Cablegate: Brazil: Cotton -Private Sector Offers Ideas and Concerns

VZCZCXYZ0125
OO RUEHWEB

DE RUEHSO #0120/01 0501536
ZNR UUUUU ZZH
O R 191535Z FEB 10
FM AMCONSUL SAO PAULO
TO RUEHC/SECSTATE WASHDC IMMEDIATE 0365
INFO RUCPDOC/DEPT OF COMMERCE WASHINGTON DC
RUEHAC/AMEMBASSY ASUNCION
RUEHBO/AMEMBASSY BOGOTA
RUEHBR/AMEMBASSY BRASILIA
RUEHBU/AMEMBASSY BUENOS AIRES
RUEHCV/AMEMBASSY CARACAS
RUEHLP/AMEMBASSY LA PAZ
RUEHMN/AMEMBASSY MONTEVIDEO
RUEHPE/AMEMBASSY LIMA
RUEHRG/AMCONSUL RECIFE
RUEHRI/AMCONSUL RIO DE JANEIRO
RUEHSO/AMCONSUL SAO PAULO

UNCLAS SAO PAULO 000120

SENSITIVE
SIPDIS

E.O. 12958: N/A
TAGS: ETRD ECON PGOV PREL EAGR BR
SUBJECT: BRAZIL: COTTON -PRIVATE SECTOR OFFERS IDEAS AND CONCERNS

REF: BRASILIA 172; POPP-CRAFT/KKALUTKIEWICZ EMAILS 02-19-2010

1. (SBU) Summary: Brazilian private sector representatives have
expressed their increasing concern about perceived potential
negative impact on bilateral trade if GOB moves forward with
retaliation in the cotton dispute. Representatives of two of
Brazil's most influential business associations have approached
post in recent days with interest in finding a constructive,
trade-enhancing solution to the dispute. Both AmCham and FIESP are
in the process of refining concrete ideas to suggest a constructive
way forward and perceive a window of opportunity for resolution
amid upcoming senior visits between now and mid-March. End
Summary.

AmCham Worried

--------------

2. (SBU) On the eve of Brazil's Carnival holiday week, Sao Paulo
American Chamber of Commerce Executive Director Gabriel Rico
contacted Sao Paulo Consul General February 12 to share the
Chamber's growing concerns regarding potential Brazilian government
retaliation in the WTO Cotton. Rico emphasized that AmCham Sao
Paulo, the largest bilateral American Chamber of Commerce in the
world, was increasingly worried that the GOB would move forward
with retaliation against U.S. products under the WTO cotton dispute
decision. Rico said that retaliation would not only financially
hurt companies providing listed products, but also had the
potential to set a more negative tone in the bilateral trade
relationship that could affect issues such as the extension of
Generalized System of Preferences (GSP) benefits for Brazil.
Information technology and pharmaceutical company members of AmCham
are particularly concerned by the prospect of cross-retaliation on
intellectual property-based products, including impeding/taxing
royalties or issuing of compulsory licenses. In recent separate
conversations, the Sao Paulo Federation of Industries (FIESP) has
emphasized similar concerns.

Finding a Trade Enhancing Solution

----------------------------------

3. (SBU) Rico said AmCham would like to assist in finding a
constructive resolution to the WTO Cotton dispute between the
United States and Brazil. He said that from his conversations with
Trade Minister Miguel Jorge and CAMEX Director Lydia Spindola, both
want to avoid worsening trade relations if at all possible. Rico
suggested that a goodwill gesture by the United States to promote
trade would likely give the Brazilian government the political
space it needs to avoid retaliation. FIESP International Trade
Director Roberto Gianetti Fonseca separately confirmed to us the
political importance of any gesture toward resolution that the USG
can make. Gianetti also agreed that Brazilian industry and most of
the GOB want to find a constructive solution that avoids
retaliation.

4. (SBU) In an effort to offer concrete recommendations, Rico told
the Consul General that AmCham had commissioned a study from the
Brazilian consulting firm Prospectiva to find market access
concessions that might provide a basis for proposing a
trade-enhancing solution. . This consultant's report suggests
increasing market access for Brazilian textile products. [NOTE:
Per ref B, Post has emailed copies of the report to EEB and USTR.
END NOTE]

5. (SBU) FIESP has told us they are also exploring with Brazilian
industry associations (particularly beef, ethanol, and cotton)
potential U.S. market access requests that potentially could be
proposed as a compensation package. MDIC and CAMEX interlocutors
in Brasilia have confirmed they support FIESP working with other
industry associations to identify specific ideas that could
potentially form a basis for compensation. As with AmCham, FIESP
believes the GOB would very likely accept a compromise compensation
as a resolution to the cotton case. Rico told the Consul General
that AmCham and FIESP are in contact about their respective efforts
and that AmCham was pressing to focus market-access proposals on
cotton and textile-based sectors.

Window of Opportunity

---------------------

6. (SBU) AmCham and FIESP both believe with upcoming senior USG
visits to Brazil, including the planned March 8-9 U.S.-Brazil CEO
Forum, there is an important window for discussion on finding a
resolution to the dispute. In the meantime, some AmCham member
companies from the IT and pharmaceutical industries are planning to
visit Washington February 24-26 to lobby stakeholders for a
constructive solution along the lines of the Prospectiva study.

7. (SBU) Over the longer term, FIESP has told us they plan to
continue efforts to deepen the bilateral economic relationship. As
part of that effort, FIESP President Paulo Skaf plans to lead a
senior-level business delegation to Washington before June 30 to
encourage a positive economic agenda and hopes to be received at
senior levels in the White House and USG agencies including the
State Department and USTR.

COMMENT

8. (SBU) Local industry interlocutors have made clear that they
want to see the cotton dispute resolved in a way that avoids
retaliation. They also want to ensure that the bilateral trade
relationship is not defined by this dispute and that both sides
continue to pursue deeper positive economic cooperation. In this
vein, industry interlocutors, like GOB officials, have separately
been extremely supportive of developing a Trade and Investment
Framework Agreement between the United States and Brazil as a means
to further deepen and broaden the positive bilateral trade and
investment relationship, and welcome upcoming high level visits as
a means to ensured continued forward momentum on positive
cooperation. END COMMENT.

9. (U) Cable was cleared/coordinated with Embassy Brasilia.
Popp

© Scoop Media