U.S.-Brazil Trade Relations

U.S.-Brazil Trade Relations

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Updated October 23, 2020
U.S.-Brazil Trade Relations
Overview
countries such as the United States and Canada, corruption,
The United States and Brazil have enjoyed a strong
and tax and other policies.
economic relationship for many years. In 2019, Brazil
From 1989 to 1995, Brazil’s average applied tariffs fell
ranked second among the United States’ Latin American
notably from 329% to 11%, and average applied tariffs on
trading partners in goods and 19th among all U.S. trading
manufactured products fell from 18% in 1998 to 9% in
partners. In March 2020, President Donald Trump and
2006. Nevertheless, Brazil’s tariffs generally remain higher
President Jair Bolsonaro announced plans to deepen the
than those of the United States. According to the World
bilateral trade relationship and potentially move toward free
Trade Organization (WTO), Brazil’s trade-weighted tariff
trade agreement (FTA) negotiations in the years to come.
Those discussions led to a “mini trade deal,” signed in
rate is 10.0% (see Table 1).
October 2020 to facilitate trade, improve regulatory
Table 1. U.S. and Brazil Average Tariff Rates, 2019
cooperation, and strengthen anti-corruption efforts.
Simple
President Bolsonaro, who entered into office in January
Simple Final
MFN
Trade
2019, is pursuing free-market reforms during his four-year
Country
Bound
Applied*
Weighted**
term, which ends in December 2022. He has taken steps to
cooperate with the United States on issues of mutual
United States
3.4
3.3
2.3
interest. Brazil’s long-term trade strategy, however, is
bound by its status as a party to the Mercado Común del
Brazil
31.4
13.4
10.2
Sur (MERCOSUR), a common market trade arrangement
Source: WTO’s World Tariff Profiles 2019.
with Argentina, Paraguay and Uruguay. If Brazil were to
Notes: *Most-favored nation (MFN) basis. **2018 data.
pursue an FTA, it would have to decide whether to pursue it
together with MERCOSUR countries or bilaterally, which
Since 1991, Brazil has been part of MERCOSUR, which
would require changing MERCOSUR’s rules.
has a high common external tariff and various nontariff
barriers. Recently, Brazil and its MERCOSUR partners
The United States has endorsed Brazil’s accession to the
have expressed interest in rethinking the trade arrangement.
Organization for Economic Cooperation and Development
In 2019, MERCOSUR and the European Union concluded
(OECD). The Trump Administration’s position is that the
FTA negotiations, which would eliminate tariffs in several
United States and Brazil have numerous reasons to build
key sectors, including autos, machinery products, and dairy
upon prior progress made in the economic relationship.
and other agricultural products. The agreement, which has
Some policymakers state that strengthening trade ties with
yet to be signed, would open Brazil’s market to EU
Brazil will help bolster U.S. interests in the region given
products and could affect U.S. exports to Brazil.
China’s increasing presence. As Latin America faces
increasing uncertainty amid global power shifts and
U.S.-Brazil “Mini Trade Deal”
external shocks, there also may be other strategic and
In March 2020, Presidents Trump and Bolsonaro met in the
economic reasons to strengthen trade ties.
United States and agreed to accelerate bilateral dialogue
Brazil’s Economy
under the 2011 Agreement on Trade and Economic
Brazil is the world’s fifth-largest country and ninth-largest
Cooperation (ATEC). On October 20, 2020, the United
economy, with a gross domestic product (GDP) of $1.8
States and Brazil announced the successful conclusion of
trillion and a GDP per capita of $8,751. According to the
the Protocol on Trade Rules and Transparency, which
International Monetary Fund, Brazil’s real GDP will
complements Brazil’s domestic reforms to improve
contract by an estimated 5.8% in 2020 and only partly
competitiveness, regulatory reform and economic freedom,
recover to 2.8% growth in 2021. Economists do not expect
and adds three annexes to the ATEC:
output to return to pre-coronavirus levels until 2025.
 Trade Facilitation and Customs Administration:
Brazil’s unemployment rate, which has remained above
provisions on advance rulings (prior “binding”
10% since 2016, is expected to rise to 14.1% by 2021.
information about tariff classification and customs
Since 2011, Brazil’s economy has been hampered by a
treatment applied to specific goods at time of
number of external factors. Chief among these was a drop
importation), disciplines on penalties imposed by
in commodity prices. Waning global demand for products
customs administration in each country, single window
like minerals, crude oil, and agricultural goods were
enabling traders to submit information requirements
particularly damaging, as these products make up
through one entry point, authorized economic operator
significant portions of Brazil’s exports. Other factors
(customs-to-business partnerships facilitating legitimate
include the depreciation of the national currency, a decline
low-risk trade), and automated customs procedures to
in consumption, the spike in global oil supply driven by
increase efficiency.
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U.S.-Brazil Trade Relations
 Good Regulatory Practices (GRP): similar to the GRP
totaled $45.3 billion in 2019 (by ultimate beneficial owner,
framework in the U.S.-Mexico-Canada Agreement
UBO), a decrease of 0.6% from 2018 (Figure 2).
(USMCA), including greater transparency in Brazilian

