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“Only Remaining Option” in Cotton Dispute is Retaliation, Brazilian Producers Say

Friday, January 17, 2014
Sandler, Travis & Rosenberg Trade Report

Brazilian cotton producers came away from two days of meetings in Washington this week saying that their only remaining option in a long-running dispute over U.S. cotton subsidies is to support their government’s efforts to impose retaliatory measures against U.S. exports, according to press reports. The producers indicated that their doubts that the problem will be resolved satisfactorily are growing due to continued delays in passing a new U.S. farm bill, increasing skepticism that this bill will include sufficient reforms to programs deemed noncompliant with World Trade Organization rules, and the fact that the U.S. several months ago halted the monthly compensatory payments it was making to Brazil in return for a suspension of retaliation proceedings. While the producers said they are still hoping to find “sensible solutions,” the sanctions, which may include higher tariffs as well as the suspension of intellectual property rights, could take effect as soon as next month.

In 2010 Brazil took steps to implement the retaliatory measures, but the two sides reached an agreement under which Brazil postponed retaliation in return for various U.S. actions, including establishing an annual fund of $147.3 million to aid Brazilian cotton producers and reforming the GSM-102 program. The monthly payments of $12.25 million were expected to continue until Congress enacted a new farm bill with provisions amending U.S. cotton subsidies to reflect the WTO’s 2004 ruling against them, but they were halted in October amid partisan wrangling over the federal budget. In response, Brazil resumed a process to determine which U.S. goods it might subject to higher import tariffs and how to go about suspending intellectual property rights for U.S. movies, music, drugs and/or other goods. The precise value of the potential retaliation is somewhat unclear but would likely reach into the hundreds of millions of dollars.

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