U.S. skirts Brazilian tariffs in cotton dispute
The United States and Brazil on Tuesday agreed to enter a negotiated settlement in a festering dispute over U.S. cotton trade promotion programs.
'As a result of our discussions with Brazil we have avoided imposition of higher tariffs against hundreds of millions of dollars in U.S. goods exports which were scheduled to go into effect this week,' said U.S. Trade Representative Ron Kirk, in a statement.
The cotton dispute with Brazil dates back to 2005. That year, and again in 2008, the World Trade Organization found that certain U.S. agricultural subsidies are inconsistent with WTO commitments, namely:
' U.S. payments to cotton producers under the marketing loan and countercyclical programs.
' Export credit guarantees under GSM-102, a U.S. Department of Agriculture program used to provide guarantees for credit extended by private U.S. banks to approved foreign banks for purchases of U.S. agricultural products by foreign buyers.
On Aug. 31, 2009, WTO arbitrators issued arbitration awards in this dispute. These awards provided the level of countermeasures that Brazil could impose against U.S. trade, including:
' A fixed amount of $147.3 million for the cotton payments.
' An amount for the GSM-102 program that varies based on program use.
The USDA estimated the awards authorized Brazil to assess countermeasures against U.S. products in the amount of $820 million.
On March 8, Brazil announced a final list of U.S. products that would face higher tariffs starting on April 7. Goods on the list include autos, pharmaceuticals, medical equipment, electronics, textiles, wheat, fruit and nuts, and cotton. Brazil had not made a final decision on which U.S. intellectual property rights might be affected by the cross-sectoral countermeasures, but it had begun the process to make this determination.
In exchange for avoiding Brazil's countermeasures, the United States agreed to work with Brazil to establish a fund of about $147.3 million per year on a pro-rata basis to provide technical assistance and capacity building. Under the terms to be agreed by the United States and Brazil in the memorandum of understanding, the fund would continue until passage of the next Farm Bill or a mutually agreed solution to the cotton dispute is reached, whichever is sooner.
The United States also agreed to make some near-term modifications to the operation of its GSM-102 export credit guarantee program, and to engage the Brazilian government in technical discussions regarding further operation of the program.
In addition, the United States agreed to publish a proposed rule by April 16 to recognize the Brazilian state of Santa Catarina as free of foot-and-mouth disease, rinderpest, classical swine fever, African swine fever, and swine vesticular disease, based on World Organization for Animal Health guidelines and to complete a risk evaluation that is underway and identify appropriate risk mitigation measures to determine whether fresh beef can be imported from Brazil while preventing the introduction of foot-and-mouth disease into the United States.
Following implementation of these initial steps, the United States and Brazil agreed to continue engagement on these issues, with the view to agreeing on a process by June that will allow both governments to resolve the cotton dispute.
'I look forward to working with Congress and Brazil to crafting a long-term, mutually agreeable solution to this dispute that meets the needs of American farmers, workers and consumers,' said U.S. Agriculture Secretary Tom Vilsack. ' Chris Gillis