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Remarks by Ambassador Miriam Sapiro at the Council on Competitiveness Second U.S.-Brazil Innovation Summit

Opening Remarks by Ambassador Miriam Sapiro
Deputy U.S. Trade Representative

Council on Competitiveness Second U.S.-Brazil Innovation Summit
Georgetown University, Washington, DC
September 21, 2010

*As Prepared for Delivery*

"I am pleased to be with all of you this morning, and am honored, along with Minister Jorge and Ambassador Shannon, to open today’s meeting of the 2nd U.S.-Brazil Innovation Summit. I would also like to thank the Council on Competitiveness, the Brazilian Competitiveness Movement, and the Brazilian Agency for Industrial Development for putting together this impressive program. We at USTR enthusiastically support the Summit’s goal of strengthening economic development through innovation, and I am pleased to see so many government and private sector leaders from both of our countries participating in these two days of meetings.

"The title of today’s conference could not better describe the growing relationship between our two economies. Both of us want to build the strongest possible “Partnership for Prosperity in the 21st Century.” In fact, the United States has always viewed Brazil as a valued partner. Our governments share many of the same goals, including the desire to spur economic growth and opportunity between, and within, our countries. Our presidents have publicly recognized the benefits of a strong and dynamic relationship between our countries – a relationship that promotes democracy, commerce, and regional stability. And, as many of you know, Ambassador Kirk made it a priority to travel to Brazil last year to deliver personally the message that this Administration is interested in setting a new tone in our bilateral trade dialogue, one that goes beyond areas of disagreement. This does not mean that we ignore those areas where we find ourselves on opposite sides; rather, it means that we work together to identify mutually beneficial solutions, and that we look for opportunities to build upon our common interests.

"The USTR-Itamaraty Bilateral Consultative Mechanism (BCM), created in 2001, is evolving to reflect this new dynamic. During Ambassador Kirk’s trip to Brazil, he made clear that after years of meetings that were sometimes characterized by contention, USTR was interested in utilizing the BCM as a forum to build upon common and mutually beneficial interests. When I traveled to Brazil to meet Ambassador Patriota, I emphasized the same goal. We remain committed to this result, and are making arrangements to host a meeting of the BCM this fall.

"We were able to use this positive approach to our relationship earlier this year to address a significant difference of opinion over the WTO Cotton dispute. In March, I led a delegation to Brasilia to find a way to resolve our dispute over cotton subsidies without resorting to countermeasures. Brazil had been authorized to impose approximately $800 million in retaliation on U.S. goods, including potential countermeasures on U.S. intellectual property rights. It was vital that both governments worked their hardest to try and avoid such a result, which could have had severe repercussions throughout both economies. During that trip, working closely with Under Secretary of Agriculture Jim Miller and Ambassador Shannon, we developed a framework for a negotiated solution. Over the next three months, both sides worked intensively to agree on the details of a plan to guide our countries’ efforts to find a permanent solution. As a result of these efforts, in June we signed a Framework Agreement that averted the imposition of countermeasures and placed us on a path to resolving the underlying issues. That both governments were able to successfully negotiate a Framework Agreement truly speaks to the mature nature of our relationship. More broadly, it also serves as an example of how two determined countries, working cooperatively and constructively, can address even difficult challenges.

"With the Framework Agreement in place, our countries now have the necessary breathing space – and a closer relationship between key U.S. and Brazilian officials – to build upon this success. Indeed, the current economic climate, with global growth resuming, provides an opportune moment to forge an even stronger bilateral trading relationship. Brazil is now predicted by some economists to be one of the world’s five largest economies by the middle of this century. In fact, Brazil was one of the first emerging markets to begin to recover, posting GDP growth in the second quarter of 2009. This year, growth rates are projected to be nearly seven percent.

"This growth has been accompanied by an upturn in our bilateral trade. Over the past decade, total U.S.-Brazil goods trade has increased by 88% – a rate that has outpaced the growth in U.S.-Mexico trade, and is only slightly slower than that for the rest of Latin America. Last year, two-way trade between our countries totaled $46.2 billion. Two-way investment was $56.7 billion – a 27 percent increase from 2008.

