Biden seeks to woo Brazil’s Lula with trade cooperation amid tensions over Ukraine

The United States and Brazil can work together to address the economic effects of the Russian invasion of Ukraine on energy supply and food production, U.S. Trade Representative Katherine Tai told The Miami Herald and el Nuevo Herald in an exclusive interview Friday following her trip to Brazil this week.

The visit highlights the Biden administration’s efforts to develop a relationship with the country’s recently elected left-leaning president, Luiz Inacio Lula da Silva, with appeals for “a workers-centered trade policy” and environmental sustainability.

Presidents Joe Biden and Lula defeated right-wing populist presidents whose supporters then stormed the countries’ respective congressional buildings. Lula won over the former right-wing President Jair Bolsonaro — an ally of former President Donald Trump — with a razor-thin margin in one of the most polarized elections in the country’s history last October.

Biden quickly tried to build on that shared experience, inviting Lula to the White House last month and accepting an invitation to travel to Brazil.

But that is as far as similarities go.

Lula, a third-time president with a complex political trajectory, was first elected in 2002 and is credited with having reduced poverty in Brazil through a big budget spending on social programs. But he was charged with corruption and sentenced to nine years in prison in 2017, for which he served almost two years until a Supreme Court judge annulled the sentence.

A former close ally of Venezuela’s Hugo Chavez and the Castro brothers in Cuba, Lula’s victory opens up questions about Brazil’s foreign policy during his new term in office, an area where tensions with the U.S. might arise. He has already restored diplomatic relationships with Venezuela’s strongman and Chavez’s successor, Nicolas Maduro. Even more concerning for the Biden administration, and another signal of U.S. diminishing influence in the region, Lula recently rejected sending arms to Ukraine, instead offering to mediate in a negotiated solution to the war, a prospect U.S. officials believe does not reflect the reality of the conflict.

Trade is at the core of Brazil’s ambivalent position on Russia’s invasion of Ukraine, as the giant South American country heavily depends on Russian agricultural fertilizers.

In the interview, Tai shared her views about the trade partnership with Brazil, U.S. efforts to discourage trade with Russia and Biden’s trade policies in the Western Hemisphere. The exchange has been edited for clarity and conciseness.

Question: What’s the main outcome of your visit to Brazil? Is there anything concrete coming out of it?

Answer: I went to test out the theory that this is a good moment of opportunity for the United States and Brazil, especially just weeks after President Lula’s visit to Washington, D.C. The reception I received was so warm and enthusiastic that I am really delighted and I think there will be a lot that we can do.

The most concrete outcome of this first set of meetings is that my Brazilian minister counterpart (Vice President and Minister of Development, Industry, Foreign Trade and Services Geraldo Alckmin) has agreed to reconvene under the Agreement on Trade and Economic Partnership (ATEC), an agreement between the United States and Brazil. We have not met since 2016. We agreed to convene an ATEC meeting in the second half of this year. I have instructed my team to be as ambitious as possible.

Q: It seems the Biden administration is trying to reinvigorate economic partnerships with countries in the region, especially through the Americas Partnership for Economic Prosperity, announced last year at the Summit of the Americas hosted in Los Angeles. But Brazil did not initially join. Was that discussed in your meetings? Are there any updates?

A: The Americas Partnership indeed came up in my meetings. My government counterparts expressed interest, and I will follow up with more information. Given the significance of Brazil’s economy in our region, we are going to be delighted to engage Brazil.

Q: Many observers point to the fact that despite this partnership and the emphasis on improving labor rights, environmental protections and other areas of common interest like the reform of the World Trade Organization, Biden’s economic policies mostly look inward. They focus on improving U.S. competitiveness and strengthening U.S. industries. Hence, there seems to be little interest in negotiations of more ambitious trade agreements or making significant investments in the region. What is the administration offering that would make Brazil and other countries in Latin America less likely to trade with China and Russia?

A: It’s a great question, but let me push back on a couple of the assumptions that you have made. You are right that the Biden administration’s economic policies are focused on what President Biden described as building our economy from the bottom up and middle out in contrast to the top-down, trickle-down approach. And you have seen in our economic numbers a lot of growth precisely in that vein. You see good job numbers, inflation slowing, and manufacturing coming back. But I would not characterize that as simply inward looking. I think it is an important vision for economic growth and development that President Biden shares with partners. President Lula, for instance, has a mandate, in terms of dealing with the economy, to be sustainable, inclusive and resilient, so that’s part of the alignment that we see between Biden and Lula’s administrations. As we embrace a new kind of industrial policy, which is about investing in ourselves, we also see that as an important part of our trade policy. At the same time, you hear a very clear message that America is back and a reliable partner.

In terms of our partnership with Brazil and our other friends and neighbors in this region, the vision is moving towards a more balanced, inclusive economy, in large part to respond to the need for the world economy to be more resilient.

Q: But is that enough to discourage these countries from pursuing investments and seeking trade with China and Russia?

A: With respect to Brazil, in particular, our FDI (foreign direct investment) flows in recent years are at 1 trillion real, translating to 200 billion U.S. dollars. That is massive. And our trade flows experienced a 26% growth between 2021 and 2022. If you also look at the composition of our trade it is actually quite healthy, well-balanced and complementary, so we already have very strong partnerships. What I would like to challenge is, in the way we have traditionally thought about trade relationships, that the traditional free trade agreement has all the answers to every question (regarding) enhancing economic relationships.

This is the hemisphere in which the United States has the most current free trade agreements. And yet what we see today, with the partners with whom we already have an existing FTA and those who don’t, we are actually confronting the same challenges, so it is clear that there is something more that we need to offer in terms of our economic engagement. How do we foster deeper and better investment relationships?

Q: Did you address Brazil’s ongoing trade with Russia? Are there any signs that the Brazilian government would be more supportive of U.S. efforts to isolate the Russian government economically?

A: In my trade conversations in Brasília, we very much talked about the pressures on the world economy that both of us are grappling with as the result of the Russian invasion of Ukraine: the energy supply pressures and also the food security challenges that the rest of the world has. With respect to those two issues, U.S. and Brazilian interests are very much aligned. We are both agricultural production powerhouses; there should be solutions to the issue of the fertilizers and food trade that we could work together. The conversations were very encouraging in terms of aligning our shared interests to do more together.

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