The United States and Brazil have signed a memorandum of understanding under which the United States will set up a $147.3 million fund to benefit Brazilian cotton producers. The fund is scheduled to continue until the next farm bill or a mutually agreed solution to the cotton dispute is reached.
A USDA statement says the MOU "is part of the path forward for the cotton dispute that the United States and Brazil reached earlier this month." As a result of the action, Brazil said it would not impose countermeasures in the cotton dispute for at least 60 days. In the interim, the two countries will continue negotiations aimed at reaching a "mutually agreed solution to resolve the cotton dispute," says USDA.
In 2005 and again in 2008, the World Trade Organization found that certain U.S. agricultural subsidies were inconsistent with WTO commitments. These include payments to cotton producers under the marketing loan and countercyclical programs and export credit guarantees under the GSM-102 program.
In August 2009, WTO arbitrators issued arbitration awards in the dispute including the level of countermeasures that Brazil could impose against U.S. trade. 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.
Using the data that the United States provided to Brazil, the current total of authorized countermeasures is more than $800 million.
Chief U.S. Agricultural Trade Negotiator Isi Siddiqui says the United States has told Brazil that it would increase fees on its export loans to make them just about as costly as a regular bank loan. He said that in addition to the $147.3 million fund, the United States has also has pledged to make other concessions but that it can't do so until Congress passes a new farm bill. "For now, our hands are tied," he said.
