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UNCLAS SECTION 01 OF 04 BRASILIA 001201 
 
SENSITIVE BUT UNCLASSIFIED 
SIPDIS 
 
STATE PASS USTR 
STATE FOR EEB AND WHA 
TREASURY FOR NANCY LEE LUYEN TRAN AND MICHAEL MUNDACA 
COMMERCE FOR WALTER BASTIAN ANNE DRISCOLL AND LORRIE FUSSELL 
 
E.O. 12958: N/A 
TAGS: ETRD ECON EINV EFIN BR
SUBJECT: BRAZIL: USTR Amb Kirk Sept 16-17 Visit to Brasilia and Sao 
Paulo 
 
REF: BRASILIA 1129 
 
BRASILIA 00001201  001.23 OF 004 
 
 
¶1. (SBU) SUMMARY:  In meetings with the private sector and labor 
representatives, as well as government officials, USTR Ambassador 
Ron Kirk achieved significant success in re-framing the tone of the 
U.S.-Brazil trade and investment relationship.  Common themes, 
including the need for a Bilateral Tax Treaty, the importance of 
intellectual property protection and further exploration of elements 
of an investment agreement, as well as the desire to maintain GSP 
preferences, were raised by both private sector and government 
interlocutors.  The press was eager to discuss the WTO cotton case 
and the U.S. decision on Chinese tires, but low-key responses from 
USTR and the Minister of External Relations (MRE) ensured these 
themes did not dominate the visit's take-away message stressing a 
positive bilateral cooperation framework and deeper trade and 
investment ties.  FM Amorim agreed to work toward a new structural 
framework for trade and investment discussions.  END SUMMARY 
 
AmCham Event 
----------- 
 
¶2. (SBU) USTR Kirk began his visit with well-received luncheon 
remarks to approximately 100 senior members of the Sao Paulo 
American Chamber of Commerce, the largest AmCham in the world. 
Ambassador Kirk's speech emphasized the importance of U.S.-Brazil 
relations and USG interest in deepening dialogue on bilateral trade 
and investment issues.  In response to written questions on the 
cotton dispute narrowly and the U.S.-Brazil relationship broadly, 
USTR Kirk noted the U.S. remains interested in concluding a Double 
Taxation Treaty with Brazil and identified technology and innovation 
sectors as key areas for future bilateral trade expansion, while 
deferring to GOB to articulate next steps on cotton.  On the margins 
of the lunch, AmCham Executive Director Gabriel Rico and Board 
Member Gaetano Crupi told Ambassador Kirk in reference to the recent 
WTO ruling against U.S. cotton supports, that any cross-retaliation 
by Brazil in the area of intellectual property rights would hurt 
Brazil more by harming investment and the public health sector. USTR 
Kirk encouraged the Brazilian private sector to raise this concern 
with the GOB. 
 
Private Sector Roundtable 
------------------------- 
 
¶3. (SBU) Following the AmCham luncheon, USTR Kirk held an 
off-the-record roundtable with representatives from the Brazilian 
business community.  USTR Kirk opened by expressing USG interest in 
expanding the bilateral trade and investment relationship. 
Representatives from Embraer, Duke Energy, Abbott Pharmaceutical, 
ADM, GM, the Sugar Growers' Association (UNICA), and the Sao Paulo 
Federation of Industries (FIESP) stressed the continued importance 
of the U.S. market for their goods, despite the increased focus on 
Brazil by Asian customers.  Most voiced concern that the prospect of 
Brazil engaging in cross-retaliation on intellectual property rights 
as part of the WTO cotton decision could harm investment and spark a 
trade war with the U.S.  The FIESP representative (also the head of 
the Brazilian Beef Producers group) suggested compensation or even 
an agreement to provide additional trade capacity-building 
development assistance in African countries, rather than 
retaliation, would be a preferred solution.  Industry 
representatives worried about the GOB increasing its presence in the 
oil sector as both an investor and a regulator.  Other issues of 
interest to industry participants were the need for a bilateral tax 
treaty, the protection of intellectual property rights, the 
increasing size of China's trade with Brazil, ethanol tariffs in the 
U.S., and opening the U.S. market for beef imports.  In closing, 
USTR Kirk expressed optimism that current differences with Brazil 
could be resolved through dialogue.  He reiterated USG interest in 
establishing a bilateral framework to deepen positive cooperation on 
trade and investment issues. 
 