regulatory procedures.
 Anti-Corruption: obligations to adopt and maintain
Figure 2. Stock of U.S.-Brazil Foreign Direct
measures to combat bribery and corruption, money
Investment (FDI)
laundering, recovery of proceeds of corruption, denial of
safe haven, whistleblower protection.
The protocol does not require U.S. congressional approval,
but will need approval by the Brazilian Congress prior to its
entry into force. While some Members of Congress see the
trade deal as a way to increase U.S. investment and promote
U.S. values in the Hemisphere, others oppose an expanded
economic partnership under the Bolsonaro Administration
due to human rights, environmental and other concerns.
U.S.-Brazil Trade
Brazil has duty-free benefits under the U.S. Generalized
System of Preferences (GSP) program, which provides
nonreciprocal, duty-free tariff treatment to certain U.S.
imports from designated developing countries. Brazil was

the fourth-largest beneficiary of the program in 2019, with
Source: CRS analysis, Bureau of Economic Analysis (BEA) data.
duty-free imports to the United States valued at $2.3 billion,
or 7.6% of all U.S. merchandise imports from Brazil.
During the Doha Round of multilateral trade negotiations
that began in 2001, and in the aftermath of their breakdown,
Despite historical differences in trade policy approaches
Brazil has played a critical role in rallying other developing
between the two countries, U.S.-Brazil trade relations are
countries into a powerful bloc within the WTO. It has been
strong and have deepened in the past two decades.
a leading voice in calling for a reduction in agricultural
Although China overtook the United States as Brazil’s
tariffs in developed nations and in resisting calls for greater
access to developing nations’ services and industrial
largest trading partner in 2008, U.S. trade with Brazil has
more than doubled since 1999 (in nominal terms),
sectors. In October 2014, the United States and Brazil
especially in the energy and aerospace industries.
settled a longstanding WTO dispute over U.S. government
support for cotton farmers. The United States has brought
Total merchandise trade (exports plus imports) between the
four WTO cases against Brazil on the automotive sector,
United States and Brazil totaled $73.5 billion in 2019, with
import prices, and patent protection. In March 2019, Brazil
$42.7 billion in U.S. exports and $30.8 billion in U.S.
agreed to forgo WTO special and deferential treatment for
imports. The United States has had a trade surplus ($11.9
developing countries and treat itself as a developed country
billion in 2019) with Brazil since 2008 (Figure 1). It also
in exchange for U.S. support in its effort to join the OECD.
had a services trade surplus of $17.8 billion in 2019.
Brazil formally applied to accede to the WTO Agreement
Merchandise trade peaked in 2012, at $75.6 billion.
on Government Procurement (GPA) in May 2020.
Figure 1. U.S. Merchandise Trade with Brazil
Issues for Congress
While an FTA between the United States and Brazil may
continue to be an elusive proposition, government-to-
government dialogues have moved towards a more
collaborative relationship. Congress may consider exploring
prospects for enhancing economic and trade relations with
Brazil under a “building block approach” towards an
eventual FTA. Congress may also examine a framework for
furthering trade ties and addressing trade issues, such as
intellectual property rights protection, and digital trade.
Several U.S. policymakers have expressed increasing
interest in expanding trade ties with Brazil by using

USMCA chapters as templates for smaller agreements,
Source: CRS using U.S. International Trade Commission data.
while others contend that Brazil must first make strides on
The accumulated stock of U.S. foreign direct investment
human rights, the environment, corruption and tax reform
(FDI) in Brazil was $81.7 billion in 2019, a $2.7 billion
before the two countries could move forward on any
(3.4%) increase from 2018, but lower than the peak reached
negotiations. (See CRS Report RL33456, Brazil:
in 2012 of $76.8 billion. Most U.S. FDI in Brazil (31.8%) is
Background and U.S. Relations, by Peter J. Meyer.)
in manufacturing ($26.0 billion). Brazil’s accumulated
stock of FDI in the United States, mostly in manufacturing,
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U.S.-Brazil Trade Relations

Andres B. Schwarzenberg, Analyst in International Trade
and Finance
M. Angeles Villarreal, Specialist in International Trade
IF10447
and Finance

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