The United States and Brazilian governments signed a new protocol on trade rules and transparency on Monday. The protocol amends the Agreement on Trade and Economic Cooperation signed in 2011 between the two governments.
The news of the signing comes on the heels of similar agreements with China, the European Union, and Japan, according to The New York Times.
According to a fact sheet released by the Office of the United States Trade Representative, the protocol contains three annexes titled Customs Administration and Trade Facilitation, Good Regulatory Practices, and Anticorruption.
“The agreement today will help all traders who seek simpler customs procedures, more opportunity to participate in development of regulations, and more confidence in the rules of the marketplace,” reads a joint statement by the Brazilian and US governments. “Looking forward, the Protocol is evidence that Brazil and the United States can successfully deepen their trade relationship in ways that are beneficial to both countries.”
Competition with China
On the same day that Brazil and the US signed the new protocol, Secretary of State Mike Pompeo framed the issue in terms of the United States’ competition with China.
According to Reuters, Pompeo said that greater trade and investment between the United States and Brazil would help both countries reduce dependence on China.
China and the United States are the largest trading partners with most countries in Latin America, including Brazil. According to data from the UN COMTRADE, China and the US were the first and second largest trading partners in goods with Brazil last year, respectively.
In the last decade, Brazil’s exports in goods to China far surpassed those to the United States. In 2019, Brazil exported $63 billion in goods to China compared to $30 billion to the United States.
Similarly, Brazil imports more goods from China than the United States. In 2019, Brazil imported $35 billion in goods from China and $30 billion from the United States.
Unlike the United States, which runs a massive trade deficit with China, Brazil is a net exporter to the second largest economy. Brazil had a nearly $30 billion trade surplus with China last year.
While the United States relies on China for manufactured goods, China relies on Brazil for raw materials.
Brazil is a crucial link in the supply chain for Chinese industry and agriculture. Soy beans, oil, and iron ore comprised 77% of all exported goods from Brazil to China in 2019.
China and the United States are courting countries like Brazil. The current competition between the two largest economies will produce economic opportunities for countries like Brazil, if they can use their position as leverage to extract more favorable terms in trade and investment agreements like the recently adopted protocols.