"This is an exhilarating time in the Brazil-U.S. relationship:
a time of change, a time of challenge, but one that moves
forward from a foundation of enduring friendship,
shared values and common goals."

The election of Luiz Inácio Lula da Silva as president of Brazil marks the beginning of a new chapter in U.S.-Brazilian relations, and the United States looks forward to building a relationship with the new government and forging an even stronger partnership with Brazil, says Deputy U.S. Trade Representative (USTR) Peter Allgeier.

Allgeier went to Brazil to attend a November 19 parliamentary summit on hemispheric integration being held by Brazil's lower house of congress. In November 18 remarks before the American Chamber of Commerce in São Paulo, Allgeier said that during the course of his visit he hopes to gain a better understanding of how Brazil's transition process will shape the hemispheric trade agenda.

Brazil's president-elect and USTR Robert Zoellick share a common goal of lifting people out of poverty in the hemisphere, Allgeier said. Given the important role trade can play in the creation and distribution of wealth and in the alleviation of poverty, Allgeier said he did not anticipate that Brazil's change of government would translate into an alteration of the trade agenda.

Instead, Allgeier predicted that working together to advance an ambitious hemispheric trade agenda as co-chairs of the FTAA negotiations should provide an opportunity for Brazil and the United States to forge a closer relationship.

"We fully expect our common goals to remain unchanged, and we expect the partnership to become even stronger," he said.

Allgeier added that such bilateral collaborations should also establish an example for the rest of the hemisphere.

"We have a great opportunity to strengthen our relationship in ways that we have not had in the past," he said. "The way in which we cooperate as co-chairs [of the FTAA process] will set the tone for how the other 32 countries in the negotiations work together."

Allgeier indicated that the meeting of hemispheric trade ministers in Quito, Ecuador, on November 1 laid the foundation for a promising start to the U.S.-Brazilian co-chairmanship and facilitated significant steps toward completing the FTAA negotiations by the target date of January 2005.

Among the important advances in Quito, Allgeier cited the naming of the chairmen of the nine FTAA negotiating groups in areas such as investment, services and government procurement—as well as the publication of the draft text of the accord. He also applauded the establishment of a detailed schedule for market access negotiations and the launching of a hemispheric cooperation program that will improve the ability of the region's smaller and less developed economies to participate in FTAA talks and to benefit from the eventual agreement.

In view of concerns expressed by Brazil and other nations over the scope of the FTAA talks, the USTR official indicated that the United States will leave nothing off the table in FTAA negotiations and expected that its partners will do the same.

Allgeier cautioned, however, that while "everything on the table means everything," negotiators "must be mindful that our negotiations take place within a global context." He suggested that hemispheric FTAA and global World Trade Organization (WTO) negotiations should be mutually reinforcing so that "the results of what we negotiate in the FTAA do not place FTAA countries at a disadvantage vis-à-vis the rest of the world."

Allgeier concluded his remarks by saying the United States looks forward to continued collaboration with Brazil to achieve their common goals.

Following is a transcript of Allgeier's remarks:

As delivered

It is a pleasure, it is an honor, to be included in this very important program that the Chamber puts on every year. And I would first like to thank the Chamber for including me in the program and also to thank Valor Econômico for co-sponsoring the program. It is also an honor that we are joined by Mr. Mantega, who I think has more than enough to do these days during the transition. We appreciate very much the time that he is spending here. And I am proud that our Consul General, Patrick Duddy, is here, and that my friend Rubens Barbosa, who represents Brazil in Washington, is here.

It is a pleasure to be back at the American Chamber, although I have not had the pleasure of being in this relatively new facility, which I guess is a year old now or almost a year old. And it is a pleasure because the Chamber has been a consistent and effective supporter of open trade in both countries. The Chamber is known for not mincing its words when it deals with the American side and when it deals with the Brazilian side. We are the better for that, and as we move ahead in the negotiations of the Free Trade Area of the Americas and the negotiations in the World Trade Organization, we look forward to the continued support and guidance of this very important Chamber.

I also would like to take this opportunity to thank the Chamber for the hospitality that it extended to Ambassador Zoellick when he was here in March. That was a very important program and trip for him, and obviously it is important because Brazil is such an important—not just trading partner—but partner in leadership in the hemisphere now, especially as we are co-chairing the Free Trade Area of the Americas. It is also a leader in the global negotiations in the World Trade Organization. So again, on behalf of Ambassador Zoellick, I would like to thank the Chamber and all of you for the hospitality that you have shown.

