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### Viewing cable 07BRASILIA2174, BRAZIL: HEAD OF FTA UNIT DISCUSSES CURRENT NEGOTIATIONS

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Reference ID | Created | Released | Classification | Origin
--- | --- | --- | --- | ---
07BRASILIA2174 | 2007-11-23 14:49 | 2011-07-11 00:00 | UNCLASSIFIED//FOR OFFICIAL USE ONLY | Embassy Brasilia

`

    VZCZCXRO3995
    RR RUEHRG
    DE RUEHBR #2174/01 3271449
    ZNR UUUUU ZZH
    R 231449Z NOV 07
    FM AMEMBASSY BRASILIA
    TO RUEHC/SECSTATE WASHDC 0507
    INFO RUEHRI/AMCONSUL RIO DE JANEIRO 5472
    RUEHSO/AMCONSUL SAO PAULO 1209
    RUEHRG/AMCONSUL RECIFE 7406
    RUEHBS/USEU BRUSSELS

` `

    UNCLAS SECTION 01 OF 02 BRASILIA 002174

    SIPDIS

    SENSITIVE
    SIPDIS

    STATE PASS USTR KATE DUCKWORTH

    E.O. 12958:N/A
    TAGS: ETRD ECON PREL BR
    SUBJECT:  BRAZIL: HEAD OF FTA UNIT DISCUSSES CURRENT NEGOTIATIONS

    ¶1. (U) SUMMARY: In a recent meeting with Evandro Didonet, Director
    of the Department of International Negotiations at Itamaraty,
    Didonet reviewed the status of ongoing Mercosul FTA negotiations,
    including Israel, GCC, India, EU and the preferential agreement with
    SACU.  Brazil does not negotiate FTAs bilaterally, but only with
    Mercosul partners.  No FTA has yet completed the negotiation,
    signature and ratification process.  A cumbersome Congressional
    ratification process will be a challenge for any eventual FTA
    ratification.  END SUMMARY

    -----------------------------------------
    MRE International Negotiations Department
    -----------------------------------------

    ¶2. (U) Evandro Didonet, Director of the Department of International
    Negotiations at Itamaraty, explained the Foreign Ministry's
    structure dealing with trade policy in a recent meeting with
    EconCouns and PolCouns.  There are three departments for trade
    policy.  Director Alfonso do Cardoso leads the department
    responsible for Mercosul and for regional integration.  Director
    Carlos Marcio Cozendey leads the Department of Economic Affairs,
    covering WTO and other international negotiations.  Director
    Didonet's department is responsible for FTA negotiations.  While the
    Mercosul office handles regional integration work within Latin
    America, Didonet's office handles the United States and Canada.
    Didonet's Department includes five senior diplomats and ten junior
    diplomats, who coordinate with AgMin, MDIC and other ministries to
    lead trade negotiations.

    ¶3. (U) Didonet explained that Brazil always negotiates FTAs jointly
    with the Mercosul bloc.  However, he emphasized, negotiations always
    build in "flexibility" for each Mercosul partner.  For example, he
    offered, Argentina has sensitivities regarding agrochemicals, so
    only the other three Mercosul members made market access offers in
    this area in negotiations with Israel.  Similarly, part of Israel's
    agricultural offer applies only to Paraguay and Uruguay; Brazil and
    Argentina ceded certain opportunities so that Israel would not feel
    threatened by too much access, Didonet explained.  This
    "flexibility" is an internal principle as well, said Didonet
    alluding to member exemptions to the Mercosul common external
    tariff, "allowing countries to feel more comfortable to be in
    Mercosul."  Mercosul FTAs do not necessarily include services, IPR
    or investment chapters.  No Mercosul FTAs have been signed, ratified
    and implemented, according to Didonet.

    -----------------
    FTAs and Congress
    -----------------

    ¶4. (U) The process to ratify international agreements, including
    trade agreements, is lengthy in Brazil, according to Didonet.
    Agreements must go first to the Chamber of Deputies, where they are
    reviewed (consecutively, not in parallel) by the Foreign Affairs
    committee, Economic Affairs committee, Justice and Legal Affairs
    committee, plus environment or other relevant committees.  Each
    committee must approve the agreement before it goes on to the next
    committee and eventually to the plenary for a full Chamber vote.
    The agreement then goes to the Senate, where a similar process
    unfolds.  The situation is further complicated, added Didonet, by
    the rule that Congress must first consider any executive order
    signed by the President to decide whether to turn it into
    legislation before any other legislative business can be taken up.
    This requirement considerably disrupts legislative calendar
    planning. (Note:  the November 19 Gazeta Mercantil reported that
    overall 165 international treaties are backlogged in Congress for
    ratification).

    --------------------
    Current Negotiations
    --------------------

    ¶5. (SBU) Turning to specific negotiations, Didonet indicated that
    negotiations on a goods-only FTA with Israel are close to
    completion; the sticking point remains agricultural market access,
    where Brazil and Argentina are satisfied but Paraguay and Uruguay
    have remaining concerns.   In Mercosul negotiations with the GCC
    (which include investment and services sections), "we are not as
    close as it may seem," Didonet explained.  While texts and product
    lists are well advanced, a fundamental issue remains.  GCC's most
    competitive sector and primary area of interest is petrochemicals,
    the area where Brazilian industry has significant concerns.  Didonet
    underlined that as far as GCC is concerned, petrochemicals market
    access is the only reason to negotiate an FTA.  Mercosul agreed on a
    framework for FTA negotiations with both Israel and GCC in 2005 and
    began negotiating in 2006, according to Didonet.

    ¶6. (SBU) The agreement Mercosul has been negotiting with SACU is

    BRASILIA 00002174  002 OF 002

    not an FTA, but rather a preference agreement.  In October in
    Pretoria, negotiators closed agricultural and non-agricultural
    market access sections of the text.  The agreement covers only 1000
    eight-digit tariff lines (15 percent of two-way trade in tariff-line
    terms; Brazil exports about 1.5 billion USD to SACU and SACU exports
    400-500 million dollars to Brazil, per Didonet).  The parties hope
    to sign the agreement soon, possibly at the Mercosul Summit.
    Remaining work includes rules of origin and free trade zones (a SACU
    concern).  SPS and TBT are done and are very short sections
    acknowledging their importance and welcoming possible future work
    toward mutual recognition of standards.  The SACU agreement includes
    an annex on customs cooperation, a first step toward negotiating an
    FTA in the future, according to Didonet.  Brazilian industry had
    wanted more access into SACU, but the African parties simply were
    not ready yet.  As would be the process for FTAs, the agreement will
    go through all four Mercosul members' congresses after signature for
    ratification.  However, SACU's internal procedures to agree to the
    text and to sign are apparently lengthy and complex and may delay
    beyond the Mercosul Summit.  Didonet hinted at some frustration in
    negotiating with SACU; before the October negotiations, the last
    negotiating session had been in August 2006 and "ever since, we've
    been knocking on the door - it seems hard for them to get ready."

    ¶7. (SBU) Mercosul is also negotiating a small agreement with India.
    Five percent of eight-digit tariff lines (450 lines) are under
    negotiation.  According to Didonet, India is not interested in
    broadening the negotiations until a 2005 agreement with Mercosul is
    ratified (only Paraguay congress has ratified, while Argentina,
    Uraguay and Brazil have not).  The agreement awaits a vote on the
    floor of the Brazilian Chamber of Deputies before proceeding to the
    Senate.  Per Didonet, Amorim made a personal effort to get the
    agreement through committees in the Chamber, but inertia in
    congress, rather than any political objection, continues to delay
    progress.

    ¶8. (SBU) Didonet acknowledged that negotiations with the EU have
    stalled.  Lists have been exchanged and texts prepared, but
    unresolved demands remain on both sides.  The EU has indicated it
    wants "clarity" on Doha negotiations before re-engaging with
    Mercosul.  He emphasized that EU claims both sides await this
    "clarity" before proceeding, but it is really just the EU.  The EU
    is offering quotas for agricultural trade rather than unrestricted
    access and needs to see what it gets overall in Doha before deciding
    what subset Mercosul can have - a position Brazil is not sympathetic
    to support.

    ¶9. (SBU) In addition to negotiations, Mercosul also has "dialogues,"
    with Australia, Japan, Korea, China, and is starting a dialogue with
    Russia.

    -------------------
    FUTURE NEGOTIATIONS
    -------------------

    ¶10. (SBU) Didonet noted that Mercosul is in internal discussions on
    whether and which new negotiations to launch next year.  The
    priority is to complete on-going negotiations, particularly the EU
    agreement, according to Didonet.  In addition, Mercosul is
    discussing whether to agree in future only to negotiate full FTAs
    and to avoid interim agreements like the preference agreement with
    SACU.  Didonet advocates only negotiating full FTAs rather than ad
    hoc time-consuming lesser value agreements.  Asked about the effect
    Venezuela's entry into Mercosul might have on the various
    negotiations, Didonet confirmed that Venezuelan representatives are
    currently sitting in on various negotiations as observers.  He said
    that negotiators would address Venezuelan participation once their
    entry is approved, but was clearly aware that it held the potential
    for complicating negotiations enormously.

    ¶11. (SBU) COMMENT:  Evandro Didonet is a knowledgeable and
    experienced trade diplomat.  He travels frequently and is relatively
    rarely in Brasilia.  He is a pragmatic negotiator, clearly as
    well-versed in the political priorities that are central to
    Mercosul's existence as he is in the economic issues that shape
    Mercosul's negotiating positions.  Taken together, Didonet's
    comments on the various negotiations under way between Mercosul and
    other groups provide a remarkably candid assessment of both the
    highly political nature of these negotiations and the fact that most
    of them are either stalled or economically insignificant.  END
    COMMENT

    CHICOLA

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