Tuesday the Brazilian government agreed to suspend, for another 60 days, any trade retaliatory measures the country was going to implement against the United States as part of a World Trade Organization (WTO) ruling in the South American nation's favor.According to the Wall Street Journal story on the agreement, the two countries reached an accord in which the US will deposit $147.3 million annually in a fund that will compensate Brazilian and Sub-Saharan African cotton farmers for damages the farmers suffered as a result of US farm subsidy programs for the cotton industry. Additionally, the US will reduce export credit to farm goods exporters under the GSM 102 credit guarantee program. Further, the US agreed to recognize that beef from the Brazilian state of Rio Grande do Sul is free from foot-and-mouth disease. In return, Brazil is postponing the imposition of millions of dollars in tariffs on American goods and services.
The WTO previously ruled that Brazil was entitled to impose $800 million in trade countermeasures because certain cotton subsidy programs were found to be "inconsistent with free trade regulations." After announcing the goods that would face higher tariffs in March, in April Brazil agreed to postpone implementing the tariffs while the two nations negotiated an accord.
According to Bartholomew Sullivan's story in the Memphis Commercial Appeal, the fund will remain in place while the United States negotiates the 2012 Farm Bill. Brazil will monitor how, or if the US changes are made to the cotton subsidy programs that were deemed trade distorting. If Brazil does decide to move forward with any trade countermeasures the US can "terminate its participation on the memorandum of understanding's fund[.]"
Bartholomew writes that the US was asked to suspend the Step 2 export subsidy program "and other 'price-contingent' subsidies that the WTO found significantly suppressed world cotton prices and hurt Third World cotton farmers." Step 2 was abolished by Congress in 2006.
Talks about the 2012 Farm Bill have already begun on Capitol Hill.
To read the Memphis Commercial Appeal story click here.
To read the Wall Street Journal story click here.
Posted: 04/21/10