I am certainly happy to be here following the momentous Brazilian elections and the successful conclusion of the Quito Ministerial of the Free Trade Area of the Americas. I can also report on a very constructive, informal meeting of some two dozen ministers that we held in Sydney, Australia, on Friday. This is one of the series of informal ministerials that are held to move the World Trade Organization negotiations forward. Obviously, both Brazil and the United States were represented there and are playing important roles in those negotiations.

The electoral victory here of Luiz Inácio Lula da Silva marks the beginning of a new chapter in the historically strong U.S.-Brazil partnership. We were impressed with the electoral process here—modern and rapid. Of course, we have our own problems sometimes in conducting elections, but they came out right. The vibrant democratic process here in Brazil actually serves as an important model for the entire hemisphere. And we certainly are equally impressed with the provisions made for this smooth transition to a new administration. I know that it may not seem this way to the incoming administration, with all the decisions that have to be made, but this is a very important and positive development.

The United States, of course, has always viewed Brazil as a friend and as a leader in the hemisphere. And the ties between our two countries have expanded over the years with increased trade, increased capital flows, cross-border investment, and tourism as well as a wide range of educational, health, environmental, scientific and other joint activities. We certainly look forward to the continuation—indeed, the intensification—of these ties between the United States and Brazil. After all, we face many common challenges, from combating terrorism and money laundering to fighting poverty and stimulating economic growth. Brazil, as you all know, is the fifth most populous country, a robust democracy, and is the eleventh-largest economy. Therefore, it is a natural partner for the United States.

My visit and the visit of a number of other officials this week to Brazil demonstrate the strength of that relationship. I'll be participating tomorrow in the Parliamentary Summit on Hemispheric Integration that is being conducted in the Chamber of Deputies in Brasilia. On Wednesday, I will join the rest of my delegation in the third meeting of the Brazil-U.S. Bilateral Consultative Mechanism on trade and investment. This is a very high-level, bilateral mechanism that we have for dealing with a whole range of trade issues. We look not just at our bilateral issues, but at how we work together for common objectives in the World Trade Organization, in the Free Trade Area of the Americas, and also at what we are doing in other bilateral and sub-regional negotiations.

On Thursday, I will return to São Paulo for a seminar on FTAA options, this being sponsored by the Getúlio Vargas Foundation.

Among the things I hope to take home is a clearer understanding of the transition process here, particularly as it pertains to our mutual interest in advancing trade in the hemisphere.

The President-elect has made trade an important part of his agenda to address the goal of improving the lives of Brazilian citizens—and indications are that Brazil is ready to move in that direction.

The President-elect has expressed the keen desire to deepen and strengthen the ties among the countries of Mercosul, of course. But Brazil is also looking at deepening the trade relationship with the European Union, the Andean Community, and—most recently—Central America. Such arrangements can serve to demonstrate the benefits of trade liberalization, whetting the appetite for more.

The same perspective has prompted us in the United States to conduct bilateral free-trade negotiations with Singapore and Chile. In fact, Ambassador Zoellick is in Singapore right now, negotiating that bilateral agreement. But we also recently notified our Congress under our new Trade Promotion Authority of our intention to initiate free-trade negotiations with the five countries in Central America, the five countries of the South African Customs Union, with Morocco and most recently—just last week—with Australia.

Brazil appears ready to move forward on the trade and economic front. It has made huge strides in the past decade. Inflation, which disproportionately hurts the poor, has fallen from 2,500 percent in 1993 to 6 percent in 2000. This, of course, improves Brazil's international competitiveness. In addition, labor productivity in manufacturing has increased 100 percent in the last ten years—another crucial element in international competitiveness. And the improved investment climate that has been created has helped to generate more than $150 billion in foreign direct investment over 10 years.

So these changes have set the stage for future growth. Both President-elect da Silva and Ambassador Zoellick share a common goal, in that they both yearn to see people of the hemisphere move out of the poverty that saps the strength of so many of our citizens.

As Ambassador Zoellick mentioned at the Quito Ministerial, trade can play a key role in that trade can help to create and to spread more broadly throughout the population the wealth that is necessary to raise people out of poverty.

So for the United States, the change in government in Brazil presents the opportunity to forge new relationships with a new team. We fully expect our common goals to remain unchanged, and we expect the partnership to become even stronger.

President Bush has already invited President-elect da Silva to Washington in December. This is the beginning of our relationship with the new administration. We expect this relationship to deepen, particularly as we work together as co-chairs of the Free Trade Area of the Americas to ensure that the final leg of that negotiation reaches a successful conclusion by January of 2005.

