Brazil Delays Cotton Dispute Duty Increases to April 22
Brazil's Foreign Trade Chamber (CAMEX) has approved a resolution to temporarily delay the increased duties on U.S. products that were set to take effect April 7, 2010. The increased duties are in response to the U.S.' noncompliance with the World Trade Organization's upland cotton dispute ruling.1
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The following summary is based on an unofficial translation of CAMEX's announcement.
(Increased duty rates of 12 to 100% were to take effect on April 7, 2010 on $591 million of U.S. products classified in over 100 tariff numbers. The increased duty rates would replace Brazil's existing duty rates for the listed U.S. products. See ITT's Online Archives or 03/09/10 news, 10030910, for most recent BP summary.)
Duty Increases Delayed to Work on Preliminary Agreement
The increased duties are now set to take effect April 22, 2010. Until then, the U.S. and Brazilian governments will continue their talks with a goal of obtaining a preliminary agreement on three points:
Funding for Brazilian cotton projects - the establishment of a fund to benefit Brazilian cotton projects financed with annual U.S. contributions of $147.3 million. (According to CAMEX, this is the amount calculated by World Trade Organization arbitrators as Brazil's damage from U.S. cotton subsidies.)
New terms for GSM-102 export guaranties - bilateral negotiations on new terms for the functioning of GSM-102 export guaranties.2
Cooperative sanitary measures - "cooperative measures" in animal sanitary issues, in particular beef and pork.
May Delay Duty Increase Another 60 Days for Further Negotiations
If agreement on these three objectives is achieved by April 22, 2010, Brazil could agree to another delay of the increased duties, possibly of 60 days, in order to negotiate a provisional agreement on various aspects of U.S. implementation of the WTO's findings.
Provisional Agreement Could Lead to Definitive One, Full Compliance is Goal
The Brazilian government states that the provisional bilateral agreement could serve as the basis of a definitive, mutually beneficial solution to the dispute. However, it may still view such an agreement as temporary since it seeks full compliance by the U.S. with the WTO's rulings in the cotton dispute.
According to CAMEX, the U.S. programs negatively affect other countries, in particular certain least developed countries in Africa, and Brazil will always seek agreements, even provisional ones, which seek to mitigate these systemic negative effects.
Brazil Also Announces Temporary Duty-Free Status for Ethanol
Brazil has also announced a temporary reduction in its import duty on ethanol from 20% to duty free until December 31, 2011. (Note that a link to the announcement was included at the bottom of the announcement on the provisional agreement with the U.S., but it is unclear if the two issues are related.)
1In August 2009, the WTO authorized Brazil to impose millions of dollars in countermeasures against the U.S. due to its failure to comply in the U.S.-Brazil cotton dispute. (See ITT's Online Archives or 09/01/09 news, 09090110, for BP summary.)
2The GSM-102 program helps to ensure that credit is available to finance commercial exports of U.S. agricultural products on competitive credit terms. By allowing assignment of the guarantee by the U.S. exporter to an approved U.S. financial institution, the program guarantees credit extended by the approved U.S. financial institution to approved foreign banks.
Ministry of Development, Industry and Foreign Trade (MDIC) press release on the CAMEX announcement (dated 04/05/10) available at http://www.mdic.gov.br/sitio/interna/noticia.php?area=1¬icia=9710
USTR statement on the negotiated solution (dated 04/06/10) available at http://www.ustr.gov/about-us/press-office/press-releases/2010/april/us-brazil-agree-upon-path-toward-negotiated-solution