Two weeks before the US election, the US and Brazil have agreed a bilateral “mini” trade deal to facilitate trade, strengthen regulatory practices and clampdown on corruption, but the finer details of the agreement have yet to be announced.
The pact, revealed on October 19 at the US-Brazil Connect Summit hosted by the US Chamber of Commerce, will aim to boost trade between the two nations. The announcement follows a series of other smaller trade deals agreed by the Trump administration, including with Japan and China. In February, Trump travelled to India to clinch a similar agreement, but it fell through and the two are yet to reach a deal on trade.
In contrast to a free trade agreement (FTA), smaller trade deals do not require Congress’ approval, which can be a lengthy process that carries no certainty of authorisation. By describing the deal as a contract between parties, the administration avoids congressional involvement.
The US-Brazil deal comes only a few weeks before the US presidential election on November 3 in which the current US President Donald Trump is vying for a second term against Democratic candidate Joe Biden.
Trump is looking for trade wins to convince voters that he can promote economic growth – amid the virus, US GDP is set to decline by 4.3% this year, according to the International Monetary Fund (IMF). Aside from the economic impact, Covid-19 has proven devastating for the US under the Trump administration, having thus far taken the lives of more than 225,000 people.
In 2018, Brazil was the US’ 13th-largest trading partner in terms of goods. That year, US goods and services trade with Brazil totalled US$105bn, with US exports, including fuel and aircraft, valued at US$67.8bn and imports from Brazil, such as fuel and iron and steel, totalling US$37.2bn.
“There is a deep understanding all across America that the American people benefit from a set of deeper, closer ties with all of our friends in the western hemisphere and in South America, and it is not possible to have a solid, capable, deep set of relationships there without an anchor like Brazil,” says US secretary of state Mike Pompeo.
Myron Brilliant, executive vice-president and head of international affairs at the US Chamber of Commerce, says that there is still more to do on key priorities, including in digital trade and express shipment provision. “We ask both governments to return to the negotiating table as soon as possible.”
Commenting on the deal, Brazilian President Jair Bolsonaro says: “This triple package will be able to slash red tape and bring about even more growth to our bilateral trade with beneficial effects to the flow of investments as well.”
At the start of the pandemic, the far-right president played down the virus as a media “fantasy” and a “trick”. Brazil has reported the world’s second highest number of Covid-19 deaths at more than 150,000, and its GDP is set to decline by 5.8% this year.
During the summit, Pompeo also underscored the need for the US and Brazil to reduce their dependence on imports from China for their own security. “To the extent we can find ways that we can increase the trade between our two countries, we can… decrease each of our two nations’ dependence for critical items” coming from China, he said as reported by Reuters.
However, Brazil is reliant on China as its biggest trading partner, with much of its soybean and iron ore exports going to the Asian trading giant. Cutting ties with it could prove detrimental to the country, which is already struggling economically because of Covid-19 and lower commodity prices and demand.
The US and China have been at loggerheads this year over coronavirus, trade and Hong Kong. Shortly after securing a trade agreement in January, the global pandemic was declared in March, crippling economies around the globe and putting national healthcare systems under pressure. The Trump administration has frequently taken aim at China over the virus – which is widely thought to have originated in Wuhan late last year.