Brazil has agreed to implement a tariff rate quota for imports of American wheat while also agreeing to accept imports of American pork for the first time, the White House said March 19. The statement was made following a meeting in Washington between the countries' two leaders.
President Donald Trump and Brazilian President Jair Bolsonaro said in a joint statement that the South American nation would implement a tariff rate quota to allow for the annual import of 750,000 metric tons of American wheat tariff-free.
Numerous Republican lawmakers have accused Brazil of not living up to the current 750,000-metric-ton tariff rate quota for U.S. wheat Brazil agreed to in 1994. The lawmakers alleged in a recent letter to Trump that the country continues to apply a 10% tariff on wheat from countries outside of South America that are not part of the Mercosur trade bloc.
According to the U.S. Wheat Associates, Brazil agreed to open up the tariff rate quota and remove the 10% tariff on all imports of wheat several years ago, including those from the U.S., but ultimately decided against it and notified the World Trade Organization that it wanted to eliminate it.
The Republicans also said that an enforced tariff rate quota by Brazil would result in $75 million to $120 million in additional annual U.S. wheat sales to Brazil.
Steve Mercer, a spokesman for the U.S. Wheat Associates, told S&P Global Market Intelligence that the duty-free tariff rate quota was something that the group "very much hoped" for following the meeting in Washington between the two leaders.
"This will give U.S. wheat a level playing field to compete for this opportunity every year," Mercer said.
The enforced, expanded access could prove beneficial at a pressing time for the U.S. wheat industry, which is grappling with lagging imports due to Chinese retaliatory tariffs on the crop that have led to a 70% drop in wheat exports, according to Panjiva.
U.S. wheat exports to Brazil were just $63.5 million in 2018, after reaching levels as high as $1.23 billion in 2013, according to Panjiva data.
In addition to duty-free U.S. wheat export access, Brazil also agreed to "science-based conditions" to open its markets to U.S. pork, the White House said.
U.S. pork currently cannot be shipped to Brazil due to "unscientific mitigation requirements and other sanitary issues," according to the National Pork Producers Council, which said it has been pushing for an end to what it called Brazil's "de facto ban" on U.S. pork.
"At a time when U.S. pork is facing serious headwinds in key markets due to trade disputes, we thank the Trump administration toward access to the Brazilian market," the council's spokesman Jim Monroe said in an emailed statement. "When we compete on a level playing field, we win."
The newly opened market could provide relief to the U.S. pork industry, which has been targeted with 20% retaliatory tariffs by Mexico for its inclusion on the Trump administration's tariffs on imports of steel and aluminum. The pork council estimates those tariffs cost the industry $1.5 billion in 2018.
In return, the White House said the U.S. would "expeditiously" schedule a visit by the U.S. Department of Agriculture's Food Safety and Inspection Service to audit Brazil's raw beef inspection system to allow for imports of Brazilian beef.
Tereza Cristina, Brazil's minister of agriculture, livestock and supply, told attendees of a U.S. Chamber of Commerce event March 18 that the two countries could work toward a bilateral trade agreement and that it would be "possible" in the long term. Trump and Bolsonaro did not mention a bilateral trade deal March 19.
Trump and Bolsonaro's meeting marked the newly elected Brazilian president's first international trip since taking office in January.
In a press conference at the Rose Garden, Trump said the two leaders are "committed to reducing trade barriers" to increase investment in agriculture as well as energy, infrastructure and technology.
Trump also told reporters at the end of the press conference that the separate set of talks with China are going "very well."
The comments come amid a day of conflicting reports, including a Bloomberg report citing sources who said American negotiators are concerned China is reneging on agreements to change forced intellectual property transfers after reportedly not receiving assurances that the Trump administration will lift its tariffs on the nation's exports to the U.S.
However, The Wall Street Journal, citing officials close to the matter, also reported March 19 that negotiations between the two countries to end their ongoing trade war are in the "final stages," adding that U.S. Trade Representative Robert Lighthizer and Treasury Secretary Steven Mnuchin are set to fly to Beijing the week of March 25 to meet with Chinese Vice Premier Liu He, the country's top negotiator.
The USTR's Office and Treasury did not immediately return requests for comment.
Panjiva is a business line of S&P Global Market Intelligence, a division of S&P Global Inc.