Just a day before Brazil was to impose tariffs and lift patent protections on $829 million in U.S. goods, an agreement framework was struck between the two governments over a cotton dispute that has been ongoing for several years.
In 2005 and again in 2008 the World Trade Organization found that certain U.S. agricultural subsidies were inconsistent with WTO commitments.
The WTO found in violation included payments made to cotton producers under the marketing loan and countercyclical programs and export credit guarantees under the GSM-102 Program - a USDA program used to provide guarantees for credit extended by private U.S. banks to approved foreign banks for purchases of U.S. agricultural products by foreign buyers.
On April 6, United States Trade Representative Ron Kirk and Secretary of Agriculture Tom Vilsack announced that the United States and Brazil agreed upon a path toward a negotiated settlement with Brazil over the cotton dispute.
Ambassador Kirk said the progress made towards a negotiated settlement would avoid the imposition of countermeasures against U.S. trade, including U.S. exports and intellectual property rights.
On August 31, 2009, WTO arbitrators stated Brazil could impose countermeasure against U.S. trade for a fixed amount of $147.3 million for the cotton payments and an amount for the GSM-102 program that was figured at more than $800 million.
“As a result of our discussions with Brazil we have avoided imposition of higher tariffs against hundreds of millions of dollars in U.S. goods exports which were scheduled to go into effect,” Kirk said.
On April 1, Deputy USTR Miriam Sapiro and USDA Undersecretary for Farm and Foreign Agricultural Services Jim Miller met with Ambassador Antonio Patriota, Secretary General of Brazil’s Ministry of External Relations to discuss possible resolution of the dispute. As a result of that dialogue, the Government of Brazil agreed not to impose any countermeasures on U.S. trade initially scheduled for April 7.
In exchange, the United States agreed to work with Brazil to establish a fund of approximately $147.3 million per year on a pro rata basis to provide technical assistance and capacity building. Under terms to be agreed by the United States and Brazil in the Memorandum of Understanding, the fund would continue until passage of the next farm bill or a mutually agreed solution to the cotton dispute is reached, whichever is sooner.
The fund would be subject to transparency and auditing requirements.
Farm bill changes
National Cotton Council Chairman Eddie Smith said the agreement provides a roadmap for the two countries to come to a long-term solution regarding this trade dispute without resorting to harmful retaliation. He stated the U.S. cotton industry is committed to work with the U.S. and Brazilian governments over the course of their discussions on this issue.
"The two critical aspects of the agreement are that it avoids the immediately harmful economic effects of trade retaliation and it puts the serious discussion concerning changes in the U.S. cotton program before Congress in the 2012 Farm Bill, which is where that discussion belongs," Smith said.
Vilsack added the proposed path forward "respects our farm bill process and the role of Congress in shaping our commodity programs." He added he looks forward to working with Congress and Brazil in crafting a "long-term, mutually-agreeable solution to this dispute that meets the needs of American farmers, workers and consumers."
Leaders of both the Senate and House agriculture committees welcomed the news and the opportunity to maintain a positive trade relationship between the two nations.
"Ultimately, Congress and the Senate and House Agriculture Committees in particular are responsible for crafting changes to these programs and we look forward working with Ambassador Kirk and Secretary Vilsack as both sides explore modifications for consideration during the 2012 farm bill process,” a joint statement from Senate Agriculture, Nutrition and Forestry Committee Chairman Blanche Lincoln, D- Ark., and Ranking Member Saxby Chambliss, R-Ga..
Their House counterparts, House Agriculture Committee Chairman Collin C. Peterson, D-Minn., and Ranking Member Frank Lucas, R-Okla., acknowledged in a statement "that a delay in countermeasures is not a final resolution of the dispute, and we will work closely with officials in USDA and USTR as their discussions on these programs continue."
Near-term changes
The United States also agreed to make some near term modifications to the operation of the GSM-102 Export Credit Guarantee Program, and to engage with the Government of Brazil in technical discussions regarding further operation of the program.
The United States also agreed to publish a proposed rule by April 16, 2010, to recognize the State of Santa Catarina as free of foot-and-mouth disease, rinderpest, classical swine fever, African swine fever, and swine vesicular disease, based on World Organization for Animal Health Guidelines and to complete a risk evaluation that is currently underway and identify appropriate risk mitigation measures to determine whether fresh beef can be imported from Brazil while preventing the introduction of foot-and-mouth disease in the United States.
Following implementation of these initial steps, the United States and the Government of Brazil agreed to continue engagement on these issues, with a view to agreeing on a process by June that will allow us to reach a mutually agreed solution to the Cotton dispute.
Policy is one of the most important issues facing farmers today, but often the most difficult to digest. Jacqui Fatka has a passion to decode the often difficult world of agricultural policy into terms understandable for today's ag players.
Fatka joined the Farm Progress team as E-Content Editor in August 2003 after graduating from Iowa State University. Prior to full-time employment with Farm Progress, she interned at Wallaces Farmer magazine, Iowa Sen. Chuck Grassley's press office and the Iowa Pork Producers Association and freelanced for National Hog Farmer. She also worked as a public relations consultant with Iowa Industries for the Future, an effort to bring together major players in the biorenewables industry.
Currently Fatka is a staff editor at a sister publication, Feedstuffs. For Farm Futures she regularly tells the story of ongoing agricultural policy changes. Her byline can also be found on management profiles.
Fatka grew up on a grain and livestock farm near Atlantic, Iowa. She currently lives in central Ohio with her husband Eric.
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