Cars vs. Juice: US and Brazil Find Talk Easier Than Trade

Brazil wants to sell more shoes and orange juice to the United States while protecting its auto industry. The US wants to sell more autos and auto parts to Brazil, while keeping Brazilian competition to domestic orange growers and shoe manufacturers at bay.

The US, enjoying a healthy trade surplus with Brazil and anticipating an expanding Latin trade market, wants to keep the road to a hemispheric free-trade zone clear of potentially troublesome regional trade blocs.

Brazil sees things differently: It looks to Mercosur, the fast-rising customs union it has developed with neighboring countries, as a negotiating force strong enough to gradually construct a free-trade zone with the US - without giving away the store.

Therein lies the crux of the trade battle that has been brewing for several years between Brazil and the US. The pot threatens to boil over just as the White House paints a bright picture of President Clinton's renewed commitment to hemispheric relations as he prepares his first tour through the region this spring.

The public airing of longstanding frictions that pit the hemisphere's economic giant against South America's economic heavyweight has reached the US Congress and international gatherings and risen to the top of Brazilian editorial pages.

US Trade Representative-designate Charlene Barshefsky told the US lawmakers last month that Mercosur is an example of the kind of trade bloc that will complicate progress toward a hemispheric free-trade zone by 2005. If the US doesn't act quickly to bring other countries such as Chile into NAFTA and keep up momentum for hemispheric free trade, she warned, proliferating sub-regional agreements will strengthen and potentially derail the 2005 goal.

At the same time Ms. Barshefsky was making her declarations before Congress, a volley of shots erupted between the US and Brazil. Brazil's Foreign Minister Luis Felipe Lampreia blamed his country's $3 billion trade deficit with the US last year on US duties on such products as orange juice, steel, shoes, and textiles, while the US Ambassador to Brazil Melvyn Levitsky countered that other countries such as China have no problem selling shoes in the US. Brazil's problem, he said, is its high costs and lack of competitiveness, which make it weak in the international battle to succeed in the US market.

Brazilian officials express a mix of satisfaction and frustration over relations between their country and the US. The satisfaction comes for some from seeing that policies they consider justified for Brazil's and South America's long-term economic good unsettle the northern economic giant. The frustration arises for those who believe the US should welcome Latin America's economic opening and democratization with an enlightened policy encouraging the region's economic growth.

"The criticisms we hear of Mercosur are nonsense, and for very good reasons," says Renato Marques, director general for Latin American integration in Brazil's foreign ministry. "Mercosur has generated significant growth not just in internal [intra-Mercosur] trade, but also in trade with third countries." In addition, Mercosur countries can negotiate their own trade policies with other countries, he says, disproving the idea of the "bloc" that inhibits third -country trade.

If the US were really interested in encouraging economic growth in the hemisphere, Mr. Marques says, it would allow production relying on second-tier technology - such as shoemaking and orange juice production - to shift outside the US, while focusing high-tech production at home.

The same holds true for Europe, he adds, which is interested in markets for its industrial products, including automobiles, while looking to protect its farmers from Brazil's beef and chicken, coffee and sugar. Brazil has come under strong attack from both the US and the European Union for its system of car-import quotas. Last month, Brazil hosted hemispheric talks on steps for creating a free-trade zone stretching from Ontario to Tierra del Fuego. Brazil used those talks to air its preference for a South American trade group strong enough to negotiate with the US-led NAFTA.

Other officials say the US is going to have to accept that, while Brazil remains committed to the goal of hemispheric free trade, their plan may differ from the US route. "Mercosur was the way we found to increase our international competitiveness, but even though we know some perceive that as opposition to the US, that is not true," says Luiz Augusto de Castro Neves, director general for the Americas in the the Foreign Ministry. "But we strongly believe that within the process of implementing a hemispheric free-trade zone some countries may have to move at different paces, and sometimes taking different routes."

Even private business leaders like Mario Bernardini who has spent years railing against the high cost of doing business in Brazil, say acquiescing to US pressure now would be suicidal.

"It would be like putting Mike Tyson in a ring with a common citizen and saying, 'You're equal, compete," says Mr. Bernardini, president of So Paulo's MGM, a large construction machinery company. "It's not hard to guess who would soon be laid out flat."