS 
 
DEPT FOR EEB/TPP/MTA/MST FOR AARON SCHEIBE 
DEPT PASS USTR FOR SUE CRONIN 
USDOC FOR 4332/ITA/MAC/WH/OLAC/ ADRISCOLL/MCAMPOS 
USDOC FOR 3134/ITA/USCS/OIO/WH/RD/DRAMBO 
USDA FOR FAS 
 
E.O. 12958: N/A 
TAGS: ECON ETRD WTO BR
SUBJECT:  NATIONAL ASSOCIATION OF MANUFACTURERS DELEGATION VISITS 
BRAZIL TO DISCUSS WTO SECTORAL TALKS 
 
REF:  Sao Paulo 242 
 
¶1. (SBU) Summary:  From April 11-13, FIESP (the Sao Paulo State 
Industrial Federation) hosted visits to Sao Paulo and Brasilia by a 
National Association of Manufacturers (NAM) delegation led by 
Governor John Engler, the organization's president. The meetings, 
which came on the heels of USTR Susan Schwab's March 9-10 meetings 
in Sao Paulo with leading Brazilian industrialists and agriculture 
sector representatives (reftel), were part of ongoing NAM/FIESP 
consultations focused on non-agricultural market access (NAMA) 
sectoral discussions within the context of the Doha Round.  In Sao 
Paulo, the discourse between FIESP and NAM centered on sectoral 
issues and the current Doha trade talks.  The wood, pulp and paper, 
plastics, medical equipment, construction and agricultural machinery 
sectoral meetings appeared to progress smoothly, with the wood 
sector requesting a USG proposal for consideration.  In contrast, 
representatives from the Brazilian Association of Electrical and 
Electronic Industries (ABINEE), expressed public concern that their 
industry would not benefit from the Doha Round emphasis on 
agriculture. The presidents of U.S. Plastics and the Brazilian 
Plastics Association (ABIPLAS) plan to continue sectoral discussions 
in a May meeting. 
 
¶2.  (U) In Brasilia, NAM and FIESP leaders held separate meetings 
with Brazilian Vice President Jose Alencar, newly appointed Minister 
of Development, Industry and Trade (MDIC) Miguel Jorge, President of 
the Senate Renan Calheiros, and President of the Chamber of 
Deputies, Arlindo Chinaglia - all of whom expressed willingness to 
work for a successful Doha outcome.  Both MDIC leaders and FIESP 
President Paulo Skaf emphasized the importance of greater Brazilian 
agricultural access to the U.S. market, with Skaf stating that his 
country would accept no less than a Swiss coefficient of thirty. 
The round of meetings ended with plans by FIESP and NAM to meet in 
Washington, DC in late May for additional sectoral meetings and a 
joint NAM-FIESP statement announcing the creation of a formal 
bilateral Brazil-U.S. Industrial Dialogue. End Summary. 
 
------------------------------------------- 
Brasilia Meetings with Government Officials 
------------------------------------------- 
 
--Discussion with Vice President Alencar 
 
¶3.  (U) Governor Engler told Vice President Alencar that Brazil and 
the U.S. were important to the success of the Doha Round and 
emphasized that Brazilian G-20 leadership is critical to overcoming 
the pessimism expressed by some about the negotiations.  NAM 
delegation members added that success will depend on candid 
discourse between the U.S. and Brazil. 
 
¶4.  (U) Alluding to perceived Brazilian intransigence on trade 
issues, Skaf noted there was once a belief that Brazil wasn't 
committed to the fight against intellectual property rights (IPR) 
piracy, but said "we changed that."  Skaf called for Alencar's 
support for a successful conclusion to the Doha Round, while 
indicating that the U.S. and E.U. must further reduce agricultural 
subsidies for the trade talks to accomplish this. 
 