Brazil has a natural role to play, both in hemispheric and in global trade, and of late has been increasingly flexing its muscles as a competitive exporter. We welcome this development, as it will inevitably strengthen the Brazilian commitment to trade liberalization. You all are probably more familiar than I with the statistics of Brazil's trade performance, so I won't dwell on those. But just briefly, Brazilian exports have increased to 12 percent of gross domestic product, and monthly exports recently have been at the level of $6 billion a month.

The Brazilian Foreign Trade Association says exports are predicted to rise 5 percent this year to over $60 billion—up from $48 billion just four years ago. Productivity increases, of course, have been essential to this performance.

Goods that are shipped to the United States have increased almost 8 percent this year to almost $13 billion. That has helped the United States to nose out the European Union as Brazil's number-one export destination. We take 26 percent of Brazil's global exports.

While export growth is important, there is a challenge that lies ahead for the new administration: to forge a program that addresses the President-elect's efforts to solve the vexing issues he has identified, particularly hunger and poverty. We understand that he is working to forge a consensus among the stakeholders in Brazilian society to find a path to the future that will allow Brazil to grow in a manner suiting its undisputed potential and that provides opportunities for broader participation in the world economy.

As an agricultural powerhouse, we hope that Brazil will support our ambitious proposal in the WTO to open markets, to eliminate export subsidies and to dramatically reduce other subsidies. We will be presenting in a few weeks an equally ambitious proposal for liberalization of trade in non-agricultural products. And in Geneva, we are preparing the offers that we will make to Brazil and others for further opening of our services market. We are eager to work with Brazil to keep up the momentum of the Doha Round, which has been called the Doha Development Agenda, as so many issues we are working on will have a profound effect on the economic growth of the developing world.

Of course, the Free Trade Area of the Americas holds the promise of economic growth for our entire hemisphere. And we are pleased to join Brazil as a co-chair for the final phase of the negotiations. This represents a very significant collaboration, as we join forces to lead the hemisphere on this historic pursuit.

The Quito Ministerial, which was held just two weeks ago, has helped us to start off on the right foot. In assuming the co-chair with Brazil, we set the tone for our work together—leading the FTAA in a collaborative fashion, rather than two consecutive chairmanships.

The decision was made in 1998 that Brazil and the U.S. would co-chair during this final phase. But nothing else was said, and so it was left to us to determine how we would conduct this co-chair. And we very quickly both concluded that the better way to do it was as a true joint chairmanship, as I said, rather than dividing up the period where the U.S. will lead for part of it and Brazil the other.

I must say that when we mentioned this back in the United States, a number of people's eyebrows would raise and they would wonder ... well, this will be very interesting to watch. But I think that it is an enormous opportunity for Brazil and the United States to work together, not just for leadership in the hemisphere. We have a great opportunity to strengthen our relationship in ways that we haven't had in the past. The way in which we cooperate as co-chairs will set the tone for how the other 32 countries in the negotiations work together. We have agreed that the next ministerial of the FTAA will be held in Miami in the fourth quarter of next year, and then Brazil will host a ministerial after that in 2004.

In Quito, the 34 countries took a number of significant steps towards our collective goal of completing the negotiation by January of 2005. That is the target date that was set by the 34 presidents and prime ministers at the Quebec City Summit of the Americas a year ago April. One of the steps that we have taken is to name a very strong slate of chairmen of the different negotiating entities of the FTAA. Their leadership and dedication obviously will be very important to our success.

I think it is noteworthy, given the importance that Brazil, Argentina and the other countries of Mercosul attach to agriculture, that the chairman of the agricultural negotiating group once again will be from Mercosul.

The ministers in Quito also confirmed the detailed schedule for negotiating market access—market access in agriculture, in manufactured goods, in services, investment and government procurement. Initial market offers are scheduled to be submitted between the middle of December and the middle of February. After that, everybody looks at each other's offers and has a period of several months until June to make requests for improvements of offers. And then the actual negotiations start, toward the middle of this coming year. This schedule is intended so that we can complete the negotiations, as I said, by January of 2005, the deadline that was set. And these market access negotiations are a truly hard part of the negotiation and of tremendous importance to Brazil as it seeks new markets for its exports in agriculture, manufactured goods and services.

