March 28, 2018 / 5:25 PM / a month ago

UPDATE 1-U.S. asks Brazil to review ethanol quotas in tariff talks -industry group

(Adds details on content of U.S.-Brazil talks, trade details, other background)

By Iuri Dantas

SAO PAULO, March 28 (Reuters) - U.S. negotiators asked Brazil to review ethanol import quotas and finalize the so-called Open Skies air deal as preconditions for discussing import tariffs over Brazilian steel and aluminum, a director at industry group FIESP told Reuters on Wednesday.

U.S. negotiators also requested in a Tuesday meeting that Brazil take measures to prevent China from circumventing the U.S. tariffs, said FIESP foreign trade director Thomaz Zanotto, who was briefed on the discussions.

In return, the United States could back Brazil’s efforts to join the Organization for Economic Cooperation and Development, Zanotto said. The U.S. government had previously backed Peru to join the 35-member Paris-based OECD but is reconsidering after the resignation of President Pedro Pablo Kuczynski.

A representative of Brazil’s Ministry of Foreign Affairs confirmed that a meeting between U.S. and Brazilian negotiators took place but declined to comment on its content. Calls and an emailed request for comment to the Office of the U.S. Trade Representative were not immediately answered.

The demands are the latest step in discussions between U.S. President Donald Trump’s administration and the United States’ No. 2 steel supplier after it threatened to slap steep tariffs on all steel and aluminum imports.

Brazil currently charges a 20 percent tariff on ethanol imports surpassing 150 million tonnes a quarter in a bid to shield local farmers from foreign competition.

Meanwhile, sanctioning the Open Skies deal, which deregulates flights between the United States and Brazil and was approved by Brazil’s Senate earlier this month, would clear the way for a partnership between American Airlines Group Inc and LATAM Airlines Group SA .

Zanotto said the U.S.-Brazil negotiations could conclude as soon as next week.

Brazil exported $3 billion worth of iron ore-based products to the United States in 2017. That is a fraction of last year’s $67 billion trade surplus but still a boost to the Brazilian economy as it emerges from the deepest recession in decades. (Reporting by Iuri Dantas; Additional reporting by Lisandra Paraguassu in Brasilia Writing by Bruno Federowski Editing by Matthew Lewis)

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