"At the same time, we can – and must – do more. While Brazil is currently the United States’ 10th largest trading partner, it is a distant second to Mexico as our largest partner in Latin America. Last year, against the backdrop of the global economic slowdown, our trade decreased. U.S. goods trade with Brazil, however, declined more than the decrease in U.S. total goods trade with the world. Moreover, while the United States is the largest economy in the world and Brazil is the 8th largest, our bilateral trade represents only one quarter of one percent of global trade. Clearly, we are underutilizing our economic potential.

"One area where we have sought greater market access from Brazil is in the context of the WTO Doha negotiations. The United States remains committed to a successful conclusion to the Doha Round. President Obama was very clear at the G-20 in Toronto that the United States has been, and remains, ready for the serious, sustained and direct bilateral negotiations needed to address existing gaps on market access and take Doha across the finish line. He also made clear that there needs to be more access to the key emerging markets – including Brazil – to ensure new opportunities not just for the United States, but also for the poorest countries.

"Indeed, one particular area where we see the potential for expanded growth is in the information technology sector. We have seen evidence in countries like China, Japan, Taiwan and India that policies fostering a more open trade environment for IT products will encourage the development of a strong and innovative domestic IT industry capable of competing in the global marketplace. World exports of IT products have almost doubled since the WTO Information Technology Agreement (ITA) was implemented, from $600 billion to more than $1.5 trillion today. We continue to be interested in working more closely with Brazil in this area, and urge Brazil to join the 72 other countries that have signed the ITA. Similarly, we encourage Brazil to show greater ambition in technology services in the Doha negotiations, particularly with regard to electronic services, as well as important computer and telecommunications services that support the Internet.

"In the services sector generally, we would like to work more closely with Brazil to promote together open markets for trade and investment across the developing world. The infrastructure of a modern economy rests upon network services like communications, transportation, distribution and financial services. Energy and environmental services are critical to supporting sustainable development. And professional services provide the knowledge base necessary to participate in global markets. Brazil has recognized the benefits of open markets and created a generally pro-competitive regime for services. As a leading influence on the developing world, Brazil can help us persuade more countries to open up to trade and investment in services as a means of bolstering economic growth and job creation.

"Intellectual property is another area where our countries can and should work together, consistent with this Summit’s goals. I was pleased to see so many proposals laid out in the Summit materials on the importance of promoting innovation within the Brazilian private sector, and on the need to increase education initiatives and scientific exchanges. As those participating in the Summit’s “Innovation Learning Laboratories” are aware, the United States is also undertaking similar initiatives. As President Obama has said, the United States’ “single greatest asset is the innovation and the ingenuity and creativity of the American people. It is essential to our prosperity and it will only become more so in this century.”

"As both of our governments work to build our economies, we must harness the creative talents of our researchers, scientists, engineers and manufacturing workers, who will be at the forefront of technological developments and innovative solutions. New jobs and opportunities have already been created in Brazil through the proliferation of information technology innovation clusters. Brazilian innovators are achieving impressive results, and these valuable assets deserve stronger protections through intellectual property laws. Strengthening protection for copyrights, patents and other forms of intellectual property, through the BCM and other bilateral fora, is vitally important. This, in turn, will encourage foreign firms to bring more sophisticated, IP-intensive investments to Brazil.

"Finally, I was pleased to see that one of the Summit’s goals is to set in motion a three- to five-year plan to address trade obstacles. The World Economic Forum earlier this month recognized the strides Brazil has made in the past twenty years toward liberalizing and opening its economy. The report also noted several challenges that Brazil must face if it is to achieve its full competitive potential, including rigidities in the goods markets that hinder the efficient allocation of resources, a complex and burdensome tax regime, and insufficient investment in infrastructure. We would welcome the opportunity to work together with our Brazilian colleagues on ways to address these issues in order to create an environment more conducive to the exchange of goods, services and investment – particularly as Brazil undertakes the responsibility of hosting the 2014 World Cup and the 2016 Summer Olympics.

"And the United States remains interested in pursuing a comprehensive bilateral tax treaty with Brazil that would provide meaningful benefits to Brazilian and U.S. investors. Such a tax treaty would provide significant reductions in withholding rates on cross-border payments and adopt international standards for transfer pricing and dispute resolution. In the meantime, we hope Brazil will be able to approve the Tax Information Exchange Agreement we negotiated in 2007.

"This is a momentous time both for the United States and Brazil. I remain confident that the common interests between our two countries far outweigh any differences. I look forward to working together to create an even stronger bilateral partnership that accelerates our economic growth and brings prosperity to our people.

"I wish you a successful Summit."