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"Strengthening the U.S.-Brazil Trade and Investment Partnership for the 21st Century" Remarks by Deputy U.S. Trade Representative Miriam Sapiro

Remarks by Deputy U.S. Trade Representative Miriam Sapiro

São Paulo Federation of Industries (FIESP)

São Paulo, Brazil

September 10, 2013

*As Prepared For Delivery*

“It is great to be back in Brazil, and I am pleased to be among so many colleagues who share a strong commitment to the U.S.-Brazilian economic partnership. I am especially thankful to the São Paulo Federation of Industries for hosting me today, to the American Chamber of Commerce for assisting with this event, and to both organizations for the excellent work that they are doing.

“This is my second visit to Brazil as Deputy U.S. Trade Representative, and I am pleased to note the progress we have made in strengthening our trade relationship since my first official trip more than three and-a-half years ago. This progress has been spurred in part by high-level visits in both directions – including trips by Presidents Obama, Lula and Rousseff, and Vice President Biden – and their focus on enhanced economic cooperation. After all, as the two largest economies and democracies in the Western Hemisphere, our economic relationship is one of the world’s most important.

“The strength of the relationship can be seen in the statistics. Brazil is now the United States’ eighth largest goods trading partner, and we have seen our trade in goods more than double over the last decade. Meanwhile, our direct investment in each other’s countries is also up dramatically – Brazil more than doubled its direct investment in the United States between 2010 and 2011 alone.

“But while our economic relationship is strong, there is a great deal more to do if the practice of this partnership is truly to match its promise. The United States is the largest economy in the world and Brazil is the seventh largest, but our bilateral trade represents only one quarter of one percent of global trade. Clearly, we can and want to do more.

“The Obama Administration recognizes the central role that Brazil plays in the Americas and in the world. As Vice President Biden said of strengthening relations between the United States and the Americas during his trip to Rio earlier this year, “no partner is more significant in this endeavor than Brazil.”

“Both Brazil and the United States have robust trade agendas and share many of the same goals. We both believe in the power of democracy and a strong middle class. As world leaders, we seek to grow our own economies and create more jobs, while contributing to global development. And both countries understand that economic success requires a level playing field, policies that are transparent and effective, and rights that protect our vision and creativity.

“We are grateful to Brazil for its leadership in multilateral fora like the World Trade Organization (WTO) and the G20. With Ambassador Roberto Azevedo now at the helm of the WTO, we look forward to a renewed focus on the importance of this organization in terms of establishing and implementing global rules. By working together to strengthen the world economy while ensuring that everyone is playing by the same rules, the United States and Brazil can make critical contributions to global growth and development.

“While collaboration on the world stage is an important pillar of our relationship, it is only one layer of a strong partnership. As progress in Doha has stalled, the United States is seeking other opportunities to expand global trade and investment, reduce and eliminate barriers, and spur the innovation necessary for dynamic economies to grow even further.

"We are working hard right now to finish a new Trans-Pacific Partnership by the end of this year. The TPP involves 12 nations, including some of our neighbors here in Latin America – Mexico, Chile, and Peru. It is shaping up to be an ambitious, 21st-century agreement that will enhance trade and investment among the TPP partner countries, and support the creation and retention of jobs in all parties.

“Looking across the Atlantic, we launched negotiations this summer with the European Union on a comprehensive Transatlantic Trade and Investment Partnership that will build on our existing relationship of nearly $1 trillion in two-way trade in goods and services and $4 trillion in investment.

“And we are deep into negotiations with 22 other partners on a new international services agreement that will reduce and eliminate impediments to services trade. These 23 parties account for more than two-thirds of global output and two-thirds of global trade in services. Because services account for the majority of Brazil’s country’s GDP and employment, we hope Brazil will work with us at the WTO, and also within Mercosur, to open up global services markets.

“While each relationship is unique, all of these agreements have similar objectives, including greater market access, fewer regulatory barriers, and more intellectual property protection to spur further innovation, development, and growth.

“As excited as we are about the progress we are making on these multilateral and regional fronts, we also want to do more with Brazil bilaterally. Global economic headwinds give the United States and Brazil a chance to pause, examine our relationship, see what is working and what is not, and determine the best ways to expand further our partnership. I see four areas as particularly helpful to deepening and broadening the U.S.-Brazilian partnership.

“The first area in which I believe that the United States and Brazil can do more work together is innovation.

“The great promise of the 21st century lies in innovation – the creative talents of our researchers, scientists, engineers, and manufacturers are at the forefront of new developments. Indeed, many jobs and opportunities have been created in Brazil through the proliferation of innovation clusters and initiatives.

