WWD.com/business-news/government-trade/brazil-says-time-running-out-on-us-cotton-pact-6456903/
government-trade
government-trade

Brazil Says Time Running Out on U.S. Cotton Pact

Ambassador to WTO sees bilateral extension as "short term."

WASHINGTON — Roberto Azevedo, Brazil’s ambassador to the World Trade Organization, took a public stand here Thursday on farm legislation in Congress, saying it does not go far enough to change U.S. cotton subsidy programs that ran afoul of the World Trade Organization and warning that time is running out on an agreement that forestalled sanctions on U.S. exports to Brazil.

Azevedo, who spoke at a roundtable hosted by the Brazil-U.S. Business Council, Council of the Americas and Brazil Industries Coalition, said he met with officials from the U.S. Trade Representative’s office and U.S. Department of Agriculture this week to discuss details about how the two countries might find a solution to the 10-year-old WTO case.

The dispute dates back to 2002, when Brazil filed a case at the WTO against the U.S. over certain cotton subsidy programs, alleging the subsidies depressed global cotton prices and put Brazilian farmers at a competitive disadvantage. The WTO sided with Brazil and issued a series of findings between 2005 and 2008. The global trade body subsequently authorized Brazil to impose sanctions against U.S. exports, ruling the U.S. failed to adequately end cotton subsidies. However, the U.S. and Brazil reached an agreement in June 2011 that forestalled the imposition of sanctions on U.S. exports until this year, when Congress is set to pass a new farm bill that sets federal farm safety net programs.

RELATED STORY: Presidential Trade Policy Vital to Production Plans >>

Under last year’s agreement, which averted $800 million in sanctions, the U.S. agreed to make some changes in its cotton export and credit guarantee program, and to work with Brazil to establish a $147.3 million fund to provide technical assistance and capacity building for the Brazilian cotton industry. Brazil has identified a list of U.S. exports it would sanction, including raw cotton, woven fabric, cotton pants and shorts and some jewelry and beauty products. The agreement was understood to hinge on Congress making changes to cotton programs to bring them into compliance with the WTO findings.

The Senate passed a $500 billion farm bill in June, which included provisions intended to bring the U.S. into compliance with the WTO decisions. A farm bill in the House stalled after passing the House Agriculture Committee, and Congress later recessed for the Nov. 6 elections. The prospects for compromise on the legislation in a lame-duck session are highly uncertain.

Azevedo did not take a position on the Senate bill in June when contacted by WWD, but his strong stance on legislation here Thursday represented a shift in Brazil’s negotiating tactics and raised the stakes on possible retaliation.

“What is on the table are the versions of the House [farm] bill and the Senate bill, and neither of those versions accommodate or would be acceptable to us,” Azevedo told the group. He later told reporters that neither bill would bring the U.S. into conformity with its commitments at the WTO.

Azevedo said he was hoping to engage in a detailed discussion with U.S. officials this week but believes the negotiations are one-sided at the moment because of the complexities of having both the U.S. legislative and executive branches involved.

“The only concern I have at this point in time about the dynamics of negotiations is that they are pretty much a situation of ‘cross your fingers and hope for the best.’ Our experience with ‘cross your fingers’ has not been positive,” Azevedo said.

“What we have is an agreement to keep the bilateral understanding [delaying retaliation against U.S. exports] for the short term,” he said. “I would say from Brazil’s side that means by early 2013.”

“We remain committed to the [agreement] and look forward to continuing to work with Brazil toward resolution of the issues in the cotton dispute,” a USTR spokeswoman said in an e-mail.