How Trade Agreements Shape US-Brazil Agricultural Relations

Because their economies are the two biggest in the Americas. As the world moves toward more integrated trade and investment, now is a good time to talk about how the U.S. and Brazilian economies could gain from stronger business ties and integration. It is well known from international experience that trade deals can be very good for both countries and industries. Trade deals between two countries help both economies grow and make more things. They also create jobs in both countries and make incomes more equal. Why does the US care so much about Brazil? The economy of Brazil is the seventh largest in the world and the biggest in Latin America. The United States and Brazil exchange a lot, and the United States is sending more and more goods to Brazil. In 2014, trade between the US and Brazil hit $108.3 billion. Most of the trade between the US and Brazil is in things, but trade in services is growing. Chemicals, oil, transportation equipment, and machinery are some of the most important things that the United States sends to Brazil.

The U.S. and Brazil have had a good business relationship for a long time

Travel and tourism-related services and transportation services are two of the most important services exported. The United States sells a lot of goods in Brazil. They are the ninth biggest market for U.S. goods and the eighth biggest market for U.S. services. More goods are exported to Brazil than to Russia, India, and South Africa together, which are also BRICS countries. Over the last 10 years, U.S. exports to China have grown at the same average yearly rate as exports to Brazil.

Brazil's share of all U.S. goods and services exports has almost doubled during that time

Chemicals, refined petroleum products, transportation equipment (mostly aerospace products and parts, but also auto parts), and electrical and non-electrical machinery and equipment are some of the main goods that the country produces.

Compared to exports, U.S. purchases from Brazil are not very big. The main type of goods that are brought into the United States from Brazil are metal products, mostly iron and steel products. Crude oil is the second most important type of goods that are brought in, followed by transportation equipment, mostly flight products and parts, and agricultural goods, like coffee and soybeans. When compared to goods or services sent from the U.S. to Brazil, imports of Brazilian services are also very small. Almost half of these imports are business services (mostly business, management consulting, and public relations services) and payments for Brazilian intellectual property rights for movies or TV shows. The United States and Brazil both have different rules that make it hard for goods to move between their borders. In Brazil, trade hurdles are especially high for tobacco and alcoholic drinks that are brought in from other countries, as well as goods from farms, forests, and fisheries. High rates of security are also in place for imported processed foods, clothing, and leather goods, as well as for exports of air and land transportation services and business and ICT services.

The U.S. also makes it hard for goods and services from Brazil to come into the country. Tariffs and nontariff barriers are some of these. Nontariff barriers that affect the sale of services are another type. Companies that are part of the Brazil-U.S. Business Council think that one way to grow the economic partnership between the U.S. and Brazil is to negotiate and sign a comprehensive trade deal that makes it easier for both countries to trade and invest.

To get a better idea of what such a trade agreement might mean for the U.S. economy

the Council and Trade Partnership Worldwide, LLC (TPW) worked together to look into what a fully-implemented trade agreement would mean for the U.S. economy. The Council starts with the idea that the deal would get rid of all U.S. and Brazilian tariffs that affect trade between the two countries and cut in half the effects of nontariff measures that affect trade in goods and services between the two countries. The Council looks at four different economic situations for the U.S. in which the trade deal would be fully put into place. Assuming that the U.S. economy is not quite full employment and that the Trans-Pacific Partnership agreement, the Trans-Atlantic Trade and Investment Partnership agreement, and the Trade in Services Agreement are all fully in effect, the results for the scenario that is thought to be most like the present situation are as follows. The expected drops in agricultural output and jobs are partly due to more competition from agricultural imports from Brazil. The amount of goods sent to Brazil would grow quickly, but they are not worth much. Both countries have a lot of hurdles to trade in agriculture, especially crops. Getting rid of or lowering these barriers would make U.S. exports and imports go up.

There would be small drops in the prices of all energy goods because resources would be moved out of the energy sector and into making goods to send to Brazil.

There would be some good and some bad effects on services from the trade deal.

It is the services sectors that have to deal with more taxes than the goods sectors. Because of this, tariff cuts in the services sector would lead to a bigger rise in direct exports. Also, because services are important for making goods, more goods being exported to Brazil would mean more demand for the services that are used to make those goods. This partly lowers U.S. services exports to the rest of the world; more services would be sent to Brazil, which would help industrial exports to Brazil.