¶5.  (U) Alencar used the example of his support for the Free Trade 
Area of the Americas (FTAA) to underscore his openness to 
multilateral trade talks, but cautioned that any trade agreement 
must provide opportunities for all involved.  He added that 
countries must prepare themselves to be competitive in the face of 
continuing worldwide globalization. 
 
--Meeting at the Ministry Development, Industry and Trade (MDIC) 
 
¶6.  (U) During their meeting at MDIC, Engler recognized the key role 
that agricultural issues will play in the Doha Round but noted that 
industrial tariffs and barriers must also be open for negotiation. 
The NAM delegation called on Minister Jorge and the MDIC to move 
forward on sectoral discussions, negotiations on a bi-lateral tax 
treaty, and reform of the Brazilian tax and customs system. 
 
 
BRASILIA 00000755  002 OF 004 
 
 
¶7.  (SBU) Minister Jorge said that the U.S. and Brazil have had a 
strong relationship in the past and the GOB is willing to work to 
find ways to forge stronger ties.  MDIC leaders noted the importance 
of trade with the U.S. and were generally receptive to the NAM 
message.  Nevertheless, they pointed to increased access to the U. 
¶S. agricultural market as their key goal.  For the GOB to provide 
the U.S. with greater NAMA access, they declared, the GOB will need 
to receive concessions from the U.S. on agriculture.  For his part, 
Skaf stated that with respect to tariff-cutting formulae, the 
minimum Brazil would accept would be a Swiss coefficient of thirty; 
fifteen was a complete non-starter, he added.  (Comment:  NAM 
officials told EconOff that they  continue to support a coefficient 
of fifteen for developing countries such as Brazil.  End Comment.) 
 
--Talks with Legislative Leaders 
 
¶8.  (U) In meetings with Senate President Renan Calheiros and 
president of the Chamber of Deputies Arlindo Chinaglia, Gov. Engler 
spoke of the need to increase contacts and improve the U.S. - Brazil 
trade relationship.  He noted that NAM wanted a stronger trade 
relationship with Brazil and pointed to the influence the GOB has, 
as a leader of the G-20, to help ensure a successful conclusion of 
the Doha Round. 
 
¶9.  (U) In both meetings, Skaf asked the legislative leaders to 
support forward movement on tax reform and other changes to improve 
the business environment in Brazil.  He noted that much could be 
done to improve Brazil's attractiveness for international trade even 
outside of an agreement in the Doha Round. 
 
¶10.  (U) In response to Skaf's plea for help reducing the sales tax 
(ICMS), including retroactive relief for stockpiled inventories, 
Calheiros noted that sales tax issues are an issue for individual 
states and not principally a federal matter.  Both Calheiros and 
Chinaglia agreed that Brazil and the U.S. should have a closer 
relationship in a number of areas and said it is important to work 
to that end. 
 
-------------- 
Media Coverage 
-------------- 
 
¶11.  (U) Press coverage of the meetings was mixed, with headlines 
stating that the Brazilian sectors were reacting negatively to the 
NAM delegation contrasted by more moderate text. The exception was 
comments made by representatives of the Brazilian Association of 
Electrical and Electronic Industries (ABINEE), who stated publicly 
that their industry does not want to be the sector to "pay the 
price" for agricultural gains. 
 
------- 
Results 
------- 
 
¶12.  (SBU) The visit generated the following positive results: 
 
- The wood, pulp and paper, plastics, medical equipment, 
construction and agricultural machinery sectoral meetings appeared 
to progress smoothly, with the wood sector requesting a USG proposal 
for consideration. 
 
- FIESP and NAM agreed to meet in Washington, DC for additional 
sectoral meetings in May or June.  The Brazilian industries will 
identify the sectoral areas to be discussed at this meeting, which 
could possibly be auto parts, granite, textiles, and ores and 
minerals. 
 
- The presidents of U.S. Plastics and the Brazilian Plastics 
Association (ABIPLAS) plan to continue sectoral discussions in a May 
meeting. 
 
- FIESP agreed to join NAM in lobbying counterpart organizations in 
other countries to address NAMA issues. 
 
 
BRASILIA 00000755  003 OF 004 
 
 
¶13.  (SBU) A NAM official told Sao Paulo EconOff that the three days 
of discussions were the "beginning of a process" that allowed both 
sides the opportunity to talk, continue with the recent momentum in 
the negotiation process, and begin to search for common areas of 
interest in the sectorals.  He also observed that a good personal 
relationship was developing between Paulo Skaf and John Engler, 
thereby relieving some of the possible tension in future sectoral 
discussions. 
 
¶14.  (SBU) Trade relations with China figured prominently throughout 
the meetings, with GOB and FIESP officials telling NAM 
representatives that any further lowering of Brazilian tariffs would 
put Brazilian industry at a severe competitive disadvantage with 
Chinese imports. 
 
¶15.  (U) At the meeting's conclusion on April 13, NAM and FIESP 
agreed - after intensive discussion on some of the wording - to 
release the following joint statement announcing the creation of a 
formal bilateral Brazil-U.S. Industrial Dialogue intended to work 
with the USG and the GOB to obtain the balanced and ambitious DDA 
agreement sought by both FIESP and the NAM: 
 
Begin text of joint statement: 
 
      JOINT NAM-FIESP STATEMENT 
      Sao Paulo, Brazil 
      April 13, 2007 
 
The Federation of Industries of the State of Sco Paulo (FIESP) and 
the National Association of Manufacturers (NAM) are united in the 
objective of liberalizing world trade and building a stronger trade 
environment through the successful negotiation of the World Trade 
Organization (WTO) Doha Development Agenda (DDA). We believe the 
attainment of this objective will benefit both our nations, as well 
as the world as a whole. 
 
To further this objective, the two organizations announced today the 
formation of the bilateral Brazil-U.S. Industrial Dialogue, a joint 
initiative with a special focus on finding solutions for pending 
issues in the multilateral talks. This initiative is a direct result 
of the deepening of the relationship of the two organizations, 
building on their initial Memorandum of Understanding (MOU) of March 
¶2005. 
 
The objective of the Industrial Dialogue is to encourage and support 
the Brazilian and American governments in increased efforts to 
obtain the balanced and ambitious DDA agreement sought by both FIESP 
and the NAM, and to do so within a short period of time. The 
Industrial Dialogue will also explore advising on complementary 
actions in terms of investment opportunities, trade adjustment 
measures, domestic reforms - with an emphasis on taxation, 
discussion of common interests with regard to the global challenges 
presented by China, combating intellectual property piracy and 
counterfeiting, and other matters of mutual interest. 
 
In our initial discussion, both associations explored the role that 
sectoral negotiations could play in the Non Agricultural Market 
Access (NAMA) negotiations. Both agreed to continue these 
discussions with a desire to seek as much commonality as possible. 
 
Both FIESP and the NAM acknowledge that the ambitious DDA outcome 
they seek also depends on further movement from other key players in 
the negotiations. Therefore the two organizations will work to 
engage private sector representatives throughout the world to 
encourage them to persuade their governments to improve their offers 
in the DDA, particularly focusing on industry representatives from 
Argentina, Canada, China, the European Union, India, Japan and South 
Africa. 
 
FIESP and the NAM believe that this is an important moment to break 
the DDA stalemate of the last several months. To achieve this end, 
both business organizations will intensify their efforts to work 
with their governments and to engage in close contact with each 
other to advance the resolution of the issues that are pending in 
 
BRASILIA 00000755  004 OF 004 
 
 
the DDA. 
 
Paulo Antonio Skaf, President 
Federation of Industries of the State of Sao Paulo (FIESP) 
 
John Engler, President and CEO 
National Association of Manufacturers 
 
End text of joint statement. 
 
¶16.  (U) Consulate Sao Paulo contributed to this cable. 
 
Sobel