“The United States and Brazil are already innovating together. One such example can be found in biofuels and aviation. Brazilian and U.S. aircraft manufacturers Embraer and Boeing are doing research and experimenting with the development of biofuels as jet fuel. If their experiments are successful, then together we will have created a brand new growth opportunity for both companies and countries.

“Unfortunately barriers still exist between our two countries that inhibit more innovation, including in the important area of intellectual property rights – or “IPR” - protection. We already know that IPR can have a large positive impact on sustaining and creating jobs. IP-intensive industries support at least 40 million jobs in the United States, and we have found that jobs in U.S. companies that use intellectual property pay 42% higher in wages.

“I am looking forward to participating in the Third U.S.-Brazil Innovation Summit tomorrow in Rio, where important areas of cooperation will be discussed, including in the energy, life sciences, and information and communications technology sectors.

“As Brazil gets ready for the 2014 World Cup and the 2016 Summer Olympics, we would like to work together on IPR enforcement and the development of best practices in the field of sports. Strengthening protections and opening markets to new technologies and ideas will encourage more innovation, all with the ultimate goal of supporting business and jobs here in Brazil and the rest of the world.

“The second area where I see an opportunity for enhanced cooperation is investment. Signaling clear openness to foreign direct investment is a critically important part of maintaining economic vitality and deepening economic ties between our countries.

“I’m looking forward to working with you and your Government to find ways to create and maintain an attractive environment for foreign investment, so that all can enjoy the benefits of open investment, spurring activity in the manufacturing, services, and agricultural sectors and producing opportunities for small-and medium-sized enterprises to compete.

“Although foreign direct investment between our two countries has increased significantly over the past few years, anecdotally at least, the rate of growth seems to be slowing. I’ve had conversations with American investors in which I hear frustration with the complexity of Brazil’s tax system, with local content requirements, and with a perceived lack of transparency.

"One solution, if Brazil is interested, would be to negotiate a Bilateral Investment Treaty. We have been negotiating such treaties with China and India, and discussing one with Russia – three of the world’s largest and fastest-growing economies. Earlier this summer we had a significant breakthrough in our negotiations with China.

“My impression is that many Brazilian companies have come to see such treaties as effective tools for protecting their investments abroad and would welcome such a move. In fact, I hope to see some of you at the SelectUSA 2013 Investment Summit in Washington, D.C. later this year, where some of these issues will be discussed and where investors from across the United States and around the world will connect with each other and execute new investment strategies.

“I hope the Brazilian Government decides to pursue such a Bilateral Investment Treaty with us with us; we are certainly interested in doing one.

“The third area that offers potential is enhanced regulatory cooperation. The World Bank has noted that it’s not always easy to do business in Brazil. One step that the Government could take would be to work with partners to demystify its regulatory system.

“On Thursday, I will be in Brasilia to co-chair the second meeting of the U.S.-Brazil Commission on Economic and Trade Relations, established under the bilateral Agreement on Trade and Economic Cooperation our Presidents signed in 2011, and regulatory cooperation will be high on our agenda.

“This topic is critically important because, despite similar commitments to health and safety, differences in our regulatory and standards systems create unnecessary costs, obstruct trade, and hurt competitiveness.

“We would like to work together to better explain our respective processes, especially with respect to increasing participation and transparency. We’ve talked through such issues with the EU, with some success, and we would like to do the same with Brazil.

“I hope that we will be able to develop new mechanisms to promote cooperation, collaboration, and coherence. By doing this, the United States and Brazil can better align our respective approaches, giving trade and investment a boost.

“Finally, I’d like to see us do more to bring our small and medium-sized businesses –our “SMEs” – together. SMEs are the backbone of economic growth in both of our countries. That is why our governments have focused energy on building small business networks and development centers. Your SEBRAE system and our Small Business Development Centers are strong on their own, but we hope to see them coordinate more closely so more and more SMEs in both countries can export to the other’s market and also integrate into the global market.

“As you can see, we have ambitious goals, both globally and with Brazil. I recognize there may be groups in both countries that prefer to keep things the way they are. Change can be scary. There will always be some who would rather protect than grow. Instead, I’d like to see us embrace change by taking new steps together to nurture innovation, boost bilateral investment, improve compatibility between our regulatory systems, and help our SMEs.

“I will end with the words of one our most famous Presidents. Almost 80 years ago, President Franklin Delano Roosevelt visited Brazil. In a speech before a Joint Session of the National Congress and the Supreme Court of Brazil, he said, “the progress we have made must not be allowed to serve as a pretext for resting on our laurels; it should, on the contrary, stimulate us to new and increased effort.”

“These words ring as true today as they did then. Let us use that same wisdom and increase our effort to build and cement an even stronger U.S.-Brazilian trade and investment relationship, building on decades of mutual respect and friendship.

“Thank you.”