Last year, the WTO ruled that "Brazil had the right to retaliate after it found U.S. cotton subsidies and its export guarantee program illegal." The WTO found that cotton subsidies under US law, specifically, the marketing assistance loan program, counter-cyclical payment programs, and the GSM-102 Export Credit Guarantee Program were too high and therefore distorted trade and world prices.
While the framework is not a permanent solution, it provides steps and the opportunity for discussion in the interim that will lead to a solution. According to Delta Farm Press, the framework has two main elements. "First, it would provide, as a basis for a discussion toward reaching a mutually agreed solution to the dispute, a limit on trade distorting cotton subsidies. Second, the framework would provide benchmarks for changes to certain elements of the current GSM-102 program." According to Reuters, the US agreed to make "short-term changes to its export credit guarantees and to give Brazil about $147 million per year in damages for a 'technical assistance' fund for cotton growers."
Subsidy reform, including the cotton programs which are the subject of the WTO dispute, are to take place in the 2012 Farm Bill.
To read the Delta Farm Press article, click here.
To read the Reuters article, click here.
Posted: 06/21/2010
