Commercial Dialogues: Paving the Way for Better Trade Relations

The U.S.–Brazil Commercial Dialogue’s working group on franchising is an example of how trade relations can develop by pragmatic means.

by Jane Siegel

To improve U.S. export competitiveness and market access, the Department of Commerce has organized and led bilateral commercial dialogues with several U.S. trading partners, including, most recently, Brazil, India, and Vietnam. The dialogues provide an excellent opportunity for the United States and its trading partners to explore one another’s regulatory systems and business climate and to achieve by pragmatic means what might otherwise develop into a trade dispute.

One such dialogue was launched with Brazil in June 2006. That dialogue has already focused on several key aspects of the commercial relationship, including business facilitation, investment, intellectual property rights, and standards.

Franchising Focus of New Working Group

A recent development in the U.S.–Brazil dialogue was the establishment of a working group on franchising. Franchising is an important element in the economies of both countries and is a subset of the distribution services sector. The United States and Brazil are, respectively, the world’s largest and sixth-largest markets for franchising, according to the International Franchise Association of the United States (IFA). The domestic benefits of franchising include the ability to efficiently start up a business, to make an up-front investment in reliable brands, and to stimulate entrepreneurial and managerial talent. For emerging economies, franchising can also provide a development boost.

Joint White Paper

To advance the objectives of the franchising working group, the Commerce Department and Brazil’s Ministry for Development and International Commerce agreed to write a white paper on franchising. This study, which will be completed in summer 2008, will research and describe the best franchising practices from around the world. It will also address sensitive issues, such as legal frameworks, protection of intellectual property, and trade policy, as they affect franchising. The focus on best practices will enhance competitiveness and improve market access in Brazil for U.S. companies.

Involvement of Business Community

Because of a memorandum of understanding promoted by the Commerce Department between the IFA and its Brazilian counterpart, the Associação Brasileira de Franchising (Association of Brazilian Franchising, or ABF), Brazil and the United States also agreed to help engage the franchise business communities. For example, representatives of the ABF recently attended the IFA annual conference in Orlando, Florida, on February 9–12, 2008. The Commerce Department used the conference to advance work on the joint paper with its Brazilian counterparts. The Commerce Department’s assistant secretary for manufacturing and services, William (Woody) G. Sutton, also attended the conference and held discussions with many top U.S. franchise companies.

Explaining U.S. Federal and State Regulations

The Commerce Department has put Brazilian franchise companies in touch with legal and business experts in the U.S. franchising market to help them understand the U.S. federal system. The Federal Trade Commission, for example, requires that a prospective franchisee receive disclosure documents from the franchisor before investing. Those disclosures are required by federal law and must be made before a transaction. In addition, 15 U.S. states have their own disclosure and registration requirements.

As with other ongoing commercial dialogues and their working groups, this commitment by the United States and Brazil to continued dialogue on specific areas of their commercial relationship—such as franchising—will, ultimately, enhance market access for both parties to their respective markets.

Jane Siegel is an international trade specialist in the Manufacturing and Services unit of the International Trade Administration.