Brazil Turns Up Heat on U.S. Cotton Policy

Brazil put the U.S. on notice at a special World Trade Organization session that unless Washington "fully and immediately" complies with dispute rulings...

GENEVA — Brazil put the U.S. on notice at a special World Trade Organization session that unless Washington “fully and immediately” complies with dispute rulings calling on it to amend cotton policies found in breach of global subsidy rules, the South American nation will seek authorization to impose punitive trade sanctions.

This story first appeared in the June 23, 2008 issue of WWD.  Subscribe Today.

Brazilian diplomats told WWD they did not rule out that the potential punitive tariffs to be slapped on various products might include U.S. textiles and apparel items. Trade diplomats say the amount of punitive tariffs is likely to be less than the initial $4 billion a year demanded in 2005, as the U.S. has scrapped some of the offending programs.

Brazilian officials said decisions regarding when to seek the authorization and which products will be included have not yet been made. Brazil’s chief trade negotiator, Roberto Azevedo, talking to reporters after the WTO dispute settlement body session, said his country was “holding internal consultations” on the retaliation issue.

Asked when it might activate the request, he said it would be in “months, for sure — weeks, I don’t know how many,” adding that a WTO arbitrator “will determine” the retaliation figure and method.

During the WTO session that confirmed Brazil’s right to impose sanctions for the U.S.’ failure to abide by WTO rulings against its cotton industry subsidies, the Brazilian delegation lashed out at the new American farm bill and its treatment of cotton. Citing a recent study by the International Cotton Advisory Committee, Brazil said the farm bill “introduces few modifications to the U.S. cotton program. The structure of subsidies will remain the same…loan rates will be unchanged…and the upland target price, currently 72.40 cents per pound, will be reduced to 71.25 cents per pound.”

The 2008 bill, it said, is little different from the program established by the 2002 farm bill.

“This is a cause for great concern, not only for Brazilian cotton growers, but also for other producers around the world, who may have to continue to suffer the adverse effects of subsidized U.S. cotton,” said a statement from the Brazilian delegation.

In response to the Brazilian onslaught, a legal adviser to the U.S. delegation said the “findings of serious prejudice being considered today are outdated.” The U.S. noted that American cotton acreage has declined by more than 38.5 percent in the last two years.

“Despite the alleged price-suppressing effects of U.S. payments, cotton prices have risen sharply and futures prices indicate the market prices will remain high for the foreseeable future,” the U.S. delegation said, adding that America has “not made any marketing loan payments since September 2007,” and “is making only minimal countercyclical payments.”