Next month, the U.S. Air Force is expected to select a bid for a new aircraft to serve in a counterinsurgency attack role for the U.S. and its foreign partners. It seeks an inexpensive light attack and armed reconnaissance and training aircraft for countries that have little need or resources for supersonic jet fighters. One major competitor for the Air Force contract is the Brazilian company Embraer.
Working with international manufacturers is paramount to promoting stronger international relationships. However, potentially partnering with a country that hosts deep anti-American sentiment is concerning at besWarranted or not, the core of this sentiment stems from troubled trade agreements and Brazil’s ever-differing approach to foreign policy, that, at times, diverges in significant ways from U.S. policy.
The absence of a close knit and significant trade relationship between the United States and Brazil is notable. There have been frequent disputes over subsidies of key agricultural exports. A second reason for Brazil’s “anti-Yanqui” sentiment dates back to the events of the Cold War. This outlook has been intensified both by perceived unfair trade practices after the end of the Cold War and by opposition to U.S. foreign policy following the attacks on September 11.
Many of Brazil’s exports compete directly with American products. Brazil produces and exports coffee, citrus, sugar, beef, and poultry the same products that the U.S. produces in larger quantities. Although former President Fernando Henrique Cardoso generally supported free trade, there were bitter disputes over subsidies, tariffs, and quotas during the negotiations for a Free Trade Agreement of the Americans (FTAA) that took place while he was in office.
These negotiations faltered, and trade disputes continued during President da Silva’s term. In March 2010, Brazil raised tariffs on U.S. cosmetics, appliances, and cars to counter U.S. cotton subsidies. The disagreements and troubled outlook continued.
Another area of tension between Brazil and the United States relates to Iran. In November 2009, President da Silva invited Iranian President Mahmoud Ahmadinejad to Brazil. In May 2010, da Silva helped broker a deal in which Iran would ship only a portion of its low-enriched uranium to Turkey for reprocessing; the rest would remain in Iranian hands, where it could be further enriched for nuclear weapon production.
The United States must also consider Brazil’s propensity for heavily subsidizing its corporations. Embraer is the world’s third-largest aircraft manufacturer and the producer of both civilian and military aircraft. It was founded in 1969 as a state-owned company. Even after Embraer’s supposed “privatization,” the Brazilian government continued to support the company through massive subsidies. These subsidies were condemned by a World Trade Organization panel.
Embraer enjoys an arm’s length relationship to the Brazilian government. There is a clause written in the company’s bylaws that gives the government authority at any time, for any reason, veto power over the production and supply of maintenance and replacement parts for military aircraft. This Golden Share provides the Brazilian government with veto power over key policies that would affect Embraer’s defense business.
There is good reason to think carefully about possible expansion of the U.S.-Brazil defense trade relationship. Brazil’s medium and long-term foreign policy orientation is uncertain. The trajectory of recent Brazilian foreign policy suggests that a strong, cohesive, and stable alliance with the United States is unlikely. Moreover, the future relationship between the Brazilian government and its private sector is unclear, unfair, and troubling.
When officials at the Department of Defense decide whether to award an important Air Force contract to a Brazilian firm, they should consider the far reaching U.S. national security implications. They should carefully scrutinize a decision that could strengthen Brazil’s defense industry while weakening U.S. aircraft manufacturers and the economy as a whole.