Labor Roundtable 
---------------- 
 
¶4. (SBU) USTR Kirk concluded his Sao Paulo meetings with a 
roundtable discussion with leaders of Brazil's three largest labor 
unions, the Central Workers' Union (CUT), the General Workers Union 
(UGT) and Forca Sindical, as well as the director of the Campinas 
University Labor Studies Center.  Ambassador Kirk opened by 
 
BRASILIA 00001201  002 OF 004 
 
 
discussing President Obama's commitment to ensuring increased trade 
and also raised labor, environmental and social standards.  These 
Brazilian labor union representatives welcomed the President's 
attendance at a national labor summit the previous day in Pittsburgh 
in preparation for the G-20 Summit as evidence of the commitment to 
engage unions in the economic agenda.  They hailed USTR Kirk's visit 
and desire to meet with them as an important symbol of openness. 
They outlined the growing international cooperation among regional 
unions, the improvement of working conditions, and a growing labor 
voice in the development of economic social development policy 
during President Lula's administration.  They emphasized the 
importance of trade for job growth and acknowledged that disputes 
hurt all nations.  USTR Kirk welcomed Brazilian labor's openness to 
new market realities and emphasized the importance of continuing to 
work together to maximize the benefits of trade for all sectors. 
 
National Confederation of Industry (CNI) 
---------------------------------- ----- 
 
¶5. (SBU) The President of CNI, the umbrella association of 
state-level industry associations, accompanied by CNI Executive 
Director and CNI International Negotiations head, as well as the 
vice-president of FIRJAN (the Rio CNI branch) and the president of 
FIERGS (Rio Grande do Sul branch), laid out priorities for the 
U.S.-Brazil commercial relationship, including the Doha Round, 
energy cooperation, and a bilateral tax treaty (BTT).  The CNI 
President (who is also a member of congress) particularly underlined 
support for a BTT, noting that the Brazilian private sector needs to 
exert strong pressure on GOB to support and that he has stressed the 
importance of a BTT to the Brazilian congress as well: "This is very 
much a point on my agenda."  Interlocutors noted the private sector 
is rethinking its position on bilateral investment treaties (BITs). 
Noting BITs used to be "taboo," and many still worry that BITs can 
also negatively affect the private sector, CNI representatives said 
Brazil needs to explore a "new" kind of investment treaty, as 
Brazilian companies have become more aggressive in the last ten 
years pursuing FDI overseas.  Noting that large service providers, 
as well as industry, are already active in Europe and the United 
States, and will eventually expand significantly in Asia, CNI is 
beginning to urge a global approach to considering investment 
protections.  Recognizing the constraints of Mercosul membership, 
CNI emphasized eagerness to seize opportunities for deeper bilateral 
U.S.-Brazil cooperation on trade and investment issues.  Noting the 
United States has a bilateral TIFA with Uruguay "despite Mercosul," 
CNI believes latitude exists to create similar U.S.-Brazil ties. 
Ambassador Kirk indicated USG interest in developing a more 
structured framework to guide trade and investment relations; 
negotiating a BIT that would help companies in both countries; 
strengthening intellectual property rights cooperation to the 
benefit of technology development, innovation, and entrepreneurship; 
and exploring increased cooperation on services, including green 
technologies.  He also welcomed CNI participation in the OECD 
Business and Industry Advisory Committee, as well as CNI's strong 
support for eventual full GOB OECD membership. 
 
¶6. (SBU) CNI representatives underlined their interest in preserving 
GSP eligibility.  Amb. Kirk noted Congress intends the program the 
program to be a jumpstart rather than a lifeline.  CNI participants 
acknowledged that as trade and investment between the United States 
and Brazil deepens and closer links are negotiated, eventually GSP 
will become less important to Brazil.  Turning to climate change, 
CNI indicated concern regarding trade provisions in the 
Waxman-Markey bill, underlined domestic measures to address climate 
change, and stressed the importance of differentiated responsibility 
based on different development levels. 
 