Probably the single most important element in the Free Trade Area of the Americas is the diversity in countries that are involved. You've got everyone: from one of the poorest countries in the world, Haiti, to the richest countries in the world; with all different sizes: continental, transcontinental countries—such as our two countries and Canada—and then micro-economies such as the Eastern Caribbean. And somehow, we have to negotiate an agreement such that at the end of the day, each of the 34 countries says, "I am going to be better off signing this agreement than I am staying out of it." It is quite a challenge.

One of the most important things that our ministers accomplished in Quito was to launch a hemispheric cooperation program. This is designed to support the smaller and less developed economies and their participation in the FTAA. This is obviously important if we are going to have an FTAA that fully benefits everyone. It is a comprehensive trade capacity-building program. In the case of the United States, the administration is seeking a 37-percent increase in the trade capacity-building assistance that we provide in this hemisphere. That would amount to about $140 million. But Brazil has stepped forward and said that it is prepared to provide in-kind support for trade capacity. So the Brazilian experts in various areas of trade would help the less developed, the smaller economies in the hemisphere to better participate in the negotiations.

We have had tremendous support from the Inter-American Development Bank. The president, Enrique Iglesias, was at the Quito Ministerial, and he has made it very clear that the Bank will continue and even intensify its efforts to support the negotiations. And it is not just supporting the negotiation process. It is helping countries to develop the capacity to implement the agreement when it is finished, and to make adjustments in their societies and their economies that would be necessary to take full advantage of the agreement.

An example: if you look at the Caribbean countries, many of them depend on import duties for more than 50 percent of their government revenue. Obviously, if we are talking about eliminating tariffs, there need to be some adjustments in their tax policies. That is just one example; every country has its own examples of the kind of adjustments that will have to be made. So this hemispheric cooperation program is extremely important.

The other thing the ministers did was to promote the transparency of this process. You know—and I think that the election here demonstrates it—that more and more people understand that they have a stake in international trade negotiations and they want to be involved, they want to know what is going on. They want to have a voice in the direction of the negotiations. And so what the ministers did is that they made public the current version of our draft text, with all the differences between the countries right out there for people to see. And that has been made public. It is on the FTAA web site, and it is in all the four official languages of the FTAA, which obviously includes Portuguese.

The same theme of openness and broader participation was felt when the ministers met at the time of the ministerial in Quito with the business community, and with a broader group of representatives of civil society. There were environmental groups, labor unions, parliamentarians and indigenous people. Like President-elect da Silva, the FTAA process has long recognized the importance of addressing the concerns of those who will be affected by the decisions government officials make in the negotiating process.

As we move forward in the FTAA, I would like to emphasize again that this negotiation leaves nothing off the table. I know that there has been some concern expressed, including in Brazil, regarding the scope and comprehensiveness of the FTAA, of the ALCA. I would like to quell any apprehension you may have regarding the position of the United States on that issue. Everything on the table means everything. We expect our negotiating partners to approach the negotiations in the same spirit. And at the same time, we also must be mindful that our regional negotiations take place within a global context. As we complete our negotiations, we will need to think creatively to ensure that the results of the WTO negotiations, for example, and the FTAA negotiations are mutually reinforcing—and that the results of what we negotiate in the FTAA do not place FTAA countries at a disadvantage vis-à-vis the rest of the world.

Your presence here today as representatives of U.S., Brazilian and international businesses is testimony to the importance of globalized trade and investment and the commitment to strong bilateral relations. The FTAA is a means to increase the benefits of trade to the citizens of the world and especially to the hemisphere. But you, when you seize the opportunities that lie ahead, will be the engines of growth. You are the creators of wealth and opportunity. Government must work to create and enforce the rules that will allow the energies of business to create the jobs for workers and the choices for consumers.

We have a new beginning on many fronts: a new Brazilian administration, a new partnership with Brazil in the FTAA, a new schedule for completing the FTAA, a very ambitious work program in the FTAA and in the WTO. We have hard work ahead of us and, of course, a period of adjustment as we become acquainted with the President-elect's new team. But we do have a long history of working together, and the United States does not see any fundamental change in our relationship with Brazil. We had been working closely together. Quito formalized that partnership.

I look forward to our continued collaboration with our Brazilian counterparts. I know that I can speak on behalf of the United States when I say this is an exhilarating time in the Brazil-U.S. relationship: a time of change, a time of challenge, but one that moves forward from a foundation of enduring friendship, shared values and common goals.

The São Paulo AmCham, of course, will continue to play a vital role in advancing those mutual goals.

Again, let me thank you for your hospitality and the opportunity to meet with you today. Thank you.

Distributed by the Office of International Information Programs, U.S. Department of State. Web site: http://usinfo.state.gov

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