The United States recorded a service surplus of $18 billion with Brazil in 2019, down 11.6% from 2018. In 2011, the United States and Brazil signed the Trade and Economic Cooperation Agreement to improve trade and investment cooperation between the two largest economies in the Western Hemisphere. The agreement expands our direct trade and investment relations by providing a framework for deepening cooperation on a number of issues of mutual interest, including innovation, trade facilitation and technical barriers to trade. The U.S. trade surplus with Brazil was $12.0 billion in 2019, an increase of 46.6% ($3.8 billion) over 2018. Brazil is one of the countries that, according to the latest European Commission report, has resorted to a large number of potentially restrictive measures. The EU encourages Brazil to remove tariff and non-tariff barriers and promote a stable and more open regulatory environment for European investors and traders. A constructive outcome to this solution – although unlikely given the Argentine government`s anti-trade stance – would be to transform Mercosur into a free trade agreement rather than a customs union. A free trade agreement can maintain the current zero tariff for domestic trade, while providing members with flexibility in negotiating their own trade agreements with other countries. The United States should follow this path by actively pursuing a free trade agreement with Brazil, which would have the added benefit of diversifying its supply chains. I hope that there will be a more open and flexible bloc that will give the citizens of Argentina, Brazil, Paraguay and Uruguay hope for a more prosperous future. If Brazil, Paraguay and Uruguay decide to continue their ambitious trade negotiations and sign new free trade agreements, but Argentina does not accompany them, there will inevitably be a point on which the three countries will have to decide whether they want to break Mercosur or if they want to make it more flexible.
For example, if a trade agreement is concluded with Canada, but Argentina remains outside the agreement, it would mean that Canada`s exports to Brazil would be preferential tariffs, but Canadian exports to Argentina would still face the high level of common tariff (CET) that all imports to Mercosur must pay today. The more Mercosur`s trade agreements sign that Argentina does not comply, the less meaningful the CET is. In fact, the customs union would be dismantled. To do so, either the Mercosur rules must be relaxed so that members can sign trade agreements without unanimity, or the founding treaty of Asuncion must be violated, which means the end of Mercosur. “From their first meeting, President Trump and President Bolsonaro shared a vision of a partnership for prosperity between the United States and Brazil and a desire for new trade initiatives. Today`s protocol uses the existing ATEC to establish common standards for both countries for effective customs procedures, transparent regulatory development and a robust anti-corruption policy that will provide a solid basis for closer economic relations between our two countries,” said Ambassador Robert Lighthizer. A future association agreement between the EU and Mercosur should promote the integration of trade between Mercosur countries and create new trade and investment opportunities with the EU, eliminating direct investment and non-tariff and non-tariff direct investment.