As part of the recent agreement aimed at reaching a negotiated settlement to the long-running dispute with Brazil over U.S. domestic cotton subsidies, the United States will provide $147.3 million per year to fund what USDA calls "technical assistance and capacity building" for the Brazilian cotton industry.
The amount represents the value of the retaliation the WTO had authorized for U.S. payments to cotton producers under a marketing loan program and a countercyclical loan program.
According to a USDA statement, 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 United States also agreed to make what it calls "near term modifications" to the GSM-102 export credit guarantee program, and to engage with the government of Brazil in technical discussions regarding further operation of the program."
USDA said that effective Friday, April 9, it had cancelled all unused balances of the GSM-102 program that it previously issued for fiscal 2010. If there are any unused program allocations under the old terms, USDA plans to announce new allocations under new credit guarantee rates. As of Feb. 28, there were $265 million in unused export credits for FY 2010.
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.
In return, Brazil has agreed not to impose any countermeasures on U.S. trade.
According to USDA, the two sides have agreed to continue negotiations "with a view to agreeing on a process by June that will allow us to reach a mutually agreed solution to the cotton dispute."
The dispute between the U.S. and Brazil began in 2002 when Brazil filed a WTO case against the United States . In 2005 and again in 2008, the WTO found that some U.S. agricultural subsidies run counter to U.S. commitments under international trading rules. Specifically, a WTO panel found that payments to cotton producers under the marketing loan and countercyclical programs and export credit guarantees under the GSM-102 program fell into the prohibited category. (Under GSM-102, USDA provides guarantees for credit extended by private U.S. banks to approved foreign banks for purchases of U.S. agricultural products by foreign buyers.)
Last August, WTO arbitrators authorized Brazil to take countermeasures in retaliation for the U.S. failure to stop its cotton subsidies. The annual amount of countermeasures has two parts: 1) a fixed amount of $147.3 million for the cotton payments; and 2) an amount for the GSM-102 program that varies based upon program usage. The current total of authorized countermeasures is $820 million.
Cotton is grown in at least 17 states, from Virginia to California , with Texas accounting for nearly half of production. The U.S. produces between 12 million and 20 million bales of cotton a year, and exports about 70 percent of the crop, worth roughly $4 billion.
Reactions
Despite the overall positive response from Brazilian authorities to the U.S. proposal, Foreign Minister Celso Amorim also stated that Brazil would continue to insist on a complete elimination of American cotton subsidies.
"Any understanding outside of a full implementation of the rulings of the WTO will by definition be temporary," he said. "This full implementation will involve complex actions by both the American executive and legislative branches. Still, a group of procedural measures that offer adequate conditions, even if temporary, would be welcomed."
The National Cotton Council called the agreement "a meaningful way forward for the two countries." In a statement, NCC Chairman Eddie Smith pledged that 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."
Smith pointed out that the agreement not only forestalls Brazil's planned trade retaliation, but it also "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." House Agriculture Committee Chairman Collin Peterson (D-Minn.) earlier said he is committed to beginning work on the 2012 farm bill this year.
In a separate statement, Peterson and committee ranking member Frank Lucas (R-Okla.) said they are pleased with the results of the U.S.-Brazil agreement, but that they also understand that a delay in countermeasures is not a final resolution of the dispute. Accordingly, "we will work closely with officials in USDA and USTR as their discussions on these programs continue," they said.
On the Senate side, Agriculture Committee Chairman Blanche Lincoln (D-Ark.) and ranking member Saxby Chambliss (R-Ga.) said they are encouraged that both sides have agreed upon a framework for dialogue and a process to further discussion. Ultimately, they said, "Congress and the Senate and House Agriculture Committees in particular are responsible for crafting changes to these programs and we look forward working with [ USTR Ron] Kirk and [Agriculture] Secretary [Tom] Vilsack as both sides explore modifications for consideration during the 2012 farm bill process."
