Brazil Agrees to Let Some Wheat Enter Duty-Free, an Opening for U.S. Grain

Wheat growers declared victory — "a big win" — with Brazil's agreement on Tuesday to allow duty-free import of wheat grown outside of a South American trading bloc. The so-called tariff-rate quota could result in exports worth more than $100 million a year if U.S. wheat dominates the new market opening.

President Trump and Brazilian President Jair Bolsonaro announced action on the wheat dispute in a joint statement following their first bilateral meeting at the White House. Trade groups said no duties would be levied on up to 750,000 tonnes of imported wheat a year. The text released by the White House said the tariff-rate quota (TRQ) would allow that quantity of U.S. wheat duty-free annually.

Trump and Bolsonaro said the countries would take steps toward pork and beef trade; the U.S. wants to sell pork in Brazil, and Brazil wants again to send beef to the U.S. market. "Commensurate with its status as a global leader," Brazil will begin to forgo special treatment at WTO, said the White House text. U.S. farm groups frequently say countries such as China, Brazil, and India classify themselves as developing nations that merit more lenient handling under world trade rules than industrialized nations such as the U.S.

At present, wheat faces a 10% duty in Brazil unless it was grown in the fellow Mercosur countries of Argentina, Paraguay, or Uruguay. Brazil agreed in 1995 to create a tariff-rate quota but offered it rarely.

"This is a big win for U.S. wheat farmers, the Trump administration, and members of Congress who have pushed for action on this issue," said president Ben Scholz of the National Association of Wheat Growers. The export-promoter U.S. Wheat Associates said the TRQ would allow U.S. wheat to compete evenly with South American wheat.

At current prices on the futures markets, 750,000 tonnes of wheat are worth $125 million. The USDA says Brazil imports more than 7 million tonnes of wheat a year. The U.S. is forecast to export 27 million tonnes of wheat during the current trade year. The U.S. has a huge wheat stockpile, forecast to equal a six-month supply when the 2019 crop is ready for harvest. Exports are an important outlet, accounting for half of annual consumption.

The U.S. and Brazil are the two largest economies in the Western Hemisphere and among the agricultural trade giants of the world. China stepped up its purchases of Brazilian soybeans when the Sino-U.S. trade war made American beans too costly. China is Brazil's leading trade partner and the U.S. is No. 2.

During a news conference with Trump, Bolsonaro was asked about Chinese influence in Brazil. "Well, like I said, Brazil is going to keep on making as much business with as many countries as possible," he said through an interpreter. "No longer businesses are going to be found in the ideology, as it used to be. We are also following this objective for the good of our peoples."

Bolsonaro, whose right-wing and anti-immigrant politics align him with Trump, also spoke warmly of relations with the U.S. Trump said he expects "a fantastic working relationship" with Bolsonaro, a former army captain who was elected president on January 1. "We have many views that are similar. And we certainly feel very, very true to each other on trade," said Trump. "I think Brazil's relationship with the United States, because of our friendship, is probably better than it's ever been by far."