WASHINGTON — The House passed a spending bill Thursday containing an amendment that would block a $147 million annual payment to Brazil’s cotton farmers and could potentially reignite a dispute over federal cotton subsidies and trigger sanctions against U.S. exports.


The House voted 217 to 203 to pass the spending bill, which funds the U.S. Agriculture Department and the Food & Drug Administration for fiscal year 2012. Passage of the spending bill creates uncertainty to a cotton framework agreement the U.S. reached with Brazil last year because it contains an amendment, added at the last minute, stripping funding to Brazil’s cotton industry.


However, that amendment faces long odds of ever being signed into law and subsequently triggering a trade war. The Senate would have to add the measure to its spending bill and, failing that, the House measure would have to survive a conference committee.


In addition, the White House has issued a stern warning against several provisions in the underlying House spending bill, including the one blocking the cotton payments.


“The bill’s provision preempts the resolution process and would open the door to retaliation negatively affecting U.S. exports and interests,” the White House said in an administrative statement of policy.
The amendment in the bill prompted strong reaction from the National Cotton Council.


NCC chairman Charles Parker said the amendment is “the latest in a long line of attempts to undermine or alter the 2010 Framework Agreement achieved by the U.S. and Brazilian governments, places the United States in violation of the agreement, undermines the good work of U.S. officials and exposes a broad range of U.S. sectors to harmful trade retaliatory measures by Brazil on up to $800 million in U.S. exports.”


In June 2010, the U.S. and Brazil reached a framework agreement averting $800 million in retaliatory sanctions that Brazil was considering imposing on U.S. exports after the World Trade Organization deemed certain U.S. cotton subsidies illegal. Under the deal, 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 agreed to forestall sanctions on a long list of U.S. exports valued at $591 million, including raw cotton, woven fabric, men’s and boys’ cotton pants and shorts, women’s and girls’ cotton pants and shorts, and some jewelry and beauty products.


The two sides agreed to meet quarterly, while the U.S. made the annual $147.3 million payment to Brazil, to discuss a resolution in the context of a new farm bill containing the cotton subsidy programs that Congress will begin negotiating in 2012.

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