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Brazil to Prepare List of Targets for Retaliation in Cotton Dispute

Monday, December 23, 2013
Sandler, Travis & Rosenberg Trade Report

According to press reports, Brazil will resume in early 2014 a process that could result in hundreds of millions of dollars’ worth of retaliatory trade measures against the U.S. in a long-running dispute over cotton subsidies. First, Brazil’s foreign trade board (CAMEX) will solicit public input in January on specific U.S. intellectual property rights that could be suspended. Second, CAMEX will receive in February a list of goods imported from the U.S. that could be subject to higher tariffs. Some press reports say a final decision on retaliation could come by Feb. 28.

Since 2010 the U.S. has been paying Brazil $12.25 million a month in return for the suspension of retaliatory measures authorized by the World Trade Organization after the U.S. failed to comply with a 2004 WTO ruling against its cotton subsidies. Those payments were expected to continue until Congress enacted a new farm bill with provisions amending the U.S. cotton subsidy program to reflect the WTO decision. However, the U.S. has not made a payment in several months, citing budget restrictions, and congressional passage of a farm bill has been repeatedly pushed back.

Brazilian officials said that while retaliation is “not the preferred option” they hope the threat of it will prompt the U.S. to act. It appears the U.S. is already moving in that direction, as over the next few weeks U.S. lawmakers are expected to approve a fiscal year 2014 budget that could provide renewed authority for the monthly payments as well as a new five-year farm bill.

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