Brazil Deal to Improve Trade Facilitation, Wheat Imports, Change US Steel Restrictions

U.S. Trade Representative Robert Lighthizer said that the trade facilitation agreement that the U.S. and Brazil signed Oct. 19 is very similar to the USMCA trade facilitation chapter, and that traders should expect more incremental progress in coming months. “There’s a lot more that needs to be done,” Lighthizer said during a U.S. Chamber of Commerce program Oct. 20. “We have ongoing negotiations on ethanol. Brazilians like to talk about sugar. There’s a variety of things in the agriculture area.”

Lighthizer said that Brazil is taking steps to implement its wheat tariff rate quota, but otherwise did not mention any advances in agriculture as part of this limited trade deal.

Rep. Ron Kind, D-Wis., a pro-trade leader in the Democratic caucus, issued a statement Oct.19 that said, “It's unacceptable that the Administration finalized a trade agreement with Brazil that included no agricultural provisions whatsoever.”

Lighthizer said a full free trade agreement is not possible because Democrats in the House oppose it. He pointed to statements issued by House Ways and Means Chairman Richard Neal, D-Mass., and Trade Subcommittee Chairman Earl Blumenauer, D-Ore., which he characterized as “fairly strong statements” against this deal. Neal said that Lighthizer flouted Congress in what may be the 11th hour of the Trump administration. “With this trade deal, the Trump Administration has circumvented Congress to reward a Brazilian administration that lacks respect for basic human rights, the environment, and its own workers. Giving President Bolsonaro ammunition to claim that the United States endorses his behavior sullies our nation’s reputation as a country that demands our trade partners respect human rights and the rule of law.”

Blumenauer called the deal a slap in the face to Congress, and said, “Congress has delegated much of its trade authority to the USTR and this delegation depends on trust and mutual respect. Today’s agreement and Lighthizer’s other mini agreements entered into without Congressional buy-in are deteriorating the Congressional-Executive relationship and may force a rebalancing of delegated powers.” He also called the trade facilitation measures minimal and unenforceable.

The deal requires Brazil to issue and accept electronic phytosanitary certificates, an International Air Transport Association electronic air waybill and an electronic cargo XML within one year. It also asks that customs declarations be able to be submitted online. It also requires Brazil's customs authority to offer advance rulings to exporters sending goods to Brazil that cover classification, valuation, origin, or application of quotas, but that portion of the deal will expire after two years, unless both countries agree it should continue.

Generally, the deal asks Brazil to operate similarly to how the U.S. operates, with public information on tariffs, fees, required documentation, regulations, and so on, and when any of these things are to change, opportunity to comment on the changes. It says that Brazil's trusted trader and the U.S.'s trusted trader program should be harmonized. Any inspection -- which should be made on the basis of risk -- should employ non-intrusive technologies “wherever practicable,” the agreement says. It also says Brazil and the U.S. should, “to the extent possible, [use] non-intrusive technologies for processing expedited shipments and other small consignments.”

The Chamber of Commerce moderator asked Lighthizer about getting de minimis provisions in the future, but he avoided the question. The Express Association of America said it's glad for some progress, but noted that the trade facilitation protocol “does not contain dedicated sections on express delivery and the release of goods, areas where Brazil has particularly burdensome and protectionist barriers.” The trade group said that while international mail benefits from a $50 de minimis level, there is no de minimis for express shipments, and there's a flat charge of 60% on express shipments.

The document does not talk about wheat TRQs, nor does it talk about the U.S. TRQs on Brazilian steel. Lighthizer said during the webinar, “We made accommodations with each other in a very friendly and constructive way in the steel area.”

Senate Finance Committee Chairman Chuck Grassley, R-Iowa, in a phone call with reporters Oct. 20, called the agreement important, but added that “it’s kind of small potatoes” compared to the negotiations over ethanol exports. He expressed confidence that those negotiations, which have a 90-day deadline, will end up with the U.S. having at least as much access as it does now.