¶7. (SBU) Regarding Argentina, CNI representatives emphasized that 
Brazil, despite being Mercosul members, were experiencing 
significant problems and delays due to Argentine licensing 
requirements.  As a tangible example, the FIERG representative noted 
his state relies heavily on footwear exports, where licenses have 
been held up six months per shipment, ensuring shoes actually arrive 
long after the intended season has ended. CNI indicated the 
Brazil/Argentine business forum had met the previous week, where 
Argentine business made clear they saw no indication that GOA would 
reverse these new requirements, in spite of the negative impact on 
Argentine business as well. CNI President emphasized that Brazilian 
companies are heavily integrated with Argentine companies, so 
 
BRASILIA 00001201  003.20 OF 004 
 
 
Argentina's "difficult political environment" is having a real 
impact industry can only hope to "attenuate" rather than "solve." 
Brazilian industry is losing market share in Argentina to China, an 
issue of deep concern.  CNI's executive secretary noted that CNI had 
prepared a analysis for GOB with a recommendation the government 
bring a WTO case against Argentina regarding the export licenses, 
but did not get much GOB support given geopolitical interests.  The 
CNI President explained that weighing against these "very 
deleterious practices" is Brazil's attempt to be a stabilizing force 
in the region and to avoid divisive issues.  Ultimately, he stated, 
GOB is trying to support Argentina to stop the GOA from aligning 
with Venezuela. 
 
FM Amorim 
--------- 
 
¶8. (SBU) FM Amorim, accompanied by his Chief of Staff as well as his 
Undersecretary and Assistant Secretaries for economic affairs, 
stated he had "no intellectual resistance" at all to an agreement 
with the United States, repeatedly emphasizing "without detriment to 
Mercosul commitments."  He noted that due to Mercosul, Brazil would 
not be able to address tariff issues bilaterally.  Amorim stated 
that "Mercosul for us is a political project to diminish our 
conflicts and resolve our problems."  Acknowledging that the 
Mercosul tariff mechanism is "very imperfect," Brazil still needed 
to respect the premise.  That said, Amorim continued, Brazil had 
economic agreements that did not address tariffs, suggesting 
Switzerland and Turkey as good examples.  Ambassador Kirk agreed 
USTR would review those agreements (NOTE: emailed to USTR).  Partly 
as a result of the CEO Forum recommendation, MRE is interested in 
exploring where deeper, "more imaginative" cooperation could be 
possible.  Such a framework would be positive in addressing aspects 
of trade and other economic cooperation, Amorim felt.  Amorim said 
he would not call an agreement with the United States a "TIFA" 
(Trade and Investment Framework Agreement), because he did not want 
to be locked into a pre-determined model, suggesting a name such as 
"economic cooperation" agreement might allow more flexibility.  In a 
separate meeting AUSTR Eissenstat held later in the day with CAMEX 
ExecSec, Commerce Ministry (MDIC) U/S for International Trade, and 
Minister Rousseff's international affairs advisor, interlocutors 
indicated strong support in their organizations as well for 
exploring TIFA possibilities.  Both Amorim and MDIC noted that 
mechanisms labeled "agreements" require congressional ratification, 
which can take years to achieve.  MDIC also noted "TIFA" is very 
close to the Portuguese word for typhoid ("tifo") and did not sound 
positive to Brazilian ears. 
 
¶9. (SBU) Amorim said the U.S. and Brazil should deepen cooperation 
toward a tax agreement.  He noted that Receita Federal 
(IRS-equivalent) is resisting a BTT, but that Brazilian companies 
operating in the United States want an agreement, therefore a BTT 
"is something we should do" even if not easy to achieve.  For an 
investment agreement, Amorim said Brazil was a "complicated 
country."  He recalled the dozen late-1990s BITs that the congress 
rejected on the grounds that domestic industry had to use the court 
system for disputes, while foreign companies could access 
international arbitration.  Commenting that while he "found that 
logic shaky and frankly we could use" investment protections in 
countries Brazil deals with, Amorim felt arbitration could be 
difficult to tackle in an agreement.  Nonetheless, he believed there 
could be scope to address principles such as MFN, NT and other 
aspects of an investment agreement. 
 
