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This Week In Trade

Brazilian president meets with Trump; EU leaders to discuss U.S. negotiations, Brexit

Posted: March 18, 2019

Brazilian President Jair Bolsonaro is in Washington, DC, this week, with trade expected to be a key topic during meetings that will include a discussion with President Trump. Meanwhile, European leaders will gather in Brussels on Thursday and Friday to discuss the fate of Brexit -- and proposed negotiating mandates for talks with the U.S.

 Last week, Republican senators urged President Trump to bring up wheat market access when he meets with Bolsonaro on Tuesday. The senators want Brazil to establish a 750,000 metric ton duty-free tariff quota for wheat, which they say Brazil committed to do over 20 years ago.

Analysts expect Brazil’s efforts to join the Organization for Economic Cooperation and Development -- and whether the U.S. will support them -- to be a topic of discussion as well. One potential hurdle for Brazil in attaining the U.S. support is the Trump administration’s push to change self-designation rules at the World Trade Organization. Last month, the U.S. proposed that membership in the OECD should automatically deem a country as “developed” in the eyes of the WTO, meaning those countries would not have access to special and differential treatment. Brazil is designated a developing country at the WTO.

In addition to his meeting with Trump, Bolsonaro is scheduled to meet with Commerce Secretary Wilbur Ross and representatives of the U.S. Chamber of Commerce. Brazilian Economy Minister Paulo Guedes and Foreign Relations Minister Ernesto Araujo will accompany Bolsonaro. On Monday, the three officials will take part in a discussion on U.S.-Brazil relations with Chamber CEO Thomas Donohue and Jane Fraser, the CEO for Latin America at Citigroup.

This week’s European Council meeting in Brussels, which will bring together the heads of government from the EU’s 28 member states, could have ripple effects for U.S. trade across the Atlantic. Leaders are expected to provide political guidance on the European Commission’s proposed negotiating mandates for talks with the U.S. The member states will likely add new conditions for those talks, including language on climate change. They are also expected to revoke the Commission’s mandate to negotiate the Transatlantic Trade and Investment Partnership.

The leaders are not expected to formally approve the mandates this week, but could decide on a plan of action that would allow lower-level officials to approve them later this month. EU Trade Commissioner Cecilia Malmström earlier this month suggested member states would soon decide on the mandates. However, last week’s vote by the European Parliament complicates member states’ decision-making, as the body was unable to agree on recommendations for the negotiations.

The EU leaders could also discuss a United Kingdom request for an extension in the Brexit talks. EU law sets March 29 as the date the UK must leave the EU unless an extension is agreed to, but the UK will be unable to implement a deal British Prime Minister Theresa May agreed to with European leaders by that time. The British Parliament has twice rejected that deal, but will consider it again on Tuesday or Wednesday.

U.S. officials have repeatedly called for the UK to break away from the European Union’s regulatory system, which U.S. businesses and officials claim creates non-tariff barriers that keep out some American goods. U.S. businesses have also warned against a no-deal Brexit, saying it would create a serious disruption in global trade.

U.S. and UK officials have also expressed mutual interest in striking a quick and comprehensive free trade agreement. Under May’s deal, the UK would be able to negotiate but not enter into a free trade agreement until December 2020.

This week’s vote by the British Parliament offers a much starker choice for British lawmakers, who will decide whether to back the deal or risk a long extension of the Brexit talks. The EU member states will have to unanimously agree to any extension. With the original deadline less than two weeks away and both sides wanting to avoid a no-deal Brexit, they are likely to do so.

That doesn't mean EU countries are happy about it, however. EU officials have expressed frustration with British Parliament's lack of majority on a way forward and a few leaders have said they expect the United Kingdom to provide a valid reason for any extension. Dutch Prime Minister Mark Rutte over the weekend compared May to the black knight in the film “Monty Python and the Holy Grail” whose legs and arms are slashed off, but calls the fight a draw. May keeps fighting, he said, but Parliament can't, or won't, break the impasse.

Other events of note this week: