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Brazil Policy Issues

Brazil Policy Issues. June 2014. Historical Brazil – US Wheat Trade Situation. Market Share Percent. Mercosur Agreement November, 1991. 47% US market share . 7% US market share . Source: USDA PS&D. Historical Brazil – U.S. Wheat Trade. Market Access - TRQ.

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Brazil Policy Issues

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  1. Brazil Policy Issues June 2014

  2. Historical Brazil – US Wheat Trade Situation Market Share Percent Mercosur Agreement November, 1991 47% US market share 7% US market share Source: USDA PS&D

  3. Historical Brazil – U.S. Wheat Trade

  4. Market Access - TRQ • WTO official reported upon inquiry • Uruguay Round Agreement on Agriculture • Brazil agreed to 750,000 MT ZERO duty TRQ • Bound duty on wheat to 55% maximum • Brazil Apr 1996 – renegotiate, updated status in 2003, 2009 and 2012 • U.S. has Initial Negotiating Rights / Canada Substantial Supplier (based on 1980s market) • Countries cannot unilaterally remove a market access commitment

  5. USW Efforts - TRQ • Raised to USDA/USTR in 2010 and multiple times since • Passed board motion as a priority in 2011 • Raised to USDA/USTR again in 2011 • Raised the issue in Geneva to Brazilian Mission in April 2011, Brazilian Embassy 2012, Brazilian Mission 2013, Brazilian officials in 2012 • Economic analysis on lost revenue to US Farmers and trade impact • Consultant meetings in 2014

  6. Market Access - TRQ • Brazil government stance • 10% applied duty is less distortive than raising the duty to the 55% bound rate • US has better access under current terms than implementing the TRQ • Why USW continues to push • More consistent competitiveness at 0% duty • WTO Case Law exists that limits Mercosur from using the 0% duty TRQ • 2008 and 2013 TRQ for wheat - shown ability to implement a TRQ • Historical wheat ties – competitive at equal basis • Growing market

  7. Brazil Farm Programs – Support • Increased funding to spur wheat production • Domestic Support notifications • Government spending more in recent years on wheat production – reducing trade opportunities • Minimum Support Price & PEP program • Support farmers • Export surplus • Wheat received the most trade distorting support in 2008/09 of any commodity

  8. Brazil’s Trade Distorting Support for Wheat

  9. Brazil Farm Support

  10. Other Issues • Merchant Marine Renewal Tax • 25% of ocean freight cost – allowance in NE • Cotton Case Negotiations • Negotiations • Retaliation / Compliance

  11. Conclusion • Trade Agreement has had a major impact on US wheat competitiveness • Brazil’s lack of TRQ implementation has hurt US export opportunities • Brazil’s farm policies have encouraged wheat production and result in exports to third countries • Need to get policies right to improve US wheat opportunities

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