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Hello from Washington, where protests sparked by the killing of George Floyd in Minneapolis have continued into this week — although US Park Police have said the fencing around Lafayette Square, across from the White House, will soon be removed.
Meanwhile, lawmakers on Capitol Hill are tussling over the latest economic stimulus, with Republicans arguing the better than expected jobs report indicates the US economy is already on the mend.
Our main piece today is about the little-covered US-Brazil trade dalliance, which caused Congressional Democrats to get hot under the collar(s) last week.
Our person in the news is Ngozi Okonjo-Iweala, the former Nigerian finance minister and one of the three officially nominated candidates for the role of World Trade Organization director-general, while Charted Waters looks at falling US imports.
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The rise of the mini-deal
Donald Trump admires strongman leaders, but few strongman leaders admire Trump as much as Brazil’s Jair Bolsonaro, aka the Trump of the Tropics. Bolsonaro, one of a new wave of conservative leaders sweeping aside Latin America’s leftist presidents, has not been shy of praising Trump, nor of imitating his style and rhetoric. Last year, his son Eduardo was spotted wearing a Make Brasil Great Again hat, in pointed homage to Trump’s bright red Maga caps.
It’s not a surprise, then, that as a suitor looking for a trade deal, Bolsonaro might have done enough to cause Trump and his allies to swoon. But it’s also no surprise that House Democrats, no fans of Trump, are not keen on dealing with Bolsonaro’s government. Late last week, influential trade-minded Democrats on Capitol Hill warned they would not countenance any sort of full trade deal at all with Brazil, writing to US trade representative Bob Lighthizer to catalogue the litany of bad things Bolsonaro has done.
The lawmakers, all Democrats on the House Ways and Means committee — which must pass any fuller trade deal — cited the “reprehensible rhetoric and actions” of the Bolsonaro government, including “its complete disregard for basic human rights, the need to protect the Amazon rainforest, the rights and dignity of workers, and a record of anti-competitive economic practices”. They add that they don’t think Bolsonaro would accept a deal similar to that won by Democrats in the US-Mexico-Canada agreement (USMCA), where beefed up labour rights and environmental protections were demanded by Washington.
Democrats criticised the ‘reprehensible rhetoric and actions’ of the Bolsonaro government, including a failure to protect the rainforest © Nelson Almedia/AFP
What’s interesting about this letter is the line in the sand drawn: there are some governments the Democrats will not negotiate with. But it also highlights another trend — the rise of the mini-deal. Rio and Washington, in fact, are already having trade talks, albeit low-key, casual ones. At a recent event in Washington, a Brazilian diplomat said the two sides were working on a limited deal to include digital trade and regulatory practices, to be completed by the end of the year. Hopefully, said Nestor Forster, the charge d’affaires at the Brazilian embassy in Washington, a “more meaningful agreement” can be made “at some point in [the] near future”.
There’s a lot that the Trump administration can get done without going to Congress, especially if the purpose is to stroke egos by making a big fuss over thin, low-impact agreements that do nothing to change tariffs or quotas. The US-China deal was a mini-deal, as was the US-Japan deal, and the US-EU deal, if one ever materialises, will be too.
Congress has been growing increasingly disgruntled about these mini-deals, seeing them as yet another way the Trump administration is bypassing lawmakers to make unilateral decisions. Congress is supposed to wield power over commerce with foreign nations, and over revenue-raising bills. Any deal that requires new legislation to be written — and this includes altering tariffs — needs to go through Congress. But otherwise, Trump is free to make politically expedient trade deals with whomever he chooses, just as he’s found ways to sell weapons to whomever he chooses (he notably bypassed Congressional dissent to sell arms to Saudi Arabia last year).
The question is whether dealing with Bolsonaro is a mini-deal too far. It risks enraging Congressional Democrats and making it more difficult for the administration to get full trade deals past them in future. Bilateral trade between the US and Brazil is worth just $100bn a year, a sixth of US-Mexico trade despite Brazil’s much larger economy. Trump cannot avoid going to Congress forever — the Democrat-controlled House has considerable ability to hold up legislation he wants pushed through, especially on any major trade deals that require legislative change. And when he needs them, there may be a reckoning. We’ll be watching.
Charted waters
The slump in US imports thanks to the global lockdowns owing to coronavirus showed no sign of abating in May, with seaborne imports of consumer goods particularly hard hit, falling at a faster annual pace than they did in April.
Person in the news
Ngozi Okonjo-Iweala is a former Nigerian finance minister © Riccardo Savi/Getty
Who is it?
Ngozi Okonjo-Iweala, Nigeria’s candidate for WTO director-general
Why is she in the news?
Okonjo-Iweala, a World Bank veteran and former Nigerian finance minister, was the first African candidate to be nominated for the soon-to-be vacant top job at the WTO, and one of the first three candidates to be formally nominated.
She has now been joined by Jesús Seade Kuri, a seasoned Mexican trade negotiator, and Hamid Mamdouh, an Egyptian lawyer and former WTO official.
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Tokyo talk
The best trade stories from the Nikkei Asian Review
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