¶10. (SBU) Amorim urged Congress renew GSP for Brazil, noting most 
products are intra-firm trade and the small remainder benefit poor 
regions in the north/northeast of Brazil.  Amorim believed that, 
were GSP withdrawn from Brazil, Chinese rather than U.S. producers 
would benefit.  Acknowledging Brazil would not be able to remain in 
the GSP program in the long run, he stressed that Brazil needed 
access as least during the global economic crisis. 
 
¶11. (SBU) Amorim raised two SPS issues - beef access and the current 
rule-making underway on Santa Catarina pork regionalization.  Saying 
there would be "big symbolic value" in gaining Santa Catarina pork 
access, he was concerned that despite his understanding the 
technical assessment went well, the rule-making might become 
politicized.  Noting he needed to be able to say he raised the 
ethanol tariff issue, Amorim was well-aware of the previous Grassley 
 
BRASILIA 00001201  004.24 OF 004 
 
 
hold in the Senate and the strength of Congressional views on this 
issue.  On cotton, Amorim said he would tell the press MRE continues 
to study next steps. 
 
¶12. (SBU) Amorim indicated Haiti was a political more than economic 
issue for Brazil, given interest in its stability.  He said Brazil's 
lead on the UN troops had generated great interest in GOB in finding 
other ways Brazil can contribute, from development assistance to 
forest conservation to dam construction (noting US assistance with 
financing would be particularly welcome in the latter).  (Note: in 
the CAMEX/MDIC/Planalto meeting, interlocutors indicated that 
President Lula had explicitly tasked all 34 Ministries to find ways 
to assist Haiti - from trade preferences to sports exchanges.  MDIC 
is working on developing trade preferences ideas, but cautioned 
preferences would require a Mercosul as well as WTO waiver).  Amorim 
reiterated GOB interest in HOPE II access for Brazilian companies to 
produce in Haiti and export to the United States.  He stated that 
GOB is prepared to offer the United States reciprocal access, 
contingent on a Mercosul waiver from Paraguay (which he indicated 
was proving problematic) and congressional approval. 
 
¶13. (SBU) Ambassador Kirk raised industry concerns regarding the 
proposed new pre-salt legislation.  Amorim said he would look into 
the matter, but understood that the model GOB is proposing is 
similar to the one most oil countries use and that many companies 
have approached Brazil interested in participating.  Amorim stated 
the proposed model was not like Russia or Venezuela and Brazil's 
intention is not to have a Petrobras monopoly, noting Brazil needs 
foreign investment.  Given this is Brazil's first experience with 
extensive oil resources, he noted that there may be a bit of a 
learning curve for Brazil. 
 
¶14. (SBU) Amorim expressed strong support for intellectual property 
protections, noting his main problems in negotiating TRIPs at the 
time had been his constrained ability to guarantee enforcement 
resources, given other GOB budget priorities.  Ambassador Kirk and 
Amorim discussed common piracy challenges in Asia.  Amorim indicated 
family members (he has three children in the film industry) had been 
directly impacted by rampant piracy in Asia.  GOB interlocutors were 
visibly intrigued to learn that Canada poses a major piracy 
challenge for the United States and was on the Special 301 Priority 
Watch List. 
 
¶15. (SBU) COMMENT:  Ambassador Kirk's visit was highly successful in 
re-framing the tone of U.S.-Brazil relations and in gaining strong 
and widespread GOB and private sector support for a new framework 
for bilateral cooperation.  Cotton did not overwhelm MRE/USTR 
discussions.  Private sector interlocutors stressed concerns 
regarding any potential cross-retaliation on intellectual property 
rights and indicated compensation would be preferable to 
retaliation.  Press reporting on the visit was accurate and 
favorable, although one editorial (Estado) the day after the trip 
expressed disappointment that USG did not meet press-generated 
expectations that the trip should have focused on cotton retaliation 
and the Doha Round.  The visit was a significant impetus to creating 
deeper trade and investment ties between the United States and 
Brazil, and Brazilian interlocutors both in the private sector and 
the government expressed eagerness to explore concrete and tangible 
cooperation.  END COMMENT 
 
Message drafted by CG Sao Paulo and EMB Brasilia. The delegation has 
cleared this message. 
 
KUBISKE