Brazil and U.S. Agree on New Framework in Cotton Dispute, Avert Sanctions
The Office of the U.S. Trade Representative and Brazil’s Ministry of Development, Industry and Foreign Trade (MDIC) have announced that they have reached a framework agreement as the two sides work toward final resolution of the World Trade Organization upland cotton dispute.1
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According to USTR and MDIC, the following are highlights of the agreement:
Averts Brazilian Countermeasures
The agreement, which still needs to be signed, continues the elements which the two sides agreed to in April 20102 and averts Brazil’s imposition of countermeasures of more than $800 million this year, including more than $560 million in countermeasures against U.S. goods and $238 million against U.S. intellectual property rights and services.
MDIC adds that while Brazil has agreed not to impose any countermeasures while the framework agreement is in place, either party is free to remove itself at any time.
Would Remain in Place Until Roughly the End of 2012
MDIC states that the framework agreement would remain in place until around the end of 2012, when the two sides will evaluate whether any changes were made by the 2012 Farm Bill to resolve the issue of U.S. cotton subsidies.
Provides Limit on Cotton Subsidies, Revises GSM-102
According to USTR, as the WTO’s findings concerned U.S. cotton support under the marketing loan and countercyclical payment programs and the GSM-102 Export Credit Guarantee Program, the framework agreement has the following two major elements:
Provides limit on cotton subsidies. 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. To this end, the agreement provides for quarterly consultations until the 2012 Farm Bill is finalized.
Revisions to U.S. GSM-102. Second, the framework would provide benchmarks for changes to certain elements of the current GSM-1023 program. According to MDIC, the U.S. has agreed to specific modifications regarding payment terms, premiums, etc.
1In August 2009, the World Trade Organization authorized Brazil to impose millions of dollars in countermeasures against the U.S. due to its failure to comply in the U.S.-Brazil upland cotton dispute. (See ITT’s Online Archives or 09/01/09 news, 09090110, for BP summary.)
2In April 2010, the U.S. and Brazil announced a “path forward” and signed a memorandum of understanding in which Brazil agreed to delay its countermeasures, the U.S. made certain preliminary concessions, and a deadline of June 21, 2010 was set for further negotiation. (See ITT’s Online Archives or 04/21/10, 04/07/10 and 04/06/10 news, 10042126, 10040705, and 10040605, for BP summaries.)
3The U.S. Department of Agriculture administers export credit guarantees for commercial financing of U.S. agricultural exports. The guarantees encourage exports to buyers in countries where credit is necessary to maintain or increase U.S. sales, but where financing may not be available without such guarantees. GSM-102 covers credit terms up to three years and underwrites credit extended by the private banking sector in the U.S. (or, less commonly, by the U.S. exporter) to approved foreign banks using dollar-denominated, irrevocable letters of credit to pay for food and agricultural products sold to foreign buyers.
(See ITT's Online Archives or 03/09/10 and 06/14/10 news, 10030910 and 10061421, for BP summaries of Brazil’s retaliatory measures on U.S. goods and IPR/services, respectively.)
MDIC press release, dated 06/17/10, available here.