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### Viewing cable 03BRASILIA907, BRAZIL: SERVICES HELD HOSTAGE TO AGRICULTURE

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Reference ID | Created | Released | Classification | Origin
--- | --- | --- | --- | ---
03BRASILIA907 | 2003-03-24 13:12 | 2011-07-11 00:00 | UNCLASSIFIED//FOR OFFICIAL USE ONLY | Embassy Brasilia

`

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

` `

    UNCLAS SECTION 01 OF 02 BRASILIA 000907

    SIPDIS

    SENSITIVE

    GENEVA - PLEASE PASS TO USTR - ALICIA GREENIDGE
    USTR FOR AMAIN
    DEPT FOR EB/TPP/MTA/MST AWHITTEN

    E.O. 12958: N/A
    TAGS: ETRD ECON WTRO FTAA
    SUBJECT: BRAZIL: SERVICES HELD HOSTAGE TO AGRICULTURE

    REF: SECSTATE 50753

    SENSITIVE BUT UNCLASSIFIED

    ¶1. (U) Econoff met on March 12 with Felipe Hees of the
    Services, Investment and Financial Issues Division of
    Itamaraty to discuss prospects for Brazil's submission of
    services offers in the WTO (reftel) and FTAA negotiations.

    WTO - Submission by Deadline Is Doubtful

    ¶2. (U) Although Hees stressed that a final decision has not
    been made, he confirmed reports that Brazil may not submit a
    WTO services offer by March 31.  The hold-up would not be
    technical.  Echoing comments made by Brazilian negotiators in
    Geneva, Hees explained that the GOB is considering the
    tactical pros and cons of withholding its services offer to
    protest what it views as a lack of progress in areas of vital
    interest for Brazil.  The most important of these areas is
    agriculture, and the GOB sees little prospect that modalities
    for the agriculture negotiations will be agreed to by the
    March 31 deadline.  Hees laid blame for the difficulties in
    the agriculture negotiations squarely on the European Union
    (EU).  Econoff noted USG concerns that momentum for the Doha
    Development Agenda (DDA) may unravel if a mounting number of
    benchmarks are missed, but Hees responded that without
    movement by the EU in agriculture, the DDA is dead anyway.
    In discussions with Ambassador on March 17, Foreign Minister
    Amorim suggested that if Brazil does submit a services offer
    by March 31, it will be modest.

    ¶3. (U) While Brazil's principal focus is agriculture, Hees
    claimed that missed deadlines in other sensitive areas (TRIPS
    and Public Health, Special and Differential Treatment), and
    low expectations for results on rules (antidumping, etc.) all
    make it extremely difficult for the GOB to domestically
    defend moving forward in negotiating areas where its posture
    is more "defensive."  He restated the GOB position that all
    areas of the DDA must progress together, rejecting as
    improbable that a satisfactory agreement would result if
    evaluation of the negotiations as a single-undertaking only
    transpires at the end of the process.

    FTAA - Services Lever

    ¶4. (SBU) The GOB has already decided to use its services
    offer within the FTAA as a tactical lever.  According to
    Hees, the GOB had prepared its offer for the February 15
    deadline, but it was withheld at the last minute by order of
    Foreign Minister Amorim, with the acquiescence of President
    Lula.  While claiming that he is not privy to Minister
    Amorim's reasoning, Hees said he understood from
    conversations within the Ministry that the decision was a
    reaction to disappointment with other aspects of the FTAA
    negotiations. In particular, he noted the GOB's very negative
    reaction to Canada's market access offers for goods, because
    it excluded 97 agricultural products, including many key
    Brazilian exports.
    GOB Demands Respect

    ¶5. (U) Leaving aside Brazil's decision to delay submission of
    its offer, Hees used the opportunity to express frustration
    with the U.S. approach in FTAA services negotiations.  His
    core accusation was that discussions between the U.S. and
    Mercosul delegations are less than frank, within plenary as
    well as within bilateral meetings.  He was particularly vexed
    by what he portrayed as a lack of forthrightness in the way
    the initial U.S. services offer was characterized in Panama.
    According to Hees, the U.S. delegation described the U.S.
    offer in plenary as covering "all levels of the USG," but
    that after reading the text, the Mercosul delegation
    concluded that it does not.  To illustrate, Hees cited an
    exception given in Annex 1 (p.17) that allowed all
    sub-federal levels of government to enact legislation that
    did not accord national treatment.   By his read, this means
    that any state within the United States would be able to
    enact legislation that discriminates against Brazilian
    service providers, without violating USG commitments.  Hees
    said the GOB recognizes that the U.S. government structure
    poses challenges for devising services commitments; he
    suggested that the GOB would display more understanding
    regarding this difficulty, if the exchanges between the U.S.
    and Mercosul delegations would be more candid.  He also
    claimed that information provided on U.S. willingness to
    negotiate Mode 4 concessions was misleading.  Hees stressed
    that more candid exchanges between the delegations could
    reduce friction and help move the negotiations forward
    through productive dialog.
    ¶6. (U) Hees also termed the U.S. "mantra" that offers be
    constructed as "negative" lists as a source of friction.
    Hees claimed that the GOB has not yet rejected the
    possibility of using a negative list.  However, he asserted
    that the U.S. delegation's insistence that the negative list
    approach be adopted, without the benefit of a substantive
    discussion of the pros and cons of other approaches, forces
    Brazil to react defensively, taking a similarly rigid stance
    in favor of a positive list.  More or less, Hees said that
    Brazil has to be convinced ) not told -- that a negative
    list approach is better.  He noted that Peru and Colombia had
    constructed their offers in yet different ways and thought
    these approaches might also have something to offer to the
    debate.

    ¶7. (U) Hees argued that the premise that a negative list
    provides for more comprehensive commitments is basically
    flawed, noting that some negative list offers submitted by
    FTAA countries were far from comprehensive ) the devil being
    in the details of the annexes ) including for future
    services.  Countries intent on liberalizing can do so under
    either approach, just as countries can also opt for keeping
    their markets closed, he opined.  Furthermore, he claimed
    that a negative list, at least according to the U.S. offer,
    provides less, not more, specificity regarding restrictions.
    He noted an annex entry covering "all sectors," which
    identified applicable U.S. laws, but without indicating how
    the laws would affect provision of the services in the
    sector; there was no mention of the specific subsectors or
    modes affected.  Expanding on this, Hees argued that there is
    also real value to sticking to a system (GATS) that
    government officials throughout the hemisphere now know how
    to read and use, pointing out that they will have to be able
    to explain to their exporters in detail what services
    openings and restrictions they will face.

    ¶8. (U) In a final note, Hees asked that due respect be given
    to Brazil considering the extent to which services have
    already been liberalized in the country.  Hees complained
    that the U.S. appears to approach Brazil much in the same way
    as it approaches countries with closed services sectors, he
    presumes because constitutional difficulties prevented
    ratification of Brazil's GATS commitments.  He suggested that
    acknowledgment of Brazil's current openness would create a
    more positive environment for Brazil to consider requests for
    improving access.
    HRINAK

`