A Free Trade Agreement Could Benefit the U.S.-Brazil Trade Relationship.

• Author: Sufrin, Peter

The recent proposal of a Free Trade Agreement between the U.S. and Brazil could serve to substantially benefit both countries. If implemented, such an agreement would offer the opportunity for greater economic integration, and could significantly improve bilateral relations.

In 2018, trade between the two countries amounted to $103.5 billion. Brazil imports aircraft, machinery, petroleum products, electronics, and optical and medical instruments from the U.S., while its main exports to the U.S. consist of crude oil, aircraft, iron and steel, and machinery. According to a recent State Department report, the United States is Brazil's second largest trading partner, and Brazil is the U.S.'s ninth largest trading partner. Both countries are members of the United Nations, OAS, the IDB, G-20, IMF, the WTO and the World Bank.

Nonetheless, Brazil remains a relatively closed economy. The lack of trade agreements and notoriously high tariffs are the legacy of 20th century import substitution industrialization policy. Not until the 1990s did the Brazilian government address trade liberalization, privatization, competition, and productivity as a way to increase commodities exports, and promote growth in imports of manufactured products.

Despite this period of trade liberalization in the 1990s, the past two decades have been marked by a return to protectionism, stifling the prospect of pan-American regional integration. During this time, Brazil moved to end dependence on the United States, neglecting international trade to its own detriment.

But today there is significant cause for optimism in U.S.-Brazil trade relations. A pioneering 2019 study by the National Confederation of Industry, the Brazil-U.S. Business Council, and the American Chamber of Commerce commissioned by Brazil's Getulio Vargas Foundation highlights how the two countries can seek to collaborate. In particular, the report describes the potential for a U.S.-Brazil Commercial Dialogue, a U.S.-Brazil Social Security Agreement, an Open Skies agreement, and space cooperation, as well as an improvement in regulatory practices and technical barriers to trade. The report argues that reduction in non-tariff barriers of 50% by 2030 would stimulate GDP growth for both countries.

An April 2019 Atlantic Council report noted the potential for growth in trade between the two countries, starting from a low base in which only 2.4% of U.S. exports go to Brazil, and Brazilian imports to the U.S. rank as...