USTR Announces Deal w/ Brazil to Avoid Sanctions Over Cotton

WASHINGTON - The Obama administration announced Tuesday it has reached agreement with Brazil over a cotton subsidies dispute that will head off over $800 million in sanctions on U.S. products, the first stage of which were due to be implemented Wednesday.

Brazil, with approval of the World Trade Organization, was ready to impose $591 million worth of tariffs on U.S. products this week. The second stage of sanctions -- the unprecedented $238 million against U.S. intellectual property, including violating pharmaceutical patents -- were expected by the end of the month.

"I am pleased that our teams have been able to make substantial progress towards the goal of a negotiated settlement which would avoid the imposition of countermeasures against U.S. trade, including U.S. exports and intellectual property rights," U.S. Trade Representative Ron Kirk said in a statement.

"We now have a clear path forward, one that is in the best interest of both the United States and Brazil," Kirk said. "This demonstrates how our two countries, working together, can solve problems."

While this agreement avoids immediate sanctions it does not resolve the dispute and the U.S. pledged to continue negotiating ahead of the next U.S. Farm Bill.

Agriculture Secretary Tom Vilsack said in the joint statement with the USTR, "I am also pleased that our path forward respects our Farm Bill process and the role of Congress in shaping our commodity programs. I look forward to working with Congress and Brazil to crafting a long-term, mutually-agreeable solution to this dispute that meets the needs of American farmers, workers and consumers."

The cotton dispute is a long-running source of friction with Brazil. In 2005 and again in 2008, the WTO ruled that certain U.S. agricultural subsidies are inconsistent with free trade rules.

The latest ruling Aug. 31, 2009, authorized Brazil to go ahead with sanctions, including "cross-sectoral countermeasures" outside of agricultural goods and to include intellectual property and services.

A U.S. team lead by Deputy USTR Miriam Sapiro and USDA Undersecretary for Farm and Foreign Agricultural Services Jim Miller met in Brasilia last week to hammer out an interim agreement to avoid sanctions.

The United States agreed to work with Brazil to establish a fund of approximately $147.3 million per year "to provide technical assistance and capacity building," until the passage of the next Farm Bill or until a final agreement is reached, USTR said.

The United States also agreed to take steps to declare the State of Santa Catarina as free of foot-and-mouth and other diseases, a move that would open the door to fresh beef can be imports from the area, USTR